1
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
FIRST OF AMERICA BANK CORPORATION
(Exact name of registrant as specified in its charter)
MICHIGAN 6712
(State or other Jurisdiction (Primary Standard Industrial
of incorporation or organization) Classification Code Number)
211 SOUTH ROSE STREET 38-1971791
KALAMAZOO, MICHIGAN 49007 (I.R.S. Employer Identification Number)
(Address, including zip code, of (616) 376-9000
registrant's principal executive (Telephone number, including area code,
offices) of registrant's principal executive
offices)
---------------------------
RICHARD K. MCCORD
SENIOR VICE PRESIDENT
FIRST OF AMERICA BANK CORPORATION
211 SOUTH ROSE STREET
KALAMAZOO, MICHIGAN 49007
(616) 376-9000
(Name, address, including zip code and telephone
number, including area code, of agent for service)
Copy to:
David E. Riggs, Esq.
Howard & Howard Attorneys, P.C.
The Kalamazoo Building, Suite 400
107 West Michigan Avenue
Kalamazoo, Michigan 49007
(616) 382-1483
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
---------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G. check the following box. / /
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Amount maximum maximum
Title of each class of securities to be offering price aggregate Amount of
to be registered registered per share offering price registration fee
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Common Stock (1)...................... 2,644,643 $579.70(2) $37,761,078.30(2) $13,021.15
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(1) Also includes an equal number of Rights to purchase shares of the
Registrant's Series A Junior Participating Preferred Stock, which
Rights are not (a) separable from the shares of Common Stock; or (b)
presently exercisable. See "Description and Comparison of First of
America Capital Stock and Park Ridge Common Stock - First of America
Shareholder Rights Plan."
(2) Estimated solely for determining the registration fee pursuant to Rule
457 (f)(1) based upon the market value of the securities to be
received or cancelled by the Registrant in the merger. As of May 31,
1994 there were 65,139 outstanding shares of the Common Stock of First
Park Ridge Corporation with a book value per share at March 31, 1994
of $579.70.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES
THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL
THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
The Exhibit Index is located at sequential page
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FIRST OF AMERICA BANK CORPORATION
CROSS REFERENCE SHEET
FOR REGISTRATION STATEMENT ON FORM S-4
ITEM OF S-4 LOCATION OF CAPTION IN PROSPECTUS/PROXY STATEMENT
- ----------- -------------------------------------------------
1. Facing Page; Outside Front Cover Page of Prospectus/Proxy Statement
2. Inside Front Cover Page of Prospectus/Proxy Statement; Available Information; Incorporation of Certain Documents by
Reference; Table of Contents
3. Summary of the Prospectus/Proxy Statement; Selected Financial Information; Equivalent Per Share Data
4. The Merger; Description and Comparison of First of America Capital Stock and Park Ridge Common Stock
5. Not Applicable
6. The Merger
7. Not Applicable
8. Legal Matters; Experts
9. Not Applicable
10. Information About First of America
11. Incorporation of Certain Documents by Reference
12. Not Applicable
13. Not Applicable
14. Not Applicable
15. Not Applicable
16. Not Applicable
17. Information About Park Ridge; Financial Statements of First Park Ridge Corporation
18. The Special Meeting, Proxies, Voting, and Certain Shareholders; The Merger; Incorporation of Certain Documents by
Reference
19. Not Applicable
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PROSPECTUS/PROXY STATEMENT
FIRST OF AMERICA BANK CORPORATION FIRST PARK RIDGE CORPORATION
211 South Rose Street 205 N. Michigan Avenue, Suite 3800
Kalamazoo, Michigan 49007 Chicago, Illinois 60601
(616) 376-9000 (312) 540-0600
PROSPECTUS PROXY STATEMENT
Up to 2,644,643 Shares of for the Special Meeting
First of America Bank Corporation of Shareholders
Common Stock to be held _______, 1994
This Prospectus/Proxy Statement is a proxy statement furnished at the
direction of the Board of Directors of First Park Ridge Corporation ("Park
Ridge") in connection with the solicitation of proxies from its shareholders to
be voted at a Special Meeting of Shareholders of Park Ridge to be held on
_________, 1994 (the "Special Meeting"), and at any adjournment thereof, for
the purpose of considering and voting upon approval of the Agreement and Plan
of Merger, dated as of April 15, 1994, among First of America Bank Corporation
("First of America"), First of America Acquisition Company ("Acquisition Sub")
and Park Ridge (the "Merger Agreement"). This Prospectus/Proxy Statement is
first being released to Park Ridge shareholders on approximately ______, 1994.
This Prospectus/Proxy Statement is a prospectus of First of America
relating to its offering of shares of its Common Stock, $10 par value ("First
of America Common Stock"), to holders of the Common Stock of Park Ridge, no par
value ("Park Ridge Common Stock"), in connection with the proposed merger of
Park Ridge into Acquisition Sub (the "Merger"). If the Merger Agreement is
approved by the requisite vote of Park Ridge shareholders and if, following
satisfaction of certain conditions, the Merger is consummated, issued and
outstanding shares of Park Ridge Common Stock will be converted into and
exchanged for shares of First of America Common Stock, as described herein and
in the Merger Agreement.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN AS CONTAINED HEREIN, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON. THIS PROSPECTUS/PROXY
STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT IN ANY
STATE OR TO ANY PERSON IN WHICH OR TO WHOM IT WOULD BE UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION. THE DELIVERY OF THIS PROSPECTUS/PROXY STATEMENT AT ANY
TIME DOES NOT IMPLY THAT THE INFORMATION INCLUDED HEREIN IS CORRECT AS OF ANY
TIME AFTER ITS DATE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus/Proxy Statement is ______, 1994.
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AVAILABLE INFORMATION
First of America is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). First of
America also files these reports and other information with the New York Stock
Exchange ("NYSE"). These reports, proxy and information statements, and other
information can be inspected and copied at the public reference facilities
maintained by the Commission in Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at certain of its regional offices located at 7 World Trade
Center, 12th Floor, New York, New York 10048 and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. In
addition, material filed by First of America can be inspected at the offices of
the NYSE, 20 Broad Street, New York, New York 10005.
First of America has filed a registration statement on Form S-4 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the First of America Common Stock issuable
in the Merger. This Prospectus/Proxy Statement does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. The
Registration Statement, including the exhibits filed or incorporated by
reference as a part thereof, can be inspected at the public reference
facilities of the Commission set forth above, copies of which can be obtained
from the Public Reference Section of the Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed with the Commission by First of America
(File No. 1-10534) pursuant to the Exchange Act, are incorporated herein by
reference:
(1) First of America's Annual Report on Form 10-K for the year ended
December 31, 1993;
(2) First of America's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994; and
(3) the description of First of America Common Stock and First of
America Series A Junior Participating Preferred Stock Purchase Rights
contained in First of America's Registration Statements on Form 8-A
dated April 30, 1990 and July 18, 1990, respectively, filed with
respect to such securities pursuant to Section 12 of the Exchange Act,
and all amendments or reports filed for purposes of updating such
descriptions.
All documents filed by First of America pursuant to Sections 13(a),
13(c), 14, or 15(d) of the Exchange Act after the date of this Prospectus/Proxy
Statement and before the Special Meeting are hereby incorporated by reference,
and such documents are deemed to be a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be modified or superseded for the
purposes of this Prospectus/Proxy Statement to the extent that a statement
contained herein or in any other subsequently filed document which is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not, except as
so modified or superseded, constitute a part of this Prospectus/Proxy
Statement.
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THESE
DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS, ARE AVAILABLE WITHOUT CHARGE
ON WRITTEN OR ORAL REQUEST OF ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO
WHOM THIS PROSPECTUS/PROXY STATEMENT IS DELIVERED, FROM RICHARD K. MCCORD,
SENIOR VICE PRESIDENT, FIRST OF AMERICA BANK CORPORATION, 211 SOUTH ROSE
STREET, KALAMAZOO, MICHIGAN 49007 (616) 376-9000. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY ______, 1994.
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TABLE OF CONTENTS
SUMMARY OF THE PROSPECTUS/PROXY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
The Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
Related Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
Consideration to be Received in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
Fairness Opinion to Park Ridge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
First of America Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
Market for First of America and Park Ridge Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii
Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii
Recommendation of Park Ridge Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Other Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
SELECTED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x
EQUIVALENT PER SHARE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
THE SPECIAL MEETING, PROXIES, VOTING, AND CERTAIN SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Certain Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Parties to the Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Reasons for Merger and Affiliation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Related Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consideration to be Received in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Fairness Opinion to Park Ridge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Interests of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Recommendation of Park Ridge Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Other Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Business of Park Ridge Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Termination, Modification, Amendment, and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Effectiveness of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Surrender of Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Resale of the First of America Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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DESCRIPTION AND COMPARISON OF FIRST OF AMERICA CAPITAL STOCK AND PARK RIDGE COMMON STOCK . . . . . . . . . . . . . . . . . . 12
First of America Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
First of America Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
First of America Shareholder Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Park Ridge Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
COMPARISON OF CERTAIN PROVISIONS OF FIRST OF AMERICA'S ARTICLES OF INCORPORATION AND BYLAWS AND PARK RIDGE'S ARTICLES
OF INCORPORATION AND BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Action By Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Supermajority Approval of Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Amendment or Repeal of Certain Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Other Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Overall Comparison and Effects of First of America Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
COMPARISON OF THE MICHIGAN BUSINESS CORPORATION ACT AND THE ILLINOIS BUSINESS CORPORATION ACT . . . . . . . . . . . . . . . . 17
Dissenters' Rights of Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Supermajority Voting Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Action Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Transactions with Interested Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Control Share Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
INFORMATION ABOUT FIRST OF AMERICA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Incorporation of Certain Information by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
INFORMATION ABOUT PARK RIDGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Management's Discussion and Analysis of Financial Condition and Results of Operations, for The Years
Ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Management's Discussion and Analysis of Financial Condition and Results of Operations, for the Three
Months Ended March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
REGULATION OF FIRST OF AMERICA AND PARK RIDGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Bank Holding Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Savings and Loan Holding Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Savings Associations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Prompt Corrective Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Standards for Safety and Soundness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Other Limitations Based on Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Audit and Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Reserve Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Deposit Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Dividend Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Monetary Policy and Economic Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Sources of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF FIRST PARK RIDGE CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . F-1
EXHIBIT A
Opinion of Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B
Agreement and Plan of Merger Among First of America Bank Corporation, First of America Acquisition
Company and First Park Ridge Corporation, Dated as of April 15, 1994 . . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C
Paragraph 11.70 of the Illinois Business Corporation Act of 1983, as amended . . . . . . . . . . . . . . . . . . . C-1
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SUMMARY OF THE PROSPECTUS/PROXY STATEMENT
This Prospectus/Proxy Statement contains information about the Special
Meeting, the Merger, First of America Capital Stock, Park Ridge Common Stock,
First of America, and Park Ridge. The following summary does not purport to be
complete and is qualified in its entirety by the specific provisions of the
full text of this Prospectus/Proxy Statement, the documents incorporated herein
by reference, and the exhibits attached hereto.
THE PARTIES. First of America is a Michigan corporation and a
registered bank holding company under the federal Bank Holding Company Act of
1956, as amended (the "Bank Holding Company Act"), and a savings and loan
holding company under the federal Home Owners Loan Act of 1933, as amended
("HOLA"). Its corporate headquarters are located at 211 South Rose Street,
Kalamazoo, Michigan 49007. Its telephone number is (616) 376-9000. At March 31,
1994, it owned 20 banks located in Michigan, Indiana and Illinois (the "FOA
Banks"). At March 31, 1994, the consolidated assets of First of America
totaled $21.2 billion. See "Information About First of America."
Acquisition Sub is an Illinois corporation wholly owned by First of
America. Its sole purpose is to facilitate First of America's acquisition of
Park Ridge through the Merger.
Park Ridge is an Illinois corporation and a registered bank holding
company under the Bank Holding Company Act. Its corporate headquarters are
located at 205 N. Michigan Avenue, Suite 3800, Chicago, Illinois 60601. Its
telephone number is (312) 540-0600. Park Ridge owns 100 percent of and
operates three banks, First State Bank & Trust Company of Park Ridge ("FSB"),
Bank of Buffalo Grove ("BBG") and First State Bank of Gurnee ("Gurnee") (FSB,
BBG and Gurnee being hereinafter referred to individually as a "Bank" and
collectively as the "Banks"), all organized under the laws of the State of
Illinois. At March 31, 1994, Park Ridge's consolidated assets totaled $323
million. Gurnee is a newly formed bank which began operations during June,
1994. See "Information About Park Ridge."
THE MERGER. The Merger Agreement provides for the merger of Park Ridge
into Acquisition Sub, with Acquisition Sub designated as the surviving
corporation. On the effective date of the Merger, First of America will
continue its existing business, Park Ridge will be merged into Acquisition Sub
and cease to exist, and Acquisition Sub will continue to be a wholly owned
subsidiary of First of America. The Merger Agreement also provides that as
soon after the effectiveness of the Merger as is reasonably practicable, the
Banks will be merged with First of America Bank - Northeast Illinois, N.A.
("First of America-Northeast Illinois"), an existing national bank subsidiary
of First of America (the "Bank Merger"). The offices of the Banks will be
maintained as branch facilities of First of America-Northeast Illinois. See
"The Merger--Merger."
BACKGROUND OF THE MERGER. In October, 1993, Park Ridge's Board of
Directors decided to explore a sale of Park Ridge in the context of its
evaluation of alternative methods of maximizing shareholder value. In this
connection, Park Ridge engaged Goldman, Sachs & Co. ("Goldman Sachs") in
December, 1993 to act as its financial advisor in a possible sale transaction
involving Park Ridge and authorized Goldman Sachs to seek indications of
interests on Park Ridge's behalf concerning a possible acquisition of Park
Ridge from First of America and other potential acquirors.
At a meeting held on April 1, 1994, which was attended by two
directors of Park Ridge and shareholders of Park Ridge owning in excess of
fifty percent of the outstanding shares of Park Ridge Common Stock, Goldman
Sachs, Park Ridge's legal counsel, and its senior management reviewed the
various acquisition proposals made by the final bidders for Park Ridge, and
based on such review and, among other things, Goldman Sachs' conclusion that,
as of that date, the final acquisition proposal made by First of America was
superior to any other pending acquisition proposal, Park Ridge's management was
authorized to negotiate a final merger agreement with First of America. Park
Ridge's management then negotiated a proposed final merger agreement with First
of America. Following an in-depth analysis, review and discussion of such
proposed final agreement by and among Park Ridge's legal counsel, management
and Board of Directors, the Park Ridge Board of Directors approved by unanimous
consent on April 14, 1994, the Merger Agreement as being in the best interests
of Park Ridge and its shareholders. See "The Merger - - Background of the
Merger, Fairness Opinion to Park Ridge."
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RELATED AGREEMENTS. In connection with execution of the Merger
Agreement, Park Ridge shareholders who own in excess of 66-2/3% of the
outstanding Park Ridge Common Stock entered into that certain Approval and
Agreement of Certain Directors, Officers and Shareholders dated April 15, 1994
whereby those shareholders agreed: (1) subject to satisfaction of all
conditions contained in the Merger Agreement, to exchange all shares of Park
Ridge Common Stock, now or hereafter beneficially owned by each of them, in
accordance with the terms of the Merger Agreement; (2) to vote said shares, in
person or by proxy, at any meeting of shareholders of Park Ridge and all
adjournments thereof, in favor of approval of the Merger Agreement; and (3)
that none of the parties thereto would directly or indirectly sell or transfer
any beneficial interest in, assign, pledge, hypothecate or otherwise dispose of
or encumber any shares of Park Ridge Common Stock prior to the effective date
of the Merger, except with the prior express written consent of First of
America.
CONSIDERATION TO BE RECEIVED IN THE MERGER. The Merger Agreement
provides that upon effectiveness of the Merger, each issued and outstanding
share of Park Ridge Common Stock will be converted into and exchanged for the
number of shares of First of America Common Stock equal to the quotient
determined by dividing $1,228.14 (the "Exchange Price") by the average (rounded
to the nearest penny) of the last reported sale price of First of America
Common Stock as reported by the NYSE during the period of twenty consecutive
business days on which trading of First of America Common Stock takes place on
the NYSE and ending on the tenth day prior to the effectiveness of the Merger
(the "Average Closing Price") (the quotient of the Exchange Price divided by
the Average Closing Price is referred to as the "Exchange Rate").
The Exchange Price, which is divided by the Average Closing Price to
yield the Exchange Rate which determines the amount of First of America Common
Stock receivable by Park Ridge's shareholders, was determined through the
parties' negotiation of the Merger Agreement (see "The Merger-- Background of
the Merger"). These terms reflect First of America's and Park Ridge's judgments
as to the value of the shares of Park Ridge Common Stock relative to the
historical and anticipated market price of First of America Common Stock.
In the event that the effectiveness of the Merger takes place after
October 14, 1994 (the "Interest Date"), Park Ridge shareholders will receive
additional consideration (in the form of First of America Common Stock), based
upon an interest factor of 7.75% per annum applied to the Exchange Price for
the period between the Interest Date and the effective date of the Merger.
FAIRNESS OPINION TO PARK RIDGE. The Merger Agreement provides that a
condition precedent to Park Ridge's and First of America's respective
obligations to consummate the Merger is that Park Ridge has received, no later
than 14 days after the date of the Merger Agreement (which was April 15, 1994),
an opinion from Goldman Sachs, dated as of the date of the Merger Agreement
(with a copy to First of America), to the effect that the terms of the Merger
are fair to the shareholders of Park Ridge. Accordingly, following execution
of the Merger Agreement, Park Ridge requested such an opinion from Goldman
Sachs, and on April 29, 1994, Goldman Sachs delivered a written opinion to the
Board of Directors of Park Ridge, dated as of April 15, 1994, to the effect
that, as of the date of the opinion, the Exchange Price, payable in shares of
First of America Common Stock, to be received by the holders of Park Ridge
Common Stock pursuant the Merger Agreement, was fair to such holders. For
information on the assumptions made, matters considered and limits on the
review undertaken by Goldman Sachs, see "The Merger -- Fairness Opinion to Park
Ridge". A copy of the opinion of Goldman Sachs is attached as Exhibit A to
this Prospectus/Proxy Statement. Shareholders of Park Ridge are urged to read
the opinion of Goldman Sachs in its entirety.
FIRST OF AMERICA COMMON STOCK. Subject to the rights of the holders of
any First of America preferred stock if and when outstanding (the "First of
America Preferred Stock") to vote in event of dividend arrearages and when
specifically required by the Michigan Business Corporation Act, as amended (the
"Michigan Act"), holders of First of America Common Stock have exclusive voting
rights. Holders of First of America Common Stock elect approximately one-third
of the Board of Directors for a three year term at each annual meeting. Subject
to the prior rights of the holders of First of America Preferred Stock if and
when outstanding, holders of First of America Common Stock are entitled to
receive dividends if and when declared by First of America's Board of Directors
out of any funds legally available therefor. Subject to the rights of the
holders of any First of America Preferred Stock if and when outstanding,
holders of First of America Common Stock are entitled to receive pro rata upon
liquidation
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all of the assets of First of America remaining after provision for the payment
of creditors. Holders of First of America Common Stock have no preemptive
rights to subscribe to any additional shares which First of America may issue.
Under the Michigan Act, holders of First of America Common Stock generally have
no dissenters' rights of appraisal because First of America Common Stock is
held of record by more than 2,000 persons. See "Description and Comparison of
First of America Capital Stock and Park Ridge Common Stock--First of America
Common Stock."
Certain provisions of First of America's Articles of Incorporation and
Bylaws and First of America's Shareholder Rights Plan may have the effect of
rendering more difficult or discouraging a merger proposal involving First of
America, a tender offer for the voting stock of First of America, or a proxy
contest for control of First of America's Board of Directors. Park Ridge's
Articles of Incorporation and Bylaws generally do not contain provisions that
may have similar anti-takeover effects, and Park Ridge does not have a
shareholder rights plan. See "Comparison of Certain Provisions of First of
America's Articles of Incorporation and Bylaws and Park Ridge's Articles of
Incorporation and Bylaws" and "Description and Comparison of First of America
Capital Stock and Park Ridge Common Stock--First of America Shareholder Rights
Plan."
MARKET FOR FIRST OF AMERICA AND PARK RIDGE COMMON STOCK. First of
America Common Stock is listed for trading on the NYSE (symbol FOA). The high,
low, and closing sales prices for First of America Common Stock on March 31,
1994 were $38.125, $37.000 and $37.875, respectively. On April 15, 1994 the
last full trading day before public announcement of the Merger, the high, low,
and closing sales prices were $37.250, $36.875 and $36.875, respectively.
To the knowledge of Park Ridge's management, there is no established
public trading market for Park Ridge Common Stock. To the knowledge of Park
Ridge's management, the following sales of Park Ridge Common Stock occurred in
1992, 1993 and 1994:
Date Number of Shares Price Per share
- ---- ---------------- ---------------
April 10, 1992 2,057 $400.00
December 1, 1992 2,923 $615.80
February 2, 1993 40 $500.00
April 13, 1993 2,057 $500.00
September 14, 1993 2,074 $723.25
See "Description and Comparison of First of America Capital Stock and Park
Ridge Common Stock -- First of America Common Stock -- Park Ridge Common
Stock."
SHAREHOLDER APPROVAL. At the Special Meeting, Park Ridge shareholders
will vote on approval of the Merger Agreement. Under the Illinois Business
Corporation Act, as amended (the "Illinois Act"), the affirmative vote of
holders of at least two-thirds of the outstanding shares of Park Ridge Common
Stock entitled to vote is required for approval of the Merger Agreement. At
_____________, 1994, the record date for the Special Meeting, there were 65,139
shares of Park Ridge Common Stock outstanding and entitled to vote at the
Special Meeting. Therefore, the affirmative vote of holders of at least 43,426
shares of Park Ridge Common Stock is required for approval of the Merger
Agreement. At ___________, 199_, all directors and officers of Park Ridge as a
group, beneficially owned 37,732 shares (or 58 percent of the outstanding
shares) of Park Ridge Common Stock. Certain directors, officers and
shareholders of Park Ridge have agreed to vote the 44,590 shares of Park Ridge
Common Stock beneficially owned by them for approval of the Merger Agreement.
Therefore, shareholders owning in the aggregate in excess of two-thirds of the
outstanding shares of Park Ridge Common Stock have agreed to approve the Merger
and their affirmative vote alone will be sufficient to yield approval of the
Merger. See "The Merger--Shareholder Approval."
RECOMMENDATION OF PARK RIDGE BOARD OF DIRECTORS. The Board of
Directors of Park Ridge has unanimously approved the Merger Agreement and
unanimously recommends that shareholders vote for approval of the Merger
Agreement. See "The Merger--Recommendation of Park Ridge Directors."
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RIGHTS OF DISSENTING SHAREHOLDERS. Any holder of Park Ridge Common
Stock who, before shareholders vote on approval of the Merger Agreement,
delivers to Park Ridge written demand for cash payment for his or her shares
and who does not vote in favor of approval of the Merger Agreement, will have
the right to such payment in the event the Merger is consummated, provided that
the shareholder complies with the applicable provisions of the Illinois Act. A
stockholder exercising dissenter rights under the Illinois Act may receive
consideration for his or her Park Ridge Common Stock more than, the same as, or
less than the consideration which would be received in the Merger. A copy of
those provisions is attached as Exhibit C to this Prospectus/Proxy Statement.
See "The Merger--Rights of Dissenting Shareholders."
FEDERAL INCOME TAX CONSEQUENCES. The Merger Agreement provides, as a
condition to the parties' obligations to consummate the Merger, that the
parties shall have received an opinion from counsel to First of America that
the Merger will qualify as a tax-free reorganization under the Internal Revenue
Code of 1986, as amended ("the Code"), and, except with respect to any cash
received in lieu of fractional shares or for shares of Park Ridge Common Stock
with respect to which dissenters' rights have been exercised, no gain or loss
will be recognized by the holders of Park Ridge Common Stock upon receipt of
shares of First of America Common Stock in exchange for their shares. See "The
Merger--Federal Income Tax Consequences."
REGULATORY APPROVALS. Consummation of the Merger is conditioned upon
obtaining the prior approval of the Board of Governors of the Federal Reserve
System (the "FRB"), the Financial Institutions Bureau of the State of Michigan
(the "Michigan FIB") and the Commissioner of Banks and Trust Companies of the
State of Illinois (the "Illinois Commissioner"). First of America is preparing
to submit, to these regulatory agencies, applications for approval of the
Merger.
OTHER CONDITIONS. Under the Merger Agreement, consummation of the
Merger is also subject to other conditions including, without limitation, the
absence of any material adverse change in the capitalization, business,
properties or financial condition of the parties. See "The Merger--Other
Conditions to the Merger,--Business of Park Ridge Pending the Merger."
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SELECTED FINANCIAL INFORMATION
($ in millions, except per share data) March 31, December 31,
----------------------------- -----------------------------------
FIRST OF AMERICA BANK CORPORATION 1994 1993 1993 1992 1991
--------------------------------- ---- ---- ---- ---- ----
BALANCE SHEET SUMMARY AT PERIOD END (Unaudited) (Unaudited)
Securities:
Held to Maturity $ 2,840 4,386 1,857 3,490 4,261
Available for sale 2,343 -- 3,261 -- --
Held for sale -- 683 -- 1,137 --
Net loans 14,186 13,379 14,205 13,516 13,053
Total assets 21,214 20,205 21,230 20,147 19,470
Deposits 18,153 17,920 18,244 18,036 17,483
Long-term debt 221 244 254 254 260
Total shareholders' equity 1,525 1,373 1,523 1,335 1,267
Book value per common share -
primary 25.69 22.76 25.60 22.12 20.58
SUMMARY OF OPERATIONS FOR THE PERIOD (a)
Net interest income 227 220 902 875 751
Provision for loan losses 21 24 85 79 71
Net income 58 59 247 148 159
Net income applicable to common
stock 58 57 241 135 144
Net income per common share:
Primary 0.98 0.99 4.20 2.46 2.69
Fully diluted 0.98 0.98 4.14 2.46 2.69
Cash dividends declared per common 0.40 0.35 1.55 1.34 1.24
share
FIRST PARK RIDGE CORPORATION
----------------------------
BALANCE SHEET SUMMARY AT PERIOD END
Securities $ 115 111 109 112 101
Net loans 179 169 181 170 163
Total assets 323 309 323 312 297
Deposits 275 254 269 255 243
Total shareholders' equity 38 34 37 33 30
Book value per common share 579.70 494.10 566.45 472.79 398.53
SUMMARY OF OPERATIONS FOR THE PERIOD
Net interest income 4 4 16 15 13
Provision for loan losses -- -- -- 1 --
Net income (loss) 1 2 6 6 5
Net income per common share 22.28 23.34 92.95 79.73 65.19
Cash dividends declared per common
share -- -- -- -- --
- -------------------------------------
($ in millions, except per share data) December 31,
---------------------
FIRST OF AMERICA BANK CORPORATION 1990 1989
--------------------------------- ---- ----
BALANCE SHEET SUMMARY AT PERIOD END
Securities:
Held to Maturity 3,775 3,604
Available for sale -- --
Held for sale -- --
Net loans 11,091 9,824
Total assets 16,790 15,507
Deposits 15,016 13,828
Long-term debt 180 171
Total shareholders' equity 1,176 1,118
Book value per common share -
primary 18.97 17.52
SUMMARY OF OPERATIONS FOR THE PERIOD (a)
Net interest income 679 641
Provision for loan losses 45 44
Net income 155 152
Net income applicable to common
stock 138 133
Net income per common share:
Primary 2.62 2.52
Fully diluted 2.62 2.52
Cash dividends declared per common
share 1.15 1.08
FIRST PARK RIDGE CORPORATION
----------------------------
BALANCE SHEET SUMMARY AT PERIOD END
Securities 95 77
Net loans 157 154
Total assets 279 262
Deposits 242 234
Total shareholders' equity 25 20
Book value per common share 333.35 269.14
SUMMARY OF OPERATIONS FOR THE PERIOD
Net interest income 13 12
Provision for loan losses 1 --
Net income (loss) 5 5
Net income per common share 64.21 58.57
Cash dividends declared per common
share -- --
- -------------------------------------
(a) The interim period presented is for the three months ended March 31.
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EQUIVALENT PER SHARE DATA (a)
Park Ridge
First of America Pro Forma Park Ridge Pro Forma
Historical First of America (b) Historical Equivalent (c)
---------- -------------------- ---------- --------------
Book value at March 31, 1994 $25.69 26.02 579.70 866.47
Cash dividends declared per share:
Year ended December 31, 1991 1.24 1.24 -- 41.29
Year ended December 31, 1992 1.34 1.34 -- 44.62
Year ended December 31, 1993 1.55 1.55 -- 51.62
Three months ended March 31, 1994 .40 .40 -- 13.32
Net income per share - primary:
Year ended December 31, 1991 2.69 2.67 65.19 88.91
Year ended December 31, 1992 2.46 2.47 79.73 82.25
Year ended December 31, 1993 4.20 4.15 92.95 138.20
Three months ended March 31, 1994 0.98 0.95 22.28 31.64
Net income per share - fully diluted:
Year ended December 31, 1991 2.69 2.68 65.19 89.24
Year ended December 31, 1992 2.46 2.49 79.73 82.92
Year ended December 31, 1993 4.14 4.08 92.95 135.86
Three months ended March 31, 1994 0.98 0.95 22.28 31.64
Market value per common share (d) 36.875 36.875 N/A 1,227.94
(a) Pro forma financial presentations provide information on the impact of
the Merger by showing how it might have affected historical financial
statements if the Merger had been consummated at an earlier time. The
pro forma results are not necessarily indicative of the results which
would have actually been attained if the acquisition had been
consummated in the past or what may be attained in the future.
Upon announcement of the Merger Agreement, First of America also
announced that it planned to repurchase a substantial portion of the
shares to be issued in connection with the Merger. The Equivalent Per
Share Data reflects repurchases of First of America Common Stock
occurring during the three months ended March 31, 1994. Since that
date First of America has repurchased an additional 1,060,600 shares
of First of America Common Stock. Further, on May 1, 1994, First of
America consummated its acquisition of LGF Bancorp, Inc. (see
"Information About First of America - Recent Developments"), which
resulted in the issuance of 1,645,245 shares of First of America
Common Stock. No assurance can be given regarding the number, if any,
of additional shares of First of America Common Stock that may be
repurchased.
(b) Pro forma amounts per share assume that Park Ridge Common Stock will
be converted and exchanged for First of America Common Stock based on
an Exchange Rate of 33.30 per share, which assumes a market value of
$36.875 per share of First of America Common Stock, the closing trade
price on the NYSE on April 15, 1994, the last trading day on which
sales of First of America Common Stock took place before public
announcement of the Merger Agreement.
(c) Pro forma amounts assume each share of Park Ridge Common Stock will be
converted into 33.30 shares of First of America Common Stock.
However, the Merger Agreement provides that the Exchange Rate is
determined based on the market price of First of America Common Stock
with a maximum Exchange Rate of 40.60 per share. See "The Merger -
Consideration to be Received in the Merger."
The Park Ridge pro forma equivalent market value assumes the Merger
was consummated on a hypothetical date in the past with an Exchange
Rate of 33.30 per share and is intended to show the subsequent value
of the First of America Common Stock hypothetically received, assuming
a subsequent market value of First of America Common Stock of $36.875.
Pro forma equivalent per share information based on the maximum
Exchange Rate follows:
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Maximum
Exchange Rate
40.60
-----------------
Pro forma book value: March 31, 1994 $ 1,056.41
Pro forma cash dividends declared:
Year ended December 31, 1991 50.34
Year ended December 31, 1992 54.40
Year ended December 31, 1993 62.93
Three months ended March 31, 1994 16.24
Pro forma fully diluted earnings per share:
Year ended December 31, 1991 108.81
Year ended December 31, 1992 101.09
Year ended December 31, 1993 165.65
Three months ended March 31, 1994 38.57
(d) The market value per share of First of America Common Stock
(Historical) represents the closing trade price on the NYSE on April
15, 1994, the last trading day on which sales of First of America
Common Stock took place before public announcement of the Merger
Agreement. Park Ridge Common Stock is not publicly traded. See Note
(c) above for a discussion of the calculation of the Park Ridge pro
forma equivalent market value.
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THE SPECIAL MEETING, PROXIES, VOTING, AND CERTAIN SHAREHOLDERS
THE SPECIAL MEETING. The Special Meeting will be held at Laser,
Pokorny, Schwartz, Friedman & Economos, P.C. located at 205 N. Michigan Avenue,
Suite 3800, Chicago, Illinois 60601, on _______, 1994, at ____ _.m. local time.
The purpose of the Special Meeting is for holders of Park Ridge Common Stock to
vote on approval of the Merger Agreement.
PROXIES. Proxies are solicited on behalf of the Board of Directors of
Park Ridge in connection with the Special Meeting and any adjournment thereof.
Shares of Park Ridge Common Stock represented at the Special Meeting by
properly executed proxies will, unless such proxies have been previously
revoked, be voted in accordance with the instructions made in such proxies. If
no instructions are made, the shares will be voted for approval of the Merger
Agreement. If any other matter is properly presented at the Special Meeting
for action, the persons named in the proxies and acting thereunder will have
discretion to vote on such matter in accordance with their reasonable business
judgment as to the best interests of Park Ridge and its shareholders. A
shareholder may revoke his or her proxy by executing and delivering to Park
Ridge a proxy bearing a later date, by giving Park Ridge written notice of
revocation before such proxy is voted, or by attending the Special Meeting and
voting in person. Attendance at the Special Meeting will not in and of itself
constitute the revocation of a proxy. Park Ridge's management currently does
not know of any other matter to be presented at the Special Meeting. The cost
of soliciting proxies will be borne by Park Ridge. Proxies may be solicited by
mail, in person, or by telephone by directors, officers or regular employees of
Park Ridge. These persons will not be specially compensated for soliciting
proxies.
VOTING. The record date for determining shareholders entitled to
notice of and to vote at the Special Meeting has been fixed as of the close of
business on _______________, 1994. At the close of business on that date,
there were 65,139 shares of Park Ridge Common Stock outstanding and entitled to
vote at the Special Meeting. Each share of Park Ridge Common Stock is entitled
to one vote. The favorable vote of the holders of at least 43,426 shares of
Park Ridge Common Stock is required for approval. See "The Merger --
Shareholder Approval, -- Related Agreements."
CERTAIN SHAREHOLDERS. The following table presents information about
the shares of Park Ridge Common Stock held as of ___________, 1994, by persons
known by Park Ridge to be beneficial owners of more than five percent of the
outstanding Park Ridge Common Stock, each director of Park Ridge, and all
directors and officers of Park Ridge as a group based on information supplied
by such persons.
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16
AMOUNT & NATURE OF BENEFICIAL OWNERSHIP OF COMMON STOCK(1)
Name & Address of Beneficial Owners, Shares of Park Ridge Common Percent of
Directors and Executive Officers Stock Beneficially Owned Common Stock
-------------------------------- ------------------------ ------------
Jules M. Laser(2) 21,486 33%
205 N. Michigan Avenue, Suite 3800
Chicago, Illinois 60601
Henry S. Frank(2) 7,625 11.7%
215 W. Illinois Street, Unit 6-B
Chicago, Illinois 60010
Patrick Arbor 7,207 11.1%
Chicago Board of Trade
141 W. Jackson
Chicago, Illinois 60604
Eugene T. Carter(3) 5,494(4) 8.4%
607 Devon Avenue
Park Ridge, Illinois 60068
Robert W. Troch, Jr. 4,689 7.2%
4116 W. Peterson
Chicago, Illinois 60646
Stephen J. Schostok(2) 3,127 4.8%
505 N. Lakeshore Drive
Chicago, Illinois 60611
All Directors & Officers as a Group 37,732 57.9%
- --------------------------------------
1 The numbers of shares presented include shares owned of record by
each person and shares which, under applicable regulations of the
Commission, are deemed to be beneficially owned by each person. Under these
regulations, a beneficial owner of a security includes any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has or shares voting power or investment power
with respect to the security. Voting power includes the power to vote or to
direct the voting of the security. Investment power includes the power to
dispose or to direct the disposition of the security.
2 The named person is a Director and Executive Officer of Park Ridge.
3 The named person is an Executive Officer of Park Ridge.
4 The number of shares presented includes 1,911 shares owned of record by
Judith A. Carter, Mr. Carter's wife.
2
17
THE MERGER
GENERAL. The following is a summary of the material terms of the
Merger Agreement and the Merger. The Merger Agreement contains all the terms of
and conditions to consummation of the Merger including the manner and basis for
converting and exchanging the outstanding shares of Park Ridge Common Stock
into and for First of America Common Stock. This description of the Merger and
the Merger Agreement and all other references herein are qualified in their
entirety by provisions of the Merger Agreement, which is incorporated herein by
reference, a copy of which is attached to this Prospectus/Proxy Statement as
Exhibit B.
PARTIES TO THE MERGER AGREEMENT. First of America is a Michigan
corporation, a registered bank holding company and a savings and loan holding
company with its corporate headquarters located in Kalamazoo, Michigan. At
March 31, 1994, its consolidated assets totaled $21.2 billion.
Acquisition Sub is an Illinois corporation wholly owned by First of
America. Its sole purpose is to facilitate First of America's acquisition of
Park Ridge.
Park Ridge is an Illinois corporation and a registered bank holding
company located in Chicago, Illinois. At March 31, 1994, Park Ridge's
consolidated assets totaled $323 million.
MERGER. The Merger Agreement provides that the affiliation of Park
Ridge with First of America is to be effected by the merger of Park Ridge into
Acquisition Sub, with Acquisition Sub designated as the surviving corporation.
Upon effectiveness of the Merger, First of America will continue its existing
business, Park Ridge will be merged into Acquisition Sub and cease to exist,
and Acquisition Sub will remain a wholly owned subsidiary of First of America.
The Merger Agreement also provides that as soon as is reasonably practicable
following effectiveness of the Merger, the Banks will be merged with First of
America-Northeast Illinois in the Bank Merger. The offices of the Banks will
be maintained as branch facilities of First of America-Northeast Illinois.
REASONS FOR MERGER AND AFFILIATION. The Board of Directors of Park
Ridge (the "Park Ridge Board") approved the Merger Agreement as being in the
best interests of Park Ridge and its shareholders. In taking such action, the
Park Ridge Board considered, among other things, the consideration offered to
Park Ridge shareholders in relation to the historical book value and earnings
per share of Park Ridge Common Stock. The Park Ridge Board also considered a
number of additional factors in approving the terms and conditions of the
Merger including, without limitation, the following: information concerning the
financial condition, earnings, dividend payment records and business prospects
of Park Ridge and First of America separately and combined; the anticipated
tax-free nature of the Merger to Park Ridge shareholders receiving First of
America Common Stock in exchange for their shares of Park Ridge Common Stock;
and the effect of the Merger on Park Ridge's customers, employees and
communities. The importance of these factors relative to one another cannot
precisely be determined here. Accordingly, the Park Ridge Board has
unanimously approved the Merger Agreement and unanimously recommends that Park
Ridge shareholders vote for approval of the Merger Agreement.
First of America's management believes that the affiliation of Park
Ridge with First of America will provide First of America with an attractive
means of expanding its presence in the financial institutions market in Park
Ridge, Buffalo Grove, and Gurnee, Illinois. This market complements the other
banking markets currently served by First of America's affiliate banks.
BACKGROUND OF THE MERGER. The terms of the Merger Agreement are the
result of arm's length negotiations between Park Ridge and First of America and
their respective representatives. In negotiating the terms of the Merger
Agreement, Park Ridge and First of America reviewed many factors, including
various of the following: the general business philosophies of First of
America and Park Ridge, the market price of First of America Common Stock,
historical earnings records, book and market values of assets, the nature of
the markets in which Park Ridge, the Banks and First of America operate, the
dividend history of First of America, deposit growth prospects, managements,
and judgments with regard to the future earnings prospects of Park Ridge and
First of America, separately and combined.
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In October, 1993, the Park Ridge Board began to evaluate alternative
methods of maximizing shareholder value, including the possibility of selling
or merging Park Ridge with a larger bank holding company. After discussing
with legal counsel the considerations involved in selling the company, Park
Ridge engaged Goldman Sachs in December 1993 to act as its financial advisor in
the possible sale transaction involving Park Ridge and authorized Goldman Sachs
to seek indications of interest on Park Ridge's behalf. In December 1993,
Goldman Sachs began to prepare a confidential selling memorandum, which was
distributed to potential buyers in January, 1994.
On February 1, 1994, Park Ridge (through Goldman Sachs) received
preliminary indications of interest from various potential buyers, including
First of America, and a number of those potential buyers (including First of
America) were invited to conduct additional due diligence on Park Ridge.
During February, 1994, all of these potential buyers completed a maximum of two
days of on-site due diligence on Park Ridge, which included a presentation by
Park Ridge's management and an opportunity to review Park Ridge's loan files.
On February 28, 1994, it was reported in the press that Park Ridge had engaged
Goldman Sachs to evaluate a potential sale of Park Ridge.
At a meeting held on April 1, 1994, which was attended by two
directors of Park Ridge and shareholders of Park Ridge owning in excess of
fifty percent of the outstanding shares of Park Ridge Common Stock, Goldman
Sachs, Park Ridge's legal counsel and its senior management reviewed the
various acquisition proposals made by the final bidders for Park Ridge on March
31, 1994, and based on such review and, among other things, Goldman Sachs'
conclusion that, as of April 1, 1994, the final acquisition proposal made by
First of America was superior to any other pending acquisition proposal, Park
Ridge's management was authorized to negotiate a final merger agreement with
First of America. Following an in-depth analysis, review and discussion of the
proposed final merger agreement with First of America, among Park Ridge's legal
counsel, its management and its Board of Directors, the Park Ridge Board
approved by unanimous consent on April 14, 1994, the Merger Agreement as being
in the best interests of Park Ridge and its shareholders.
RELATED AGREEMENTS. In connection with execution of the Merger
Agreement, Park Ridge shareholders who own in excess of 66-2/3 percent of the
outstanding Park Ridge Common Stock entered into that certain Approval and
Agreement of Certain Directors, Officers and Shareholders dated April 15, 1994
whereby those shareholders agreed: (1) subject to satisfaction of all
conditions contained in the Merger Agreement, to exchange all shares of Park
Ridge Common Stock, now or hereafter beneficially owned by each of them, in
accordance with the terms of the Merger Agreement; (2) to vote said shares, in
person or by proxy, at any meeting of shareholders of Park Ridge and all
adjournments thereof, in favor of approval of the Merger Agreement; and (3)
that none of the parties thereto would directly or indirectly sell or transfer
any beneficial interest in, assign, pledge, hypothecate or otherwise dispose of
or encumber any shares of Park Ridge Common Stock prior to the effective date
of the Merger, except with the prior express written consent of First of
America.
CONSIDERATION TO BE RECEIVED IN THE MERGER. The Merger Agreement
provides that upon effectiveness of the Merger, each issued and outstanding
share of Park Ridge Common Stock will be converted into and exchanged for the
number of shares of First of America Common Stock equal to the quotient
determined by dividing $1,228.14 (the "Exchange Price") by the average (rounded
to the nearest penny) of the last reported sale price of First of America
Common Stock as reported by the NYSE during the period of twenty consecutive
business days on which trading of First of America Common Stock takes place on
the NYSE and ending on the tenth day prior to the effectiveness of the Merger
(the "Average Closing Price") (the quotient of the Exchange Price divided by
the Average Closing Price is referred to as the "Exchange Rate").
In the event that the effectiveness of the Merger takes place after
October 14, 1994 (the "Additional Consideration Date"), Park Ridge shareholders
will receive additional consideration (in the form of First of America Common
Stock), based upon an interest factor of 7.75% per annum applied to the
Exchange Price for the period between the Additional Consideration Date and the
effective date of the Merger.
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The following table shows a range of hypothetical Average Closing
Prices and the Exchange Rates corresponding to those Average Closing Prices.
Average Closing Price Exchange Rates
-------------------------- ---------------------
$40.00 30.70
39.00 31.49
38.00 32.32
37.00 33.19
36.00 34.12
35.00 35.09
34.00 36.12
33.00 37.22
32.00 38.38
31.00 39.62
At or below 30.25 40.60
The parties to the Merger Agreement have no obligation to consummate
the Merger in the event that the Average Closing Price is less than $30.25 (ie.
at an Exchange Rate in excess of 40.60); however, in the event that the Average
Closing Price is less than $30.25, the Park Ridge Board of Directors may elect
to consummate the Merger at an Exchange Rate of 40.60.
The following table shows the closing trade price of First of America
Common Stock on the dates shown and the corresponding Exchange Rate that would
apply if the closing prices shown were the Average Closing Price.
Date Closing Trade Price Exchange Rates (2)
--------------------- --------------------- ---------------------
April 15, 1994 (1) $36.875 33.30
April 29, 1994 37.750 32.53
(1) The last trading day before public announcement of the Merger
Agreement.
(2) Assuming the closing trade price shown is the Average Closing Price.
The Exchange Rate, which determines the amount of First of America
Common Stock receivable by Park Ridge's shareholders, was determined through
the parties' negotiations of the Merger Agreement. These terms reflect First of
America's and Park Ridge's judgments as to the value of the shares of Park
Ridge Common Stock. (See "The Merger -- Background of the Merger ".)
FAIRNESS OPINION TO PARK RIDGE. Park Ridge engaged Goldman Sachs in
December, 1993, to act as its financial advisor in a possible sale transaction
involving Park Ridge.
The Merger Agreement provides that a condition precedent to Park
Ridge's and First of America's respective obligations to consummate the Merger
is that Park Ridge has received, no later than 14 days after the date of the
Merger Agreement (which was April 15, 1994), an opinion from Goldman Sachs,
dated as of the date of the Merger Agreement (with a copy to First of America),
to the effect that the terms of the Merger are fair to the shareholders of Park
Ridge. Accordingly, following execution of the Merger Agreement, Park Ridge
requested such an opinion from Goldman Sachs, and on April 29, 1994, Goldman
Sachs delivered a written opinion to the Board of Directors of Park Ridge,
dated as of April 15, 1994, to the effect that as of the date of the opinion,
the Exchange Price, payable in shares of First of America Common Stock, to be
received by the holders of Park Ridge Common Stock pursuant to the Merger
Agreement was fair to such holders.
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The full text of the opinion of Goldman Sachs, dated April 15, 1994,
which sets forth the assumptions made, matters considered and limits on the
review undertaken, is attached as Exhibit A to this Prospectus/Proxy Statement.
Park Ridge shareholders are urged to read such opinion in its entirety. The
summary of the opinion of Goldman Sachs set forth in this Prospectus/Proxy
Statement is qualified in its entirety by reference to the full text of such
opinion. Goldman Sachs' opinion is addressed only to the Board of Directors of
Park Ridge, is directed only to the Exchange Price, payable in shares of First
of America Common Stock, and does not constitute a recommendation to any Park
Ridge shareholder as to how such shareholder should vote at the Special Meeting
of Park Ridge shareholders relating to the proposed Merger.
In connection with its opinion, Goldman Sachs, among other things:
(a) reviewed the Merger Agreement, the Annual Report to Shareholders and Annual
Reports on Form 10-K of First of America for the five years ended December 31,
1993, the audited financial statements of Park Ridge for the four years ended
December 31, 1992, certain interim reports to stockholders and Quarterly
Reports on Form 10-Q of First of America, certain reports on Form FR Y-9C and
other interim reports of Park Ridge, certain other communications from First of
America to stockholders, and certain internal financial analyses and forecasts
for Park Ridge prepared by its management; (b) held discussions with members of
the senior management of Park Ridge and First of America regarding the past and
current business operations, financial condition and future prospects of their
respective companies; (c) reviewed with members of senior management of Park
Ridge the results of Park Ridge's due diligence examination of First of
America, and held discussions with the independent auditors of Park Ridge
regarding the financial and accounting affairs of Park Ridge; and (d) reviewed
the reported price and trading activity of shares of First of America Common
Stock, compared certain financial information for Park Ridge and certain
financial and stock market information for First of America with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations in
the bank and thrift industries specifically and in other industries generally
and performed such other studies and analyses as it considered appropriate.
Goldman Sachs relied without independent verification upon the
accuracy and completeness of all the financial and other information reviewed
by it for purposes of its opinion. In that regard, Goldman Sachs assumed, with
Park Ridge's consent, that the financial forecasts for Park Ridge have been
reasonably prepared on a basis reflecting the best currently available
judgments and estimates of Park Ridge and will be realized in the amounts and
at the times contemplated thereby. In addition, Goldman Sachs assumed, with
Park Ridge's consent, that allowances for losses with respect to loan
portfolios for each of Park Ridge and First of America are in the aggregate
adequate to cover all such losses. Goldman Sachs did not review individual
credit files nor did it make an independent evaluation or appraisal of the
assets and liabilities of Park Ridge or First of America or any of their
respective subsidiaries, and Goldman Sachs has not been furnished with any such
evaluation or appraisal.
In performing its analyses in order to render its opinion, dated April
15, 1994, Goldman Sachs made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many
of which are beyond the control of Park Ridge and First of America. The
analyses performed by Goldman Sachs are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Such analyses were prepared solely
as part of Goldman Sachs' analyses of the fairness of the Exchange Price
payable to Park Ridge's Shareholders pursuant to the Merger Agreement. The
analyses do not purport to be appraisals or to reflect the prices at which a
company might actually be sold or the prices at which any securities may trade
at the present time or at any time in the future.
Pursuant to a letter agreement, dated December 2, 1993 (the
"Engagement Letter"), Park Ridge has agreed to pay Goldman Sachs for its
services a transaction fee which becomes payable if a sale of Park Ridge is
accomplished in one or a series of transactions. Under the Engagement Letter,
the transaction fee will be payable in cash based on the aggregate
consideration paid in such transaction as follows: (i) 1 percent on the
aggregate consideration less than $85 million; (ii) 5 percent on the aggregate
consideration in excess of $85 million but less than $90 million and (iii) 6
percent on the aggregate consideration in excess of $95 million. Accordingly,
upon consummation of the Merger, a transaction fee of $800,000 will be payable
by Park Ridge to Goldman Sachs pursuant to the Engagement Letter. Park Ridge
has also agreed to pay Goldman Sachs for its reasonable out-of-pocket expense
up to a maximum aggregate reimbursement of $25,000 and for the fees and
disbursements of Goldman Sachs' counsel up to a maximum of $25,000 and to
indemnify Goldman Sachs against certain liabilities.
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Goldman Sachs has also performed various investment banking services
for First of America from time to time, including acting as co-manager of a
public offering of subordinated notes of First of America in January, 1992. In
connection with such services, Goldman Sachs received customary compensation.
INTERESTS OF MANAGEMENT. At ____________, 1994, all directors and
officers of Park Ridge as a group beneficially owned 37,732 shares or 58
percent of the outstanding shares of Park Ridge Common Stock. No director or
any executive officer of Park Ridge owns any First of America Common Stock.
None of First of America's executive officers or directors owns any shares of
Park Ridge Common Stock.
Certain members of Park Ridge's management and the Park Ridge Board
may be deemed to have certain interests in the Merger that are in addition to
their interests as stockholders of Park Ridge generally. The Park Ridge Board
was aware of these interests and considered them, among other matters, in
approving the Merger Agreement and the transactions contemplated thereby.
The Merger Agreement provides that for a period of two years following
the Bank Merger, Jules M. Laser shall serve on the Board of Directors of First
of America - Northeast Illinois. Additionally, the Merger Agreement provides
that First of America will indemnify the directors, officers and employees of
Park Ridge against certain liabilities following consummation of the Merger and
that First of America shall also use its best efforts to obtain directors and
officers' liability insurance for the benefit of the directors and officers of
Park Ridge for three (3) years after the Merger.
Pursuant to his prior existing agreement with FSB, in the event of a
sale or merger of Park Ridge, Eugene T. Carter, President of FSB, is entitled
to receive a special $250,000.00 bonus from FSB, in addition to payment of his
regular performance bonus determined in accordance with past practice. The
Merger will constitute a triggering sale or merger under his agreement.
SHAREHOLDER APPROVAL. At the Special Meeting, Park Ridge shareholders
will vote on approval of the Merger Agreement. Under the Illinois Act, the
affirmative vote of holders of at least two-thirds of the outstanding shares of
Park Ridge Common Stock entitled to vote is required for approval of the Merger
Agreement. At _____, 1994, the record date for the Special Meeting, there were
65,139 shares of Park Ridge Common Stock outstanding and entitled to vote at
the Special Meeting. Therefore, the affirmative vote of holders of at least
43,426 shares of Park Ridge Common Stock is required for approval of the Merger
Agreement. At ___________, 1994, all directors and officers of Park Ridge as a
group, beneficially owned 37,732 shares (or 58 percent of the outstanding
shares) of Park Ridge Common Stock. Certain directors, officers and
shareholders of Park Ridge have agreed to vote the 44,590 shares of Park Ridge
Common Stock beneficially owned by them for approval of the Merger Agreement.
See "The Merger--Related Agreements."
RECOMMENDATION OF PARK RIDGE BOARD OF DIRECTORS. The Park Ridge Board
has unanimously approved the Merger Agreement and unanimously recommends that
Park Ridge shareholders vote for approval of the Merger Agreement.
RIGHTS OF DISSENTING SHAREHOLDERS. Any holder of Park Ridge Common
Stock who objects to the Merger may demand payment of the appraised value of
his or her shares in cash pursuant to the procedures set forth in Paragraph
11.70 of the Illinois Act ("Paragraph 11.70"). Any holder of Park Ridge Common
Stock contemplating the exercise of his or her dissenter's rights of appraisal
should carefully review the provisions of Paragraph 11.70, which are described
below and set forth in their entirety as Exhibit C to this Prospectus/Proxy
Statement which is incorporated herein by reference. The following discussion
is not complete and is qualified in its entirety by reference to Paragraph
11.70.
Holders of record of Park Ridge Common Stock who desire to exercise
their appraisal rights must satisfy all of the following conditions. A writing
identifying the shareholder and demanding cash payment of the appraised value
of the shares must be delivered to Park Ridge before the shareholder vote on
approval of the Merger Agreement. A Park Ridge shareholder wishing to exercise
his or her dissenter's rights must not vote in favor of the Merger. A holder
of Park Ridge Common Stock who votes his or her shares of Park Ridge Common
Stock
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against the Merger, by proxy or otherwise, but who does not exercise his or her
dissenter rights pursuant to paragraph 11.70, will not thereby fulfill the
demand for appraisal requirement under Paragraph 11.70.
A shareholder who elects to exercise appraisal rights must mail or
deliver his or her written demand to:
Secretary
First Park Ridge Corporation
205 N. Michigan Avenue, Suite 3800
Chicago, Illinois 60601
The written demand for payment should specify the shareholder's name
and mailing address, the number of shares owned, and that the shareholder is
dissenting from the Merger and is thereby demanding payment for his or her
shares.
Within ten days after effectiveness of the Merger or thirty days after
delivery of the shareholder demand, Acquisition Sub will do the following: (1)
provide notice of the effectiveness of the Merger to all shareholders who have
complied with Paragraph 11.70; (2) submit to such shareholders an opinion of
Acquisition Sub as to the estimated fair value of the shares; (3) provide to
such shareholders Park Ridge's balance sheet and income statement as of the end
of its most recent fiscal year and its latest available interim financial
statements; and (4) commit to pay for the shares of the dissenting shareholder
for the estimated fair value upon transmittal of proof of ownership.
If the shareholder does not agree with the opinion of Acquisition Sub
as to the estimated fair value of the shares or the amount of interest due, the
shareholder, within 30 days from the delivery of Acquisition Sub's statement of
value, shall notify Acquisition Sub in writing of the shareholder's estimated
fair value and amount of interest due and demand payment for the difference
between the shareholder's estimate of fair value and interest due and the
amount offered by Acquisition Sub.
If, within 60 days from delivery to Acquisition Sub of the
shareholder's notification of estimated fair value of the shares and interest
due, Acquisition Sub and the dissenting shareholder have not agreed in writing
upon the fair value of the shares and interest due, Acquisition Sub shall
either pay the difference in value demanded by the shareholder, with interest,
or file a petition in the Circuit Court of Cook County, Illinois, requesting
the court to determine the fair value of the shares and the interest due.
Acquisition Sub shall make all dissenters whose demands remain unsettled
parties to the proceedings and all parties shall be served with a copy of the
petition. Failure of Acquisition Sub to commence such an action shall not
limit or affect the right of the dissenting shareholders to otherwise commence
an action as permitted by law.
Shareholders considering seeking appraisal should consider that the
fair value of their shares determined under Paragraph 11.70 could be more than,
the same as, or less than the consideration they are to receive in the Merger
if they do not seek appraisal of their shares, and that opinions of investment
banking firms, including the opinion of Goldman Sachs, dated as of April 15,
1994, (see "The Merger -- Fairness Opinion to Park Ridge"), as to fairness are
not deemed determinative as to fair value under Paragraph 11.70.
The cost of the appraisal proceeding shall be determined by the
Circuit Court and assessed against such parties as the Circuit Court deems
equitable in the circumstances. These costs do not include fees and expenses
of counsel and experts for the respective parties. The Circuit Court may order
that all or a portion of the costs incurred by any dissenting shareholder in
connection with the appraisal proceeding be assessed against Acquisition Sub
but only if Acquisition Sub's estimate of fair value is materially exceeded by
that determined by Circuit Court. If the amount which any dissenter estimated
to be the fair value of the shares materially exceeds the fair value of the
shares as determined by the Circuit Court, then all or any part of the costs
may be assessed against that dissenter. The Circuit Court may also assess the
fees and expenses of counsel and experts for the respective parties, in amounts
that the Circuit Court finds equitable in accordance with the guidelines set
forth in Paragraph 11.70.
Any shareholder who has duly demanded appraisal in compliance with
Paragraph 11.70 will not, after effectiveness of the Merger, be entitled to
vote the shares subject to such demand for any purpose or to receive any
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dividends or other distributions on such shares, except for dividends or
distributions payable to shareholders of record at a date preceding
effectiveness of the Merger.
FEDERAL INCOME TAX CONSEQUENCES. The Merger Agreement provides, as a
condition to the parties' obligations to consummate the Merger, that the
parties shall have received an opinion from counsel to First of America that
the Merger will qualify as a tax-free reorganization under the Code and, except
with respect to any cash received in lieu of fractional shares or for shares of
Park Ridge Common Stock with respect to which dissenters' rights have been
exercised, no gain or loss will be recognized by the holders of Park Ridge
Common Stock upon receipt of shares of First of America Common Stock in
exchange for their shares.
First of America has been advised by letter from its counsel, Howard &
Howard Attorneys, P.C. ("Howard & Howard") that in its opinion the Merger would
yield the federal income tax consequences described above. Howard & Howard's
opinion also states that the Merger would yield the following additional
federal income tax consequences.
No gain or loss will be recognized to Park Ridge shareholders who
receive First of America Common Stock in exchange for their Park Ridge Common
Stock. The basis of the First of America Common Stock received by Park Ridge
shareholders will be the same as the basis of the Park Ridge Common Stock
surrendered in exchange therefor. The holding period of the First of America
Common Stock received by Park Ridge shareholders will include the period during
which the Park Ridge Common Stock surrendered in exchange therefor was held,
provided that the Park Ridge Common Stock surrendered was held as a capital
asset at the time of the exchange. The payment of cash to Park Ridge
shareholders in lieu of fractional shares of First of America Common Stock will
be treated as if the fractional shares were distributed as part of the exchange
and redeemed by First of America. Provided that the Park Ridge Common Stock
surrendered in the exchange was held as a capital asset at the time of the
exchange, capital gain or loss will be realized and recognized to such
shareholder measured by the difference between the redemption price and the
adjusted basis of the First of America Common Stock redeemed.
Howard & Howard's opinion letter is dated ___________, 1994, and is
based on facts, laws, regulations, and interpretations as of that date.
Therefore, receipt of an additional opinion of Howard & Howard as of a date
more proximate to effectiveness of the Merger will be required to satisfy the
condition to the parties' obligations to consummate the Merger.
THE DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS INCLUDED
HEREIN FOR INFORMATIONAL PURPOSES ONLY. THE TAX CONSEQUENCES OF THE MERGER
WILL VARY DEPENDING ON THE CIRCUMSTANCES OF THE INDIVIDUAL SHAREHOLDER. EACH
SHAREHOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE AND
LOCAL TAX LAWS.
REGULATORY APPROVALS. Consummation of the Merger is contingent upon
obtaining the prior approvals of the Merger by the FRB, the Michigan FIB, and
the Illinois Commissioner, all without any conditions, which, in the reasonable
opinion of First of America, are materially adverse. First of America is
preparing to submit applications for approval of the Merger to these regulatory
agencies.
OTHER CONDITIONS TO THE MERGER. Consummation of the Merger is also
contingent upon other conditions, including the following: (1) accuracy in all
material respects of all financial statements of First of America and Park
Ridge required to be furnished to the opposite party; (2) prior receipt by Park
Ridge and First of America of favorable opinions of legal counsel to First of
America and Park Ridge, respectively, regarding various legal matters in
connection with the Merger; (3) compliance in all material respects by First of
America and Park Ridge with all terms of the Merger Agreement and receipt by
First of America and Park Ridge of officers' certificates from Park Ridge and
First of America, respectively, certifying such compliance; (4) immediately
before effectiveness of the Merger, the net worth of Park Ridge as shown by its
total shareholders' equity, plus the reserve for loan losses, shall not be less
than such amount as set forth in its consolidated balance sheet as of December
31, 1993; (5) neither Park Ridge, the Banks nor First of America shall have
been made a party to or, to their respective knowledge,
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threatened by litigation or other proceedings which, in their respective
reasonable opinions, are likely to materially adversely affect them, or which
materially challenges the Merger; (6) there shall have been no material adverse
change in the consolidated capitalization or business, properties, or financial
condition of First of America, the Banks or Park Ridge; (7) all documents
delivered and all proceedings undertaken by First of America and Park Ridge
shall be reasonably satisfactory to counsel to Park Ridge and counsel to First
of America, respectively; (8) receipt by First of America and Park Ridge of any
consents or approvals reasonably necessary, in the respective opinions of First
of America and Park Ridge, to consummate the Merger; (9) no stop order
proceedings with respect to the Registration Statement shall be pending or
threatened; (10) First of America shall have obtained any and all material Blue
Sky permits, authorizations, consents or approvals required for the issuance of
the First of America Common Stock; (11) consummation of the Merger shall not
violate any injunction, order, decree or judgment of any court or governmental
body having competent jurisdiction; (12) neither Park Ridge, the Banks, nor
First of America shall have failed to disclose any fact or circumstance
discovered since the date of the Merger Agreement that would materially impair
consummation of the Merger, or have a material adverse effect on their
business, operations or financial condition; and (13) consummation of the
Merger shall not violate any law, statute, rule or regulation, domestic or
foreign.
BUSINESS OF PARK RIDGE PENDING THE MERGER. There are additional
obligations of Park Ridge which are also conditions to consummation of the
Merger. Certain of these obligations provide that from the date of the Merger
Agreement to effectiveness of the Merger, Park Ridge and the Banks will: (1)
conduct business only in the ordinary course, on an arms-length basis and in
accordance with applicable laws, rules, regulations and past practices; (2)
maintain an adequate loan loss reserve based on past experience and evaluation
of potential losses in current portfolios; (3) remain in good standing with all
applicable banking regulatory authorities; (4) preserve each of its existing
locations; (5) consult with First of America before acquiring any interest in
real property; (6) use reasonable efforts to cause its current insurance
policies not to be canceled, terminated or to lapse, unless simultaneous
therewith replacement policies equal to the coverage are in full force and
effect; (7) use commercially reasonable efforts to preserve intact the business
organization and its goodwill and to keep available the services of its
officers and employees and preserve intact material agreements; (8) confer on a
regular and frequent basis as reasonably requested by First of America to
report on operational matters and the general status of ongoing operations.
Additional terms of the Merger Agreement provide that from the date of
the Merger Agreement to the effectiveness of the Merger, subject to certain
exceptions for contemplated transactions, Park Ridge will not, among other
things, without the prior written consent of First of America: (1) issue or
sell any shares, options, warrants, conversion privileges, or rights of any
kind to acquire any shares of any of its capital stock; (2) sell, assign,
transfer, mortgage, pledge, or encumber any of its material assets except in
the ordinary course of business, as a lien for current property taxes not yet
due, or as a lien which does not materially affect the value of or interfere
with the use or ability to convey the subject property; (3) amend or propose to
amend its Charter or Bylaws; (4) split, combine or reclassify any outstanding
share of capital stock; (5) declare, set aside or pay any dividend or other
distribution except for dividends payable in cash by any of its subsidiaries in
sums sufficient to enable it to pay amounts due to Continental Bank, N.A.; (6)
increase the number of shares outstanding or redeem, purchase, acquire, or
offer to acquire any shares of other securities; (7) acquire any corporation,
partnership, joint venture or other business organization or division or
material assets thereof except in exchange for debt previously contracted; (8)
borrow, incur, or become subject to any material liability except those
incurred in the ordinary course of business (but in no event will it or its
subsidiaries enter into any borrowing with a term greater than one year, except
for certificates of deposit and interest rate swaps, in each case with terms
not exceeding five years); (9) discharge or satisfy any material lien or
encumbrance, or pay any material liability except in the ordinary course of
business; (10) cancel any material debt or claim, or waive any right except in
the ordinary course of business; (11) make or enter into any transaction,
contract, or agreement involving in excess of $100,000, except with respect to
loan transactions; (12) incur any indebtedness for borrowed money with the
repayment exceeding one year, except for deposit liabilities and debt incurred
in the ordinary course of business; (13) cancel or compromise any material
amount of debt or claim, not previously charged off, except in the ordinary
course of business; (14) except as specifically provided in the Merger
Agreement, enter into any transaction other than in the ordinary course of
business; (15) invite, initiate, or engage in any merger or acquisition
discussions or negotiations other than with First of America; (16) take any
action which constitutes a breach or default or which is likely to delay or
jeopardize
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any regulatory approval; (17) modify any employment, severance, or similar
agreement or grant any bonus, wage, salary, compensation increase, severance,
or termination pay to any director, officer, employee, or consultant other than
that consistent with past practices; (18) adopt or amend any bonus, profit
sharing, stock option, pension, retirement, deferred compensation, or employee
benefit plans, trust, fund contract or arrangement, except as required by law;
(19) enter into any settlement agreement or take any other significant action
with respect to the conduct of any action, suit, proceeding, order or
investigation in which the amount involved is $50,000 or more, without
providing at least five business days prior notice to First of America; (20)
take any action with respect to investment securities held or controlled
inconsistent with past practices; (21) change its method of accounting except
as required by generally accepted accounting principles; (22) change its
method of reporting income and deductions for federal income tax purposes
except as required by law; (23) adopt or implement any amendment to its Charter
or any plan of reorganization which would affect the terms and provisions of
First of America's Common Stock to be issued in connection with the Merger.
TERMINATION, MODIFICATION, AMENDMENT, AND WAIVER. The Merger
Agreement may be terminated and the Merger abandoned before the effectiveness
of the Merger as follows: (1) by agreement between First of America and Park
Ridge authorized by a majority of the entire Board of Directors of each; (2) by
First of America or Park Ridge if any condition to effectiveness of the Merger
is not fulfilled and not waived by the party adversely affected; (3) by First
of America or Park Ridge in the event of a material breach by the opposite
party of any representation, warranty, covenant, or agreement contained in the
Merger Agreement which has not been cured within 30 days after written notice
has been given to the breaching party; or (4) by First of America or Park Ridge
if the Merger is not consummated on or before December 31, 1994; (5) by First
of America or Park Ridge, if the Merger is not approved by the Shareholders of
Park Ridge in accordance with the requirements of the Illinois Act; or (6) by
First of America or Park Ridge if (i) the Average Closing Price of First of
America Common Stock is less than $30.25; and (ii) the party electing to
terminate notifies the other party not later than two business days after the
last day of the valuation period; provided, however, that upon receipt of
notice from First of America, Park Ridge may elect to consummate the Merger at
the Exchange Rate of 40.60 by providing notice to First of America of its
intent to do so not later than two business days after Park Ridge has received
said notice from First of America.
At any time before effectiveness of the Merger (including the time
after shareholder approval of the Merger Agreement), the time for performance
may be extended and the covenants, agreements, and conditions of the Merger
Agreement may be modified, amended, or waived by First of America and Park
Ridge. However no such modification, amendment, or waiver may adversely affect
the consideration to be received in the Merger by Park Ridge shareholders, as
described above.
EFFECTIVENESS OF THE MERGER. No specific effective date for the Merger
is provided by the Merger Agreement. If the Merger Agreement is approved by
Park Ridge shareholders, it is expected that the Merger will be consummated as
soon as practicable after the requisite regulatory approvals (see "The
Merger--Regulatory Approvals") have been received. The Merger will thereafter
become effective upon the filing of the appropriate documents with applicable
regulatory authorities.
ACCOUNTING TREATMENT. The parties anticipate accounting for the
Merger as a purchase.
SURRENDER OF STOCK CERTIFICATES. After effectiveness of the Merger,
each holder of certificates theretofore representing validly issued and
outstanding shares of Park Ridge Common Stock will surrender his or her
certificates to First of America's stock transfer agent, the exchange agent for
such shares, and each holder will be entitled upon surrender to receive a
certificate representing the whole number of shares of First of America Common
Stock into which his or her shares of Park Ridge Common Stock will have been
converted and cash (without interest thereon) in lieu of fractional shares of
First of America Common Stock. Following effectiveness of the Merger and until
surrendered, each outstanding certificate representing Park Ridge Common Stock
will be deemed for all corporate purposes, other than payment of dividends
previously declared and unpaid or uncollected, to evidence ownership of only
the right to receive the First of America Common Stock (and cash in lieu of
fractional shares) into which shares of Park Ridge Common Stock will have been
converted in the Merger. Unless and until any such certificate is surrendered,
the holder thereof will not have any right to receive First of America Common
Stock (and cash in
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lieu of fractional shares) or any dividends otherwise payable on First of
America Common Stock. Following surrender, there will be paid to the record
holder of any Park Ridge Common Stock the amount of any dividends (without
interest thereon) otherwise payable except for failure to surrender.
RESALE OF THE FIRST OF AMERICA COMMON STOCK. Shares of First of
America Common Stock issued to shareholders of Park Ridge will be transferable
without restriction upon disposition, except shares issued to any person who
may be considered an "affiliate" of Park Ridge, as defined by the rules and
regulations of the Commission under the Securities Act. Shares of First of
America Common Stock issued to an affiliate of Park Ridge may be transferred
only in accordance with Rule 145 promulgated by the Commission under the
Securities Act.
DESCRIPTION AND COMPARISON OF FIRST OF AMERICA CAPITAL STOCK AND PARK RIDGE
COMMON STOCK
Holders of Park Ridge Common Stock will, upon consummation of the
Merger, become holders of First of America Common Stock. The rights of holders
of First of America Common Stock differ in some respects from the rights of
holders of Park Ridge Common Stock. These differences are due to differences
between the provisions of First of America's Articles of Incorporation and
Bylaws and Park Ridge's Articles of Incorporation and Bylaws and differences
between the Michigan Act, under which First of America is incorporated, and the
Illinois Act, under which Park Ridge is incorporated. The following discussion
describes and compares the material differences between the rights of holders
of First of America Common Stock and Park Ridge Common Stock.
FIRST OF AMERICA COMMON STOCK. First of America is authorized to issue
100,000,000 shares of First of America Common Stock, par value $10 per share.
At ___________, 1994, there were __________ shares of First of America Common
Stock outstanding, held of record by approximately _______ persons. As of that
date, there were also outstanding options to purchase _______ shares of First
of America Common Stock, held by officers of First of America and its
subsidiaries.
Subject to the prior rights of the holders of any First of America
Preferred Stock if and when outstanding (as described below), holders of First
of America Common Stock are entitled to receive dividends if and when declared
by the Board of Directors out of any funds legally available therefor. Subject
to the rights of holders of any First of America Preferred Stock if and when
outstanding, holders of First of America Common Stock are entitled to receive
pro rata upon liquidation, dissolution, or winding up all of the assets of
First of America remaining after provision for the payment of creditors.
Subject to the rights of holders of any First of America Preferred Stock if and
when outstanding to elect additional directors in the case of dividend
arrearages, holders of First of America Common Stock are vested with exclusive
voting rights, each share being entitled to one vote. Holders of First of
America Common Stock have no cumulative voting rights in electing directors.
Holders of First of America Common Stock have no preemptive rights to subscribe
for any additional shares of capital stock which First of America may issue.
First of America Common Stock is neither convertible nor redeemable. All
outstanding shares of First of America Common Stock are fully paid and
nonassessable.
First of America Common Stock is listed for trading on the NYSE
(symbol FOA). The high, low, and closing sales prices for First of America
Common Stock on March 31, 1994, were $38.125, $37.000 and $37.875,
respectively. On April 15, 1994, the last full trading day before public
announcement of the Merger, the high, low, and closing sales prices were
$37.250, $36.875 and $36.875, respectively. The First of America Common Stock
issuable upon consummation of the Merger will be listed for trading on the
NYSE.
FIRST OF AMERICA PREFERRED STOCK. First of America is authorized to
issue 10,000,000 shares of First of America Preferred Stock, $1.00 stated
value. Shares of First of America Preferred Stock are issuable in series with
designation, powers, relative rights and preferences as prescribed by First of
America's Board of Directors in the resolution providing for the issuance
thereof. There are currently no shares of First of America Preferred Stock
outstanding.
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FIRST OF AMERICA SHAREHOLDER RIGHTS PLAN. First of America has
reserved 500,000 shares of preferred stock for issuance as Series A Junior
Participating Preferred Stock ("Series A Preferred") upon the exercise of
certain preferred stock purchase rights (each a "Right") issued to holders of
and in tandem with shares of the Common Stock. The description and terms of
the Rights are set forth in a Rights Agreement ("Rights Agreement"), dated July
18, 1990, between First of America and First of America Bank-Michigan, N.A., as
Rights Agent. The Rights Agreement was filed with the Securities and Exchange
Commission as an exhibit to First of America's Registration Statement dated
July 18, 1990 on Form 8-A under the Securities Exchange Act of 1934. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement which is
incorporated herein by reference.
Generally, the Rights Agreement provides as follows. The Rights are
not exercisable until a Distribution Date, which occurs ten days after a person
or group (an "Acquiring Person") publicly announces acquisition of or commences
a tender offer which may result in the acquisition of beneficial ownership of
10 percent or more of the outstanding shares of First of America Common Stock
(a "Stock Acquisition Date"). If, following a Stock Acquisition Date, First of
America is merged with or engages in a business combination transaction with
the Acquiring Person or the Acquiring Person increases its beneficial ownership
of First of America Common Stock by more than one percent or engages in self
dealing, then holders of Rights, other than the Acquiring Person, will receive
upon exercise of each Right, common stock of First of America or of the entity
surviving the merger or business combination or other consideration with a
value of two times the exercise price of the right.
First of America may, at its option, at any time after a Stock
Acquisition Date and before an Acquiring Person becomes the beneficial owner of
more than 50 percent of the outstanding shares of First of America Common
Stock, elect to exchange all outstanding Rights for shares of First of America
Common Stock at an exchange ratio of one share of First of America Common Stock
per Right, subject to adjustment to prevent dilution. At any time until twenty
days following the Stock Acquisition Date, First of America may redeem the
Rights in whole, but not in part, at a price of $.01 per Right. Until a Right
is exercised, the holder thereof, as such, will have no right as a shareholder
of First of America, including, without limitation, the right to vote or to
receive dividends. Other than those provisions relating to the principal
economic terms of the Rights, any of the provisions of the Rights Agreement may
be amended by First of America's Board of Directors prior to the Distribution
Date.
If issued upon exercise of the Rights, shares of the Series A
Preferred will rank junior to the Convertible Preferred. Each share of Series
A Preferred shall be entitled to 100 votes on all matters submitted to a vote
of the shareholders of the Company. Additionally, in the event the Company
fails to pay dividends on the Series A Preferred for four full quarters,
holders of the Series A Preferred have certain rights to elect additional
directors of the Company. Except as described above, holders of the Series A
Preferred have no preemptive rights to subscribe for additional securities
which the Company may issue. The Series A Preferred will not be redeemable.
Each share of Series A Preferred will, subject to the rights of the Convertible
Preferred and any other preferred stock the Company may issue ranking senior to
the Series A Preferred, if any, be entitled to preferential quarterly dividends
equal to the greater of $10.00, or subject to certain adjustments, 100 times
the dividend declared per share of Common Stock. Upon liquidation of the
Company, holders of Series A Preferred will, subject to the rights of senior
securities, be entitled to a preferential liquidation payment equal to $95.00
per share, plus accrued and unpaid dividends. In the event of any merger,
consolidation, or other transaction in which shares of Common Stock are
exchanged, each share of Series A Preferred will, subject to the rights of
senior securities, be entitled to receive 100 times the amount received per
share of Common Stock. The rights of the Series A Preferred are protected by
customary antidilution provisions.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire First of
America without conditioning the offer on a substantial number of Rights being
acquired. The Rights should not interfere with any merger or other business
combination approved by First of America's Board of Directors since the Board
of Directors may, at its option, at any time until 20 days following the stock
acquisition date redeem all but not less than all of the then outstanding
Rights at the redemption price. First of America Common Stock issuable upon
consummation of the Merger shall have rights under the Rights Agreement to the
same extent as other outstanding shares of First of America Common Stock.
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PARK RIDGE COMMON STOCK. Park Ridge is authorized to issue 200,000
shares of Park Ridge Common Stock, no par value. At ___________, 1994, there
were 65,139 shares of Park Ridge Common Stock outstanding, held of record by 23
persons or entities. As of that date, there were no outstanding warrants,
options, rights, calls, agreements, understandings, or other commitments of any
nature relating to the authorization, issuance or sale of any Park Ridge Common
Stock.
There is no established public trading market for Park Ridge Common
Stock. To the knowledge of Park Ridge's management, the following sales of
Park Ridge Common Stock occurred in 1992, 1993, and 1994:
Date Number of Shares Price Per share
- ---- ---------------- ---------------
April 10, 1992 2,057 $400.00
December 1, 1992 2,923 $615.80
February 2, 1993 40 $500.00
April 13, 1993 2,057 $500.00
September 14, 1993 2,074 $723.25
Holders of Park Ridge Common Stock are entitled to receive dividends
when, as, and if declared by the Park Ridge Board out of any funds legally
available therefor. Park Ridge did not declare or pay dividends on Park Ridge
Common Stock during 1992 and 1993.
In the event of liquidation holders of Park Ridge Common Stock are
entitled, after payment of the claims of creditors, to receive pro rata the net
assets of Park Ridge. Holders of Park Ridge Common Stock are vested with all
voting power of Park Ridge and are entitled to one vote for each share held.
Park Ridge's shareholders have cumulative voting rights with respect to the
election of directors. Holders of Park Ridge Common Stock have preemptive
rights to subscribe for additional shares of capital stock of Park Ridge. Park
Ridge Common Stock is neither convertible nor redeemable. All outstanding
shares of Park Ridge Common Stock are fully paid and nonassessable.
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COMPARISON OF CERTAIN PROVISIONS OF FIRST OF AMERICA'S ARTICLES OF
INCORPORATION AND BYLAWS AND
PARK RIDGE'S ARTICLES OF INCORPORATION AND BYLAWS
The following discussion describes provisions of First of America's
Articles of Incorporation and Bylaws and Park Ridge's Articles of Incorporation
and Bylaws relating to the topics indicated by the captions and then compares
the provisions. The discussion is intended to show the differences in the
rights of holders of First of America Common Stock and Park Ridge Common Stock
and illustrate the effect of the Merger on Park Ridge shareholders who become
First of America shareholders.
BOARD OF DIRECTORS.
FIRST OF AMERICA. The Articles of Incorporation ("Articles") of
First of America provide that directors of First of America are divided into
three classes and, at each annual meeting of shareholders, one class is elected
for a three year term. Under the Articles, the number of directors is fixed
from time to time by resolution adopted by a number of directors constituting
not less than 80 percent of First of America's full Board of Directors. Subject
to the rights of holders of any particular class or series of equity securities
of First of America, any newly created directorship resulting from an increase
in the total number of authorized directors may be filled by an 80 percent vote
of the directors then in office, or by a sole remaining director, or by a
majority vote of the shareholders. Any vacancy resulting from death,
resignation, retirement, disqualification, removal from office, or other cause
may be filled only by an 80 percent vote of the directors then in office, or by
a sole remaining director. Any director elected to fill any newly created
directorship or vacancy shall serve for the remainder of the full term of the
class to which such director has been elected. The Articles provide that
directors may be removed only for cause and only by the affirmative vote of
holders of not less than 66 2/3 percent of the outstanding shares of capital
stock of First of America entitled to vote generally in the election of
directors ("Voting Stock"). First of America's Bylaws provide that nomination
of directors by shareholders may be made only in person or by proxy at a
meeting at which the nominating shareholder is entitled to vote, and only if
written notice of such shareholder's intent to make such nomination has been
received by First of America at least 30 days but not more than 90 days before
the anniversary date of the record date for determination of shareholders
entitled to vote at the immediately preceding annual meeting of shareholders.
The notice must contain certain information as specified in First of America's
Bylaws.
First of America's Bylaws set forth certain qualifications for any
nominee to be eligible to be elected or to serve on its Board of Directors.
These qualifications include the requirement that the nominee have a history of
conducting his or her own personal and business affairs in a safe and sound
manner, in a safe and sound condition, and in accordance with applicable laws
and regulations, and without substantial conflicts of interest. The Bylaws
require that all nominees complete a qualification, eligibility and disclosure
questionnaire in the form approved by First of America's Board of Directors.
The Bylaws also set forth procedures pursuant to which the Directors Nominating
and Management Succession Committee of the Board of Directors shall determine
whether nominees are eligible to serve as directors pursuant to the
qualifications set forth in the Bylaws.
PARK RIDGE. Park Ridge's Articles and Bylaws do not prescribe
qualifications or other eligibility criteria for persons to serve as directors.
Pursuant to the Park Ridge Bylaws the Board of Directors may consist of not
greater than three members. Currently, there are three directors on the Park
Ridge Board of Directors. The number of directors may be increased or
decreased by a resolution of the Board of Directors. Vacancies may be filled
at any regular or special meeting of shareholders called for that purpose.
Directors are elected by shareholders using cumulative voting, whereby each
shareholder has the right to vote the number of shares owned by him or her,
multiplied by the number of directors to be elected. The shareholder can give
all of his votes to one director or can distribute them among as many directors
as he or she sees fit.
COMPARISON. First of America's Articles make removal of directors more
difficult than do Park Ridge's Articles or Bylaws. The First of America
provisions could have the effect of making removal of incumbent management more
difficult, and, therefore, may discourage accumulation of a substantial block
of First of America Common Stock by a shareholder and discourage assumption of
control by such a shareholder. Also, by not adopting
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cumulative voting, First of America provisions make it more difficult for
minority shareholders to elect a member to the Board of Directors.
ACTION BY SHAREHOLDERS.
FIRST OF AMERICA. First of America's Articles do not contain a written
consent provision. As a result First of America shareholders may not act by
written consent without a shareholder meeting unless the written consent of all
shareholders is obtained. Special meetings called by shareholders may be called
only by holders of not less than 66-2/3 percent of the Voting Stock, and such
meetings require 30 days prior notice stating all purposes of the meeting.
First of America's Bylaws provide that only such business as set forth in a
notice of a special meeting of shareholders shall be conducted at the meeting.
First of America's Bylaws set forth procedures for shareholders to give notice
of matters proposed to be brought before the annual meeting of shareholders.
These procedures require that the shareholder's notice be received by First of
America's Secretary at least 30 but not more than 90 days before the
anniversary of the record date for determination of shareholders entitled to
vote at the immediately preceding annual meeting of shareholders. The notice
must include information about the business desired to be brought before the
annual meeting, and any material interest of the shareholder therein, and the
shareholder's beneficial ownership of First of America's securities.
PARK RIDGE. Park Ridge's Articles are silent with respect to written
consents. Therefore, any action which may be taken at a meeting of the
shareholders may be taken by written consent of the number of outstanding
shares necessary to approve the action by vote, provided five days prior
written notice was given to all shareholders authorized to vote, or by
unanimous written consent of all shareholders entitled to vote with respect to
the subject matter thereof. Under Park Ridge's Bylaws, special shareholder
meetings must be called upon the request of holders of not less than 20 percent
of the then outstanding shares of Park Ridge.
COMPARISON. First of America's Articles do not permit action by
shareholders by written consent without a meeting. Park Ridge's Articles do
permit such action. First of America's Articles make calling special
shareholder meetings more difficult than do Park Ridge's Articles. First of
America's Bylaws also make it more difficult than do Park Ridge's Articles and
Bylaws for shareholders to raise matters for action at the annual meeting of
shareholders. The First of America provisions may have the effect of assisting
incumbent management in retaining their positions and discouraging business
combination transactions, such as a merger, which management does not first
approve.
SUPERMAJORITY APPROVAL OF CERTAIN TRANSACTIONS.
FIRST OF AMERICA. Under First of America's Articles, except where a
greater vote is required by the Fair Price Act (as defined below, see
"Comparison of The Michigan Business Corporation Act and the Illinois Business
Corporation Act--Transactions with Interested Shareholders"), the affirmative
vote of 66-2/3 percent of the Voting Stock and a majority of the Voting Stock
not held by the beneficial owner of 10 percent or more of the Voting Stock of
First of America (an "Interested Shareholder") is required to approve certain
business combination transactions with an Interested Shareholder not approved
by First of America's Board of Directors, unless the price per share to be
received by all shareholders is at least equal to the price paid for shares of
Voting Stock purchased by the Interested Shareholder within the preceding two
years. The Articles also provide that any merger with another corporation other
than a subsidiary, sale or disposition of substantially all assets, or
liquidation or dissolution requires the affirmative vote of at least 66-2/3
percent of the Voting Stock, unless it is approved by a majority of the First
of America's Directors, other than those affiliated with the other party to the
transaction.
PARK RIDGE. Park Ridge's Articles and Bylaws do not contain
supermajority approval provisions similar to those of First of America
described above.
COMPARISON. First of America's Articles discourage business
combination transactions, such as a merger, between First of America and a
holder of a substantial block of Voting Stock, unless management approves the
transaction. Thus, the First of America provisions may have the effect of
giving a minority shareholder or group
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of shareholders, including management, the ability to defeat a transaction
which may be desired by or viewed as beneficial to other shareholders.
AMENDMENT OR REPEAL OF CERTAIN PROVISIONS.
FIRST OF AMERICA. The provisions of First of America's Articles
described herein may be amended or repealed only by the affirmative vote of at
least 66-2/3 percent of the Voting Stock. The provisions of First of America's
Bylaws described above and certain other bylaw provisions may be amended or
repealed only by the affirmative vote of at least 66-2/3 percent of the Voting
Stock or 80 percent of First of America's full Board of Directors.
PARK RIDGE. Park Ridge's Articles may be amended by the affirmative
vote of at least 66-2/3 percent of the outstanding shares entitled to vote on
the proposed amendment. Park Ridge's Bylaws may be amended or repealed by a
majority vote of the Board of Directors.
COMPARISON. The First of America and Park Ridge provisions regarding
amendments to their respective Articles are the same. However, First of
America's Bylaws are, with respect to provisions discussed in this section,
more difficult to amend than Park Ridge's Bylaws.
OTHER PROVISIONS.
FIRST OF AMERICA. First of America's Articles provide that when the
Board of Directors is evaluating a tender or exchange offer of another person,
an offer to merge, or to purchase all the assets of First of America, it shall
consider all relevant factors including the social and economic effects on
employees, customers, suppliers, and other constituencies and on the
communities in which First of America operates or is located. This provision of
First of America's Articles may allow First of America's Board of Directors to
use the factors stated as a basis for rejecting an offer that, judged strictly
on its financial terms, may be desirable by First of America shareholders.
PARK RIDGE. Park Ridge does not have a similar provision in its
Articles or Bylaws.
OVERALL COMPARISON AND EFFECTS OF FIRST OF AMERICA PROVISIONS.
In comparison to Park Ridge's Articles and Bylaws, First of America's
Articles and Bylaws generally contain more provisions that may have the effect
of discouraging, delaying, deterring, or preventing a change in control of
First of America, through a business combination transaction or otherwise.
These provisions may also have the effect of making First of America's
incumbent management more difficult to remove and may discourage accumulations
of significant blocks of First of America Common Stock. However, First of
America's intent in implementing the provisions described above was not to
discourage proposals involving a change in control of First of America, but
rather, to encourage the makers of such proposals to negotiate with First of
America's management and Board of Directors so that they can act in the best
interest of shareholders.
COMPARISON OF THE MICHIGAN BUSINESS CORPORATION ACT AND THE ILLINOIS BUSINESS
CORPORATION ACT
If the Merger is consummated, Park Ridge shareholders will become
shareholders of First of America. First of America is a Michigan corporation
incorporated under the Michigan Act. Park Ridge is an Illinois corporation
incorporated under the Illinois Act. The following discussion summarizes
material differences between the Michigan Act and the Illinois Act with respect
to rights of shareholders.
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DISSENTERS' RIGHTS OF APPRAISAL.
In both Michigan and Illinois, a shareholder who does not vote in
favor of certain corporate actions has the right to receive cash in exchange
for such shareholder's stock. This right is known as the "right to dissent"
and is triggered by certain amendments to the articles of incorporation,
mergers, consolidations, and sales or other dispositions of all or
substantially all of the assets of a corporation.
MICHIGAN ACT. Under the Michigan Act, rights to dissent from a
corporate action (including a merger or consolidation) are not available as to
shares listed on a national securities exchange (such as First of America
Common Stock) or held of record by not less than 2,000 persons on the record
date fixed to determine the shareholders entitled to vote on the corporate
action. Further, rights to dissent are not available in connection with
mergers or consolidations pursuant to which shareholders receive cash or shares
of stock which shares of stock to be received are listed on a national
securities exchange or are held of record by not less than 2,000 persons on the
record date fixed to determine the shareholders entitled to vote on the merger
or consolidation.
ILLINOIS ACT. Under the Illinois Act, the right to dissent is not
limited by the size of the corporation or the type of consideration received.
Park Ridge shareholders have dissenters' rights with respect to the Merger.
See "The Merger--Rights of Dissenting Shareholders."
SUPERMAJORITY VOTING PROVISIONS
MICHIGAN ACT. Under the Michigan Act, supermajority voting provisions
(which require a greater-than-majority vote in order to take certain actions)
may be included in a corporation's articles of incorporation. Adding a
supermajority voting provision to the articles of incorporation requires a
simple majority vote of approval by shareholders. Changing or eliminating a
supermajority voting provision, however, requires the same supermajority
shareholder approval as contained in the provision being changed or eliminated.
ILLINOIS ACT. Under the Illinois Act, certain corporate actions
requiring shareholder approval (e.g., amendment of articles of incorporation,
sale of substantially all assets, merger, and liquidation) must be approved by
holders of two-thirds of a corporation's outstanding voting stock.
Supermajority voting provisions (which require a vote greater than that
required by statute in order to take certain actions) may be included in a
corporation's articles of incorporation. Adding a supermajority voting
provision to the articles of incorporation requires the affirmative vote of
holders of at least two-thirds of a corporation's outstanding voting stock.
Changing or eliminating a supermajority voting position requires the same
two-thirds shareholder approval unless the articles specifically require a
higher vote.
ACTION WITHOUT A MEETING
MICHIGAN ACT. Under the Michigan Act, a corporation's articles of
incorporation may provide that shareholders may take action without a meeting
and without a vote if consent in writing to the action taken is given by
holders of at least the minimum number of shares that would be required to vote
for approval of such action at a meeting. If a corporation's articles do not
contain a provision such as that described above, then unanimous consent by
holders of all shares that would be entitled to vote on the action at a meeting
is required to take action without a meeting and a vote.
ILLINOIS ACT. Under the Illinois Act, unless otherwise provided in a
company's articles of incorporation, an action required by law to be taken at
an annual or special meeting of shareholders may instead be taken by written
consent, setting forth the action, signed by the holders of the number of
outstanding shares necessary to approve the action by vote, provided five days
prior written notice was given to all shareholders authorized to vote, or by
unanimous consent of all the shareholders entitled to vote with respect to the
subject matter thereof.
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TRANSACTIONS WITH INTERESTED SHAREHOLDERS.
MICHIGAN ACT. The Fair Price Act, which forms a part of the Michigan
Act, provides that a supermajority of 90 percent of the shareholders and no
less than two-thirds of the votes of noninterested shareholders must approve a
"business combination." The Fair Price Act defines a "business combination" to
encompass any merger, consolidation, share exchange, sale of assets, stock
issue, liquidation, or reclassification of securities involving an "interested
shareholder" or certain "affiliates." An "interested shareholder" is generally
defined as any person who owns 10 percent or more of the outstanding voting
shares of the corporation. An "affiliate" is a person who directly or
indirectly controls, is controlled by, or is under common control with, a
specified person.
The supermajority vote required by the Fair Price Act does not apply
to business combinations that satisfy certain conditions. These conditions
include, among others, that (1) the purchase price to be paid for the shares of
the corporation is at least equal to the highest of either (a) the market value
of the shares or (b) the highest per share price paid by the interested
shareholder within the preceding two-year period or in the transaction in which
the shareholder became an interested shareholder, whichever is higher; and (2)
once becoming an interested shareholder, the person does not become the
beneficial owner of any additional shares of the corporation except as part of
the transaction which resulted in the interested shareholder becoming an
interested shareholder or by virtue of proportionate stock splits or stock
dividends.
The requirements of the Fair Price Act do not apply to a business
combination with the interested shareholder that the board of directors has
approved or exempted from the requirements of the Fair Price Act by resolution
at any time prior to the time that the interested shareholder first became an
interested shareholder.
ILLINOIS ACT. The Illinois Act also has a fair price provision which
is similar to that found in the Michigan Act. This provision, however, does
not apply to Park Ridge because Park Ridge Common Stock is not registered under
the Exchange Act and Park Ridge has not specifically adopted the provision.
In addition to the fair price provision mentioned above, the Illinois
Act also contains another provision limiting business combination transactions
between a corporation and an interested shareholder. This provision, however,
does not apply to Park Ridge because Park Ridge Common Stock is not listed on a
national securities exchange, authorized for quotation on an inter-dealer
quotation system of a registered national securities association, or held of
record by more than 2,000 shareholders.
CONTROL SHARE ACQUISITIONS.
MICHIGAN ACT. Under the Shareholder Equity Act, which forms a part of
the Michigan Act, "Control Shares" of an "issuing public company" purchased by
a shareholder or group of shareholders may be voted only to the extent approved
(1) by a majority of the outstanding voting shares and (2) a majority of the
outstanding voting shares excluding shares held by the acquiring person or
group and shares held by officers and employees/directors of the issuing public
company. "Control Shares'' are shares that, when added to other shares owned by
the person or group, would entitle such person or group to exercise voting
power of an issuing public company in the election of directors within any of
the following ranges of voting power: (1) one-fifth or more but less than
one-third of all voting power; (2) one-third or more but less than a majority
of all voting power; or (3) a majority of all voting power. An "issuing public
company" is one that has (1) 100 or more shareholders of record, (2) its
principal place of business, its principal office or substantial assets in
Michigan and (3) either (a) more than 10 percent of its shareholders of record
reside in Michigan, (b) more than 10 percent of its shares owned of record by
Michigan residents or (c) 10,000 shareholders of record residing in Michigan.
The Board of Directors of First of America has amended its Bylaws to
provide, as authorized by the Shareholder Equity Act, that Control Shares held
by a Control Shares acquiror who has not filed an acquiring person statement
with First of America are subject to redemption and that Control Shares which
have not been accorded full voting rights after a vote, as provided in the Act,
are subject to redemption. The redemption price is the highest price per share
which the Control Share acquiror has paid for the Control Shares.
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ILLINOIS ACT. The Illinois Act does not contain any provision similar
to those of the Michigan Act with respect to control share acquisitions other
than as discussed above under "Transactions with Interested Shareholders."
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INFORMATION ABOUT FIRST OF AMERICA
GENERAL. First of America is a corporation organized under the
Michigan Act, a bank holding company registered under the Bank Holding Company
Act and a savings and loan holding company under HOLA. Its principal activity
consists of owning and supervising 20 affiliate financial institutions which
operate general commercial banking businesses from 567 offices and facilities
located in Michigan, Illinois, Indiana, and Florida. First of America owns 9
banks located in Michigan with combined assets of $12.9 billion at March 31,
1994. First of America owns 9 banks located in Illinois with combined assets
of $6.9 billion at March 31, 1994. First of America owns two banks in Indiana
with combined assets of $1.4 billion at March 31, 1994. First of America also
has divisions and non-banking subsidiaries which provide mortgage, trust, data
processing, pension consulting, discount securities brokerage, revolving credit
and investment advisory services. First of America owns all of the outstanding
stock of Acquisition Sub. At March 31, 1994, First of America had consolidated
assets of $21.2 billion, deposits of $18.2 billion, and shareholders' equity of
$1.5 billion.
First of America is frequently in the process of examining potential
acquisitions or merger candidates. Several potential acquisitions or mergers
are often at different stages of development and negotiation at any one time.
No assurance can be given that First of America will or will not consummate any
such acquisitions or mergers.
First of America was incorporated in 1971 by its lead bank, First of
America Bank-Michigan, N.A., Kalamazoo, Michigan, which was established in
1863. It became a bank holding company in 1972 in a transaction in which First
of America Bank-Michigan, N.A. and two other banks became wholly owned
affiliates. First of America became a savings and loan holding company on July
31, 1990, through the acquisition of a federally chartered stock savings
association which has since been merged with one of First of America's
affiliate commercial banks.
As the parent company, First of America provides certain management
functions to its affiliate financial institutions relating to loan policies and
procedures, profit planning and accounting, external and internal audit, legal
advice and compliance with government regulations, and general coordination of
investment, trust, and human resources administration, data processing, and
product development activities.
First of America's affiliate financial institutions offer a broad
range of lending, depository, and related financial services to individual,
commercial, industrial, financial, and governmental customers, including
demand, savings, and time deposits, secured and unsecured loans, lease
financing, letters of credit, money transfers, corporate and personal trust
services, cash management, and other financial services.
RECENT DEVELOPMENTS. On April 15, 1994, First of America acquired the
Florida offices of Goldome Federal Savings Bank from the Resolution Trust
Corporation. First of America purchased assets and assumed liabilities,
including approximately $390 million in deposits and 36 full banking offices in
ten counties of southern Florida.
On May 1, 1994, First of America completed the acquisition of LGF
Bancorp, Inc. ("LGF") and its principal subsidiary, La Grange Federal Savings &
Loan Association, based in La Grange, Illinois. Each share of LGF common stock
was converted into 0.8754 share of First of America Common Stock and certain
option rights to purchase LGF common stock were each converted into 0.6322
share of First of America Common Stock. This transaction resulted in the
issuance of 1,645,245 shares of First of America Common Stock and was accounted
for as a purchase. At March 31, 1994, LGF had total assets of $408 million.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE. Additional
information about First of America, including certain financial information,
information about voting securities of First of America and principal holders
thereof, and information about directors and executive officers of First of
America, is included in the documents filed by First of America with the
Commission and the NYSE under the Exchange Act and incorporated herein by
reference. See "Incorporation of Certain Documents by Reference."
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INFORMATION ABOUT PARK RIDGE
BUSINESS. Park Ridge is a corporation organized under the Illinois
Act and a bank holding company registered and operating under the Bank Holding
Company Act. Park Ridge's corporate headquarters are located at 205 N.
Michigan Avenue, Suite 3800, Chicago, Illinois 60601. Park Ridge's sole
activity consists of owning and supervising the Banks. At March 31, 1994, Park
Ridge had total assets of $323 million, deposits of $275 million and
shareholders' equity of $38 million.
The Banks are Illinois state banks and serve the greater Chicago
market with offices located in Park Ridge, Buffalo Grove and Gurnee, Illinois.
FSB and BBG were chartered in 1967 and 1968, respectively. Gurnee's charter
dates back to 1916; however, that charter was obtained through acquisition of an
inactive charter. Gurnee began its operations in June, 1994.
The Banks offer a broad range of lending, depository, and related
financial services to individuals, commercial, industrial, financial, and
governmental customers, including demand, savings, and time deposits, secured
and unsecured loans, money transfers, letters of credit, merchant processing
and other financial services.
COMPETITION. The banking business is highly competitive in the
metropolitan Chicago area, which is the primary market for the Banks. The
Banks compete for commercial, individual and other deposits and loans with
banks and other financial service providers including savings and loan
associations, credit unions, insurance companies, captive finance companies,
brokerage firms and credit card companies.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
The following financial review compares the performance of Park Ridge
and the Banks, for the three years ended December 31, 1993, and should be read
in conjunction with the consolidated financial statements and notes thereto.
INCOME ANALYSIS
Net income for the periods ending December 31, 1993, 1992 and 1991 was
$6,254,000, $5,785,000 and $4,843,000, respectively. The 1993 net income
reflects a $140,000 cumulative effect of a change in accounting principle for
the adoption of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes". Return on average assets for the same periods
was 2.0 percent, 1.8 percent and 1.7 percent, respectively. Return on average
total equity was 18.0 percent for 1993, 18.5 percent for 1992 and 17.8 percent
for 1991.
Net interest income, which is the difference between interest earned
on assets and interest paid on liabilities, was $15,765,000 in 1993,
$15,412,000 in 1992 and $13,051,000 in 1991. The increases in 1993 was mainly
the result of increased loan volume. The increase in 1992 was mainly the
result of investment and loan yields declining at a lessor rate than deposit
yields. The net interest margin for the same periods was 5.42 percent, 5.51
percent and 5.18 percent, respectively.
The provision for loan losses was $280,000 for 1993, $510,000 for 1992
and $230,000 for 1991. The allowance for loan losses as a percent of period
end loans was 1.1 percent at year-end 1993, 1.0 percent at year-end 1992 and
1.1 percent at year end 1991. Net charge-offs for those years totalled
$17,000, $566,000 and $230,000, respectively.
In the non-interest income categories, service charges increased 2.5
percent to $1,059,000 in 1993 compared with $1,033,000 in 1992 and $1,047,000
in 1991. Credit card processing fees increased 24.7 percent to $1,117,000 in
1993 compared to $896,000 in 1992 and $513,000 in 1992. Other operating income
was up 20.3 percent in 1993 versus 1992. A net securities gain of $18,000 was
reported in 1993 compared with a loss of $87,000 in 1992 and $8,000 gain in
1991.
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Non-interest expenses, including salaries, employee benefits,
occupancy expense, equipment expense, FDIC insurance premiums, professional
fees, and other expenses, totalled $9,376,000 in 1993, $8,955,000 in 1992 and
$8,292,000 in 1991.
The effective tax rates for 1993, 1992 and 1991 were 32.2 percent,
31.0 percent and 27.0 percent, respectively.
BALANCE SHEET ANALYSIS
Total loans, net of unearned income, were $183 million at year-end
1993, increasing 6.4 percent from the $172 million at year-end 1992. At
December 31, 1991, total loans were $165 million. The Bank grants commercial
and residential real estate mortgages, and consumer loans to customers mainly
in the Chicago, Illinois metropolitan area. Generally, the loans are backed by
collateral and are expected to be repaid from cash flow or proceeds from the
sale of selected assets of the borrower. Nonaccrual loans at period ends were
$1,088,000, $1,559,000 and $2,885,000, respectively.
Deposits at year-end 1993 were $269 million, compared with $255
million in 1992 and $243 million in 1991. At December 31, 1993, the loans to
deposit ratio was 68.0 percent, versus 67.6 percent at year-end 1992 and 67.9
percent for 1991.
Total stockholders' equity from December 31, 1992 to December 31, 1993
increased $4,129,000 or 12.6 percent due to retention of earnings and the
adoption of Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" which had $424,000 of
unrealized gains on investment securities available for sale. At December 31,
1993, Park Ridge's tier I and total capital ratios were 17.6 percent and 18.8
percent, respectively. These ratios were an increase over the 16.3 percent and
17.1 percent reported for year-end 1992. Both risk based capital ratios
exceeded the fully phased-in regulatory minimum levels of 4.00 percent and 8.00
percent, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
Net income for the three months ended March 31, 1994 was $1,451,000, a
1.8 percent decrease from the $1,477,000 of income before the $140,000
cumulative effect of a change in accounting for income taxes reported for the
same period 1993. Earnings per share were $22.28 for the quarter versus $23.34
a year ago.
Net interest income, interest income less interest expense, decreased
3.3 percent during the first quarter of 1994 compared to the same period of
1993. The annualized net interest margin for the quarter was 5.10 percent
compared with 5.45 percent for the 1993 quarter.
The provision for loan losses remained level for the
quarter-to-quarter comparison. Net charge-offs for the comparative quarters
were $17,000 and $3,000, respectively. The allowance as a percent of period end
loans remained unchanged at 1.1 percent at March 31, 1994 versus December 31,
1993. Non-performing loans totalled $2.0 million at March 31, 1994.
In the non-interest income categories, service charges increased 15.1
percent for the 1994 quarter versus the 1993 first quarter. Other operating
income was down 1.9 percent for the 1994 period versus 1993. Investment gains
of $61,000 were recorded in the 1994 quarter versus a loss of $11,000 in the
1993 quarter.
Non-interest expenses, including salaries, employee benefits,
occupancy expense, equipment expense, and other expenses, totalled $2,343,000
and $2,342,000 for the 1994 and 1993 quarters, respectively.
The effective tax rates were 32.0 percent and 31.7 percent,
respectively for the 1994 and 1993 quarters.
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Bank premises and equipment increased from December 31, 1993 mainly
due to the acquisition of land for the newly chartered subsidiary bank, First
State Bank of Gurnee.
During the period ending March 31, 1994, the unrealized gain (loss) on
investment securities available for sale decreased from a gain of $424,000 to a
loss of $164,000.
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REGULATION OF FIRST OF AMERICA AND PARK RIDGE
Various federal and state banking laws and regulations affect the
businesses of First of America and its affiliate financial institutions and of
Park Ridge and the Banks. First of America and its affiliate financial
institutions are subject to supervision, regulation, and periodic examination
by various federal and state financial institution regulatory agencies,
including the FRB, the OCC, the Federal Deposit Insurance Corporation (the
"FDIC"), the Office of Thrift Supervision (the "OTS"), the Illinois
Commissioner, the Michigan FIB and the Indiana Department of Financial
Institutions (the "Indiana DFI"). Park Ridge and its Banks are subject to
supervision, regulation, and periodic examination by the FRB, the FDIC and the
Illinois Commissioner.
The following is a summary of certain statutes and regulations
affecting First of America, its affiliate financial institutions, Park Ridge
and the Banks. This summary is qualified in its entirety by such statutes and
regulations, which are subject to change based on pending and future
legislation and action by regulatory agencies.
BANK HOLDING COMPANIES. First of America and Park Ridge are bank
holding companies under the Bank Holding Company Act (the "BHC Act") and as
such are subject to regulation by the FRB. A bank holding company is required
to file with the FRB annual reports and other information regarding its
business operations and those of its subsidiaries. A bank holding company and
its subsidiary banks are also subject to examination by the FRB. The
non-banking activities of a bank holding company and its subsidiaries are
limited to certain activities specified in the BHC Act and such other
activities as the FRB, by regulation or order, determines to be closely
related, and a proper incident, to the business of banking. The FRB has
determined that owning, controlling or operating a savings association is a
permissible activity for bank holding companies if the savings association
engages only in activities that are permissible for bank holding companies.
Prior FRB approval may be required for a bank holding company to acquire new
subsidiaries, including savings associations, or commence new lines of
business.
The BHC Act requires every bank holding company to obtain the prior
approval of the FRB before acquiring substantially all the assets of any bank
or bank holding company or ownership or control of any voting shares of any
bank or bank holding company, if, after such acquisition, it would own or
control, directly or indirectly, more than five percent of the voting shares of
such bank or bank holding company. Bank holding companies are also prohibited
from acquiring shares of any bank located outside the state in which the
operations of the bank holding company's banking subsidiaries are principally
conducted unless such an acquisition is specifically authorized by statute of
the state of the bank whose shares are to be acquired.
Under a Michigan statute applicable to First of America, a Michigan
bank holding company may acquire a bank located in any state in the United
States if the laws of the other state permit ownership of banks located in that
state by a Michigan bank holding company. Under the same Michigan statute, a
Michigan bank or bank holding company may be acquired by a bank holding company
located in any state in the United States subject to approval of the Michigan
FIB and the existence of a reciprocal law in such other state.
The Illinois Bank Holding Company Act of 1957, as amended, allows
Illinois bank holding companies to acquire banks located anywhere in Illinois.
In addition, holding companies from any state are allowed to acquire banks or
bank holding companies in Illinois subject to the approval of the Illinois
Commissioner if the state in which the acquired holding company is located
permits Illinois bank holding companies the same privilege.
SAVINGS AND LOAN HOLDING COMPANIES. First of America is a savings and
loan holding company and subject to the jurisdiction of the OTS with regard to
certain matters. Among other things, a savings and loan holding company is
required to: (1) file and cause all of its subsidiaries which are not savings
associations to file such periodic reports as may be required by the OTS; (2)
maintain books and records as prescribed by the OTS; and (3) be subject to
examination by the OTS. In addition, a savings and loan holding company that
is also a bank holding company (such as First of America) may engage only in
those activities that are permissible for a bank holding company, and may, in
certain circumstances, be required to obtain approval from the OTS, as well as
the FRB, prior to acquiring new subsidiaries or commencing new business
activities.
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Under the Financial Institutions Reform, Recovery and Enforcement Act
of 1989 ("FIRREA"), the OTS is granted broad power to impose restrictions on
savings and loan holding company activities if the OTS director determines
there is reasonable cause to believe that the continuation by the holding
company of any activity constitutes a serious risk to the financial safety,
soundness or stability of a subsidiary savings association. The restrictions,
issued in the form of a directive, may limit: (1) the payment of dividends by
the savings association to the holding company; (2) transactions between the
savings association, the holding company, and the subsidiaries or affiliates of
either; and (3) any activities of the savings association that might create a
serious risk that the liabilities of the holding company or its other
affiliates may be imposed on the savings association.
Finally, a savings and loan holding company must obtain prior written
approval from the OTS before acquiring substantially all the assets of any
savings association or savings and loan holding company or any ownership or
control of any voting shares of any savings association or savings and loan
holding company if, after such acquisition, it would own or control, directly
or indirectly, more than five percent of the voting shares of such savings
association or savings and loan holding company. Savings and loan holding
companies also are prohibited from controlling savings associations in more
than one state unless such acquisition is specifically authorized by federal
law as an emergency acquisition or by statute of the state of the savings
association whose shares are to be acquired.
BANKS. Fourteen of First of America's affiliate banks are national
banking associations and as such are subject to regulation and supervision and
regular examination by the OCC. Four of First of America's affiliate banks are
Michigan state banks and are subject to regulation and supervision and regular
examination by the Michigan FIB. One of First of America's affiliate banks is
an Indiana state bank and is subject to regulation and regular examination by
the Indiana DFI. Five of First of America's affiliate state banks are members
of the Federal Reserve System, and as such are subject to the applicable
provisions of the Federal Reserve Act and regulations thereunder and to
supervision, regulation and regular examination by the FRB. One of First of
America's affiliate state banks is not a member of the Federal Reserve System
and is subject to regulation, supervision and regular examination by the FDIC.
The Banks are Illinois state banks and members of the Federal Reserve System
and are subject to regulation, supervision and regular examination by the
Illinois Commissioner and the FRB. Deposits held by nine affiliate banks of
First of America and the Banks are insured, to the extent permitted by law, by
the Bank Insurance Fund ("BIF") administered by the FDIC, and deposits held by
eleven of First of America's affiliate banks are insured in part by BIF and in
part by the Savings Association Insurance Fund ("SAIF") administered by the
FDIC.
Federal law and the laws of Michigan, Indiana, and Illinois govern,
among other things, the scope of a bank's business, the investments a bank may
make, the loans a bank may make, transactions with affiliates, and a bank's
activities with respect to mergers and establishing branches.
SAVINGS ASSOCIATIONS. One of First of America's affiliate financial
institutions, First of America Bank-Florida, F.S.B. ("FOA-Florida) is a
federally chartered stock savings association and is subject to regulation,
supervision and regular examination by the OTS and to the provisions of the
HOLA as amended by FIRREA, and the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), and other federal laws including the
Federal Deposit Insurance Act. Federal law governs, among other things, the
scope of the savings association's reserves, the investments a savings
association may make, the loans a savings association may make, and
transactions with affiliates. Deposits held by the savings association are
insured, to the extent permitted by law, by the SAIF.
TRANSACTIONS WITH AFFILIATES. Each of First of America's subsidiary
banks and each of the Banks are subject to Sections 23A and 23B of the Federal
Reserve Act, which impose certain restrictions on loans and extensions of
credit by a bank to its affiliates, on investments by a bank in the stock or
securities of its affiliates, on acceptance of such stock or securities as
collateral for loans by the bank to any borrower and on leases and service and
other contracts between a bank and its affiliates. For purposes of sections
23A and 23B of the Federal Reserve Act, the affiliates of a bank include its
holding company and all other companies (including other banks) controlled by
the holding company. Transactions between banks that are at least 80 percent
owned by the same
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holding company (such as First of America's subsidiary banks) are exempt from
certain of the restrictions of sections 23A and 23B of the Federal Reserve Act
under the so-called "sister bank" exemption.
Sections 23A and 23B of the Federal Reserve Act generally apply to
savings associations in the same manner and to the same extent as they apply to
banks but with several differences. First, a savings association may not make
any loan or extension of credit to any affiliate unless the affiliate is
engaged only in permissible bank holding company activities. Next, a savings
association is barred from investing in the securities of an affiliate other
than a subsidiary of the savings association. Finally, the "sister bank"
exemption from quantitative limitations of Section 23A, which is available to
80 percent commonly-controlled banks, generally is not available to "sister
thrifts" until January 1, 1995. However, the exemption is available on a
limited basis for banks and savings associations that are 80 percent owned by
the same holding company, provided that every bank and savings association
owned by the holding company complies with all applicable capital requirements
on a fully phased-in basis without reliance on goodwill.
Banks and savings associations are also subject to Section 22(h) of
the Federal Reserve Act, which places limitations on loans to insiders. Under
Section 22(h), a bank or savings association may extend credit to its or its
affiliates' executive officers, directors and principal shareholders or their
related interests only if the loan is made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with non-insiders and if credit underwriting standards
are followed that are no less stringent than those applicable to comparable
transactions with non-insiders. Also, loans to insiders must not involve more
than the normal risk of repayment or present other unfavorable features and
must, in certain circumstances, be approved in advance by a majority of the
entire board of directors of the lending institution. The aggregate amount
that can be lent to all insiders is limited to the institution's unimpaired
capital and surplus. No insider shall knowingly receive any extension of
credit not authorized under Section 22(h). Banks and savings associations also
are subject to Section 22(g) of the Federal Reserve Act which imposes
additional restrictions on loans to executive officers.
CAPITAL REQUIREMENTS. The FRB has adopted risk based capital
requirements applicable to bank holding companies. Under these requirements,
bank holding companies must have a minimum ratio of total capital to total
risk-weighted assets of eight percent. In addition, bank holding companies must
maintain a minimum ratio of Tier I capital to total risk-weighted assets equal
to four percent. In determining the amount of risk-weighted assets, all
assets, including certain off-balance sheet assets, are multiplied by a
risk-weight of 0 percent to 100 percent. Tier I capital includes common
shareholders' equity, qualifying perpetual preferred stock and minority
interests in equity accounts of consolidated subsidiaries less goodwill.
Based on calculations as of March 31, 1994, both First of America's
Tier I capital and total capital as a percentage of total risk- weighted assets
were in excess of the required ratios.
As a supplement to risk based capital requirements, the FRB also
adopted a leverage measure which requires bank holding companies to maintain a
minimum of Tier I capital equal to 3 percent of total assets. All bank holding
companies except those that are most highly-rated must maintain an additional
cushion of Tier I capital of at least 100 to 200 basis points, which is a
leverage ratio of 4 to 5 percent. As of March 31, 1994, First of America's
Tier I leverage ratio, computed using period end total assets, was 6.57
percent.
All of First of America's affiliated financial institutions meet
applicable capital requirements. Park Ridge's risk based capital position is
discussed above under the caption "Information About Park Ridge--Management's
Discussion and Analysis of Financial Condition and Result of Operations." The
following table shows capital requirements and current capital levels for First
of America and Park Ridge and for combined First of America and Park Ridge on a
pro forma basis based on FRB capital requirements for bank holding companies.
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PRO FORMA RISK BASED CAPITAL CALCULATIONS AS OF MARCH 31, 1994
Pro Forma
First of
FULLY PHASED-IN CAPITAL REQUIREMENTS First of America
($ in thousands) America Park Ridge & Park Ridge
- ---------------- ------- ---------- ------------
CAPITAL:
TIER 1:
Common Stock $ 593,516 604 615,207
Surplus 260,693 419 315,421
Retained earnings 665,611 36,902 665,610
Less: Goodwill and core deposit intangibles (135,911) (520) (179,757)
------------ ------- ----------
Tier I capital $ 1,383,909 37,405 1,416,481
----------- ------ ---------
----------- ------ ---------
TIER II:
Allowance for loan losses $ 183,480 2,056 186,004
Subordinated debt 161,867 -- 161,867
----------- ------- --------
Total Tier II Capital 345,347 2,056 347,871
----------- ------- --------
Total Capital $ 1,729,256 39,461 1,764,352
----------- ------ ---------
----------- ------ ---------
TOTAL RISK-WEIGHTED ASSETS AND OFF-
BALANCE SHEET ITEMS $14,678,407 201,917 14,880,324
----------- ------- ----------
----------- ------- ----------
RISK-WEIGHTED CAPITAL RATIOS:
Tier I capital to risk-weighted assets 9.43% 18.52 9.52
Minimum fully phased-in requirement 4.00 4.00 4.00
Total capital to risk-weighted assets 11.78 19.54 11.86
Minimum fully phased-in requirement 8.00 8.00 8.00
Tier I leverage ratio (period end) 6.57% 11.59 6.62
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PROMPT CORRECTIVE ACTION. In addition to the existing capital
requirements discussed above, FDICIA created a new approach to supervision of
insured banks and savings associations that requires, or in some cases permits,
federal regulatory agencies to take certain actions based on an institution's
capital level. This "prompt corrective action" framework addresses capital
deficiencies and supervisory concerns of institutions with the intent of
resolving problems of institutions at the least possible long-term costs to BIF
and SAIF. FDICIA and prompt corrective action regulations adopted by the
federal regulatory agencies create five capital categories. Each insured
depository institution will be categorized based on its level of capital as
measured by specified ratios. An institution's capital category determines what
regulatory restrictions and supervisory actions, if any, must, or in some cases
may, be taken by federal regulators. These provisions became effective December
19, 1992.
The five capital categories are well-capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized, and critically
undercapitalized. The specified capital ratios for determining the capital
category of all but critically undercapitalized institutions are: (1) the ratio
of total capital to risk-weighted assets (total risk based ratio); (2) the
ratio of Tier 1 or core capital to risk-weighted assets (Tier 1 risk based
ratio); and (3) the ratio of Tier 1 or core capital to total average assets
(Tier 1 leverage ratio). The sole capital measure for defining critically
undercapitalized institutions is the ratio of tangible equity to total assets.
The required ratios for each of the five capital categories are summarized in
the following table:
TIER 1 TIER 1
TOTAL RISK RISK BASED LEVERAGE
CATEGORY BASED RATIO RATIO RATIO OTHER
- ----------------- ----------- ---------- -------- ----------------------
Well-capitalized 10% or 6% or 5% or Not subject to a
above above above directive to meet a
specific level for any
capital measure
Adequately 8% or above 4% or 4% or Does not meet
capitalized above above(1) definition of well-
capitalized
Undercapitalized Under 8% Under 4% Under
4%(2)
Significantly Under 6% Under 3% Under 3%
undercapitalized
Critically Ratio of tangible
undercapitalized equity to total assets
of 2% or under.
- -------------------------
(1) 3% or above for institutions rated CAMEL 1 or MACRO 1 in most recent
examination by federal regulators.
(2) Under 3% for institutions rated CAMEL 1 or MACR0 1 in most recent
examination by federal regulators.
FDICIA also provides that a well-capitalized institution may be
reclassified as adequately capitalized and that an adequately capitalized or
undercapitalized institution may be required to comply with restrictions and be
subjected to supervisory actions as if it were in the next lower capital
category, if the appropriate federal regulatory agency determines, after notice
and opportunity for an informal hearing, that the institution is in an unsafe
or unsound condition or is deemed to be engaging in an unsafe or unsound
practice. An institution may be deemed to be engaged in an unsafe or unsound
practice if it received a less-than-satisfactory rating in its most recent
examination. Although no restrictions apply automatically and regulatory
agencies are not required to take other supervisory action as a result of
reclassification, such a reclassification permits an institution's regulatory
agency to impose various restrictions and to take supervisory action to deal
with the institution's deficiencies.
The Banks and all of First of America's affiliate financial
institutions are well-capitalized. Neither First of America nor Park Ridge
currently have reason to believe or otherwise anticipate that any of First of
America's affiliate financial institutions or the Banks, respectively, will be
reclassified to a lower capital category.
FDICIA and the prompt corrective action regulations specifically
impose certain restrictions on, and require regulators to take certain
supervisory actions with respect to, less than adequately capitalized
institutions. The imposition of other restrictions and supervisory actions are
left to the regulatory agencies' discretion. Certain of the more significant
provisions are generally described below. Among the mandatory provisions are
the following.
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Under FDICIA all institutions are prohibited from making a capital distribution
or paying a management fee to a controlling person if doing so would leave the
institution undercapitalized. All institutions which are undercapitalized or
worse are subject to increased monitoring and capital restoration requirements.
Significant additional restrictions apply to significantly and critically
undercapitalized institutions. In addition to these mandatory supervisory
actions, if an institution is undercapitalized or worse, the institution's
federal regulatory agency has the authority to, among other things, restrict
the institution's activities, growth and affiliate relationships.
STANDARDS FOR SAFETY AND SOUNDNESS. FDICIA requires each federal
banking agency to prescribe for all insured depository institutions and their
holding companies standards relating to internal controls, information systems
and audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, and compensation, fees and benefits and such other
operational and managerial standards as the agency deems appropriate. In
addition, the federal banking regulatory agencies are required to prescribe by
regulation standards specifying: (1) a maximum ratio of classified assets to
capital; (2) minimum earnings sufficient to absorb losses without impairing
capital; (3) to the extent feasible, a minimum ratio of market value to book
value for publicly traded shares of depository institutions or the depository
institution holding companies; and (4) such other standards relating to asset
quality, earnings and valuation as the agency deems appropriate. Finally, each
federal banking agency is required to prescribe standards for employment
contracts and other compensation arrangements of executive officers, employees,
directors and principal stockholders of insured depository institutions that
would prohibit compensation and benefits and arrangements that are excessive or
that could lead to a material financial loss for the institution. If an
insured depository institution or its holding company fails to meet any of the
standards described above, it will be required to submit to the appropriate
federal banking agency a plan specifying the steps that will be taken to cure
the deficiency. If an institution fails to submit an acceptable plan or fails
to implement the plan, the appropriate federal banking agency will require the
institution or holding company to correct the deficiency and, until corrected,
may impose restrictions on the institution or company, including any of the
restrictions applicable under the prompt corrective action provisions of
FDICIA. The federal regulatory agencies issued a proposed rule regarding
implementation of these standards but final regulations have not been released.
Since final regulations have not yet been prescribed, First of America and Park
Ridge cannot assess the significance of the impact, if any, such standards may
have on First of America and its affiliated banks and the Banks.
OTHER LIMITATIONS BASED ON CAPITAL. FDICIA and implementing
regulations place certain limitations, based on an institution's capital
categorization, on the acceptance of brokered deposits, interest rates on
deposits, and deposit insurance coverage. Only well-capitalized institutions
may accept brokered deposits without limitation. Adequately capitalized
institutions may accept brokered deposits only upon obtaining a waiver from the
FDIC. Further, an adequately capitalized institution may not offer rates of
interest on deposits that are significantly more than relevant local or
national rates. Undercapitalized institutions may not accept brokered deposits.
Effective December 19, 1992 "pass through" deposit insurance on
employee benefit plan deposits is available only on deposits at institutions
that can accept brokered deposits. This includes well-capitalized institutions
and adequately capitalized institutions accepting brokered deposits pursuant to
an FDIC waiver.
AUDIT AND REPORTING REQUIREMENTS. FDICIA added a new section to the
Federal Deposit Insurance Act, the purpose of which is to facilitate early
identification of problems in financial institutions' management through annual
independent audits, more stringent reporting requirements, and the
establishment and maintenance of internal control structures and procedures.
Under FDICIA and implementing regulations of the FDIC, the new requirements
apply to institutions with assets of $500 million or more, with certain
exceptions for subsidiaries of holding companies, and are effective for fiscal
years beginning after December 31, 1992.
The new audit and reporting requirements under FDICIA generally
required are as follows. Each insured depository institution (or its holding
company, as discussed below) must submit to its primary regulatory agency and
make publicly available an annual report including the following: (1) financial
statements audited by an independent public accounting firm; (2) a report by
the institution's management, which acknowledges responsibility for the
financial statements and compliance with safety and soundness laws and
regulations, assesses the institution's internal controls; and (3) an
attestation and report by the independent public accountant on management's
assertions on internal control structure and procedures for financial
reporting. In addition, a nonpublic issued statement by
30
45
the independent public accountant related to the findings on compliance with
laws and regulations relating to insider loans and dividends should be filed.
Additionally, each institution (or its holding company, as discussed below)
must have an independent audit committee comprised entirely of outside
directors and subject to duties specified by FDICIA and the FDIC regulations.
For large institutions, such as First of America, the committee must include
two members with banking or financial management experience, may not include
large customers or individuals associated with large customers of the
institution, and must have access to outside legal counsel.
The Banks are not subject to the audit and reporting requirements
described above. All of First of America's affiliate depository institutions
are subject to these requirements. It is currently anticipated that the
independent audit will be satisfied by the audit at the holding company level.
RESERVE REQUIREMENTS. FRB regulations require banks and savings
institutions to maintain non-interest-earning reserves against their
transaction accounts (primarily NOW and demand accounts). The FRB regulations
generally require that reserves be maintained against aggregate transaction
accounts as follows: for accounts aggregating $51.9 million or less (subject to
adjustment by the FRB) the reserve requirement is three percent or
approximately $1.6 million. Net transaction accounts in excess of $51.9
million currently are subject to a ten percent reserve requirement which is
subject to adjustment by the FRB between eight percent and fourteen percent.
The first $4.0 million of otherwise reservable balances (subject to adjustments
by the FRB) are exempted from the reserve requirements.
DEPOSIT INSURANCE. Both banks and savings associations are insured by
the FDIC. However, under FIRREA, separate funds have been established, with BIF
(the Bank Insurance Fund) generally covering banks and SAIF (the Savings
Association Insurance Fund) generally covering savings associations. A minimum
designated reserve ratio, i.e., the ratio of the insurance fund's reserves to
total estimated insured deposits of 1.25 percent of insured deposits has been
established for both BIF and SAIF. However, the FDIC may set a higher
designated reserve ratio for either fund if circumstances raise a significant
risk of substantial future losses to the fund. Assessment rates will be
established sufficient to maintain reserves at the designated reserve ratio or,
if the reserve ratio is less than the designated reserve ratio, to increase the
reserve ratio to the designated reserve ratio within a reasonable period of
time. In order to recapitalize the BIF, the FDICIA permits the FDIC to either
set assessment rates for BIF members such that the required 1.25 percent
reserve ratio is achieved within one year or specify a series of target reserve
ratios culminating in a reserve ratio of 1.25 percent within a maximum of 15
years. The FDIC also is authorized to impose special assessments as it deems
necessary. The rates on regular assessments may be changed by the FDIC
semi-annually for each fund independent of the other. All insured financial
institutions are assessed on a semi-annual basis.
Under FDICIA the FDIC has established a system of risk based deposit
insurance premiums, effective January 1, 1994. Under a risk based assessment
system each institution's semi-annual assessment will be based on the
probability that the insurance fund will incur a loss related to that
institution, the likely amount of the loss and the revenue needs of the deposit
insurance fund. If the BIF reserve ratio is less than 1.25 percent, under the
risk based system the FDIC must collect total premiums at least equal to the
amount that would be collected if all BIF members were paying $0.23 per $100 of
deposits. For SAIF members, if the SAIF reserve ratio is less than 1.25
percent, the minimum aggregate assessment rate per $100 of deposits is $0.18
from January 1, 1994 through December 31, 1997 and $0.23 thereafter.
The FDIC adopted a risk based premium system effective January 1,
1994, under which higher-risk banks and thrifts pay more into the insurance
funds than other institutions. Under the final rules, a financial institution
will pay an assessment of between 23 cents and 31 cents per $100 of insured
deposits based on its risk classification. To arrive at a risk based assessment
for each insured institution for each semi-annual period, the FDIC places it
in one of nine assessment risk classifications using a two-step analysis based
first on capital ratios and then on supervisory risk factors.
Three capital categories are used, well-capitalized, adequately
capitalized and undercapitalized, which are identical to those adopted for
prompt corrective action purposes, except the deposit insurance premium rule
excludes references to supervisory evaluations and directives included under
the prompt corrective action rule (see
31
46
"Regulation of First of America and Park Ridge - Prompt Corrective Action").
Each institution also is assigned to one of three supervisory risk subgroups
based on consideration of supervisory evaluations by the institution's primary
regulatory agency and other information relevant to the institution's financial
condition and the risk of loss to the insurance fund posed by the institution.
Subgroup A is for financially sound institutions with only a few minor
weaknesses. Subgroup B is for institutions that demonstrate weakness that, if
not corrected, could result in significant deterioration. Subgroup C is for
institutions that pose a substantial probability of loss to the insurance fund
unless effective corrective action is taken. These supervisory subgroups will
modify premium rates within each of the three capital categories.
The FDIC notifies institutions of their assessment risk classification
for each semi-annual period by the first day of the month preceding each
semi-annual period (June 1 for the period beginning July 1 and December 1 for
the period beginning January 1). An institution may submit a written request
for review of its assessment risk classification.
Nine of First of America's subsidiary institutions and the Banks are
covered by BIF and are subject to assessments at the BIF rates. Eleven of
First of America's subsidiary institutions have a portion of their deposits
insured by BIF and subject to assessment at the BIF rates with the remaining
portion of their deposits insured by SAIF and subject to assessment at the SAIF
rates. The deposits of one of First of America's subsidiary institutions are
covered by SAIF and subject to assessment at the SAIF rates.
DIVIDEND REGULATION. A bank holding company which controls an
institution that is classified as undercapitalized or worse for prompt
corrective action purposes (see "Regulation of First of America and Park Ridge
- - Prompt Corrective Action") may be prohibited from making any dividend payment
without prior approval of the FRB. In addition, the ability of a bank or
savings and loan holding company to obtain funds for the payment of dividends
to its shareholders and for other cash requirements is largely dependent on the
amount of dividends which may be declared by its subsidiary banks and savings
associations. Federal and state statutes and regulations restrict the payment
of dividends by banks and savings associations. Certain of these statutes and
regulations applicable to First of America's affiliate financial institutions
and the Banks are discussed below.
Under FDICIA no insured depository institution may declare any
dividend if, following the payment of such dividend, the institution would be
undercapitalized (see "Regulation of First of America and Park Ridge - Prompt
Corrective Action").
A national bank may not pay a dividend on its common stock if the
dividend would exceed the net undivided profits then on hand after deducting
losses and bad debts. Additionally, the prior approval of the OCC is required
for any dividend to a bank holding company by any affiliated national bank if
the total of all dividends, including any proposed dividend, declared by such
bank in any calendar year exceeds the total of its net profits for that year to
date combined with its retained net profits for the preceding two years, less
any required transfers to surplus.
Under the Federal Reserve Act, a state bank which is a member of the
Federal Reserve System cannot pay a dividend in an amount greater than its net
profits then on hand after deducting losses and bad debts. Further, the
approval of the FRB will be required if dividends declared by any subsidiary
state bank which is a member of the Federal Reserve System in any year exceeds
the total of net profits for that year to date combined with the retained net
profits for the preceding two years, less any required transfers to surplus.
Under the Michigan Banking Code, no dividend may be declared by a
Michigan state bank in an amount greater than net profits then on hand after
deducting losses and bad debts. In addition, if the surplus of the bank is
less than the amount of its capital stock, before a dividend may be declared,
the bank must transfer to surplus not less than ten percent of the net profits
of such bank for the preceding half-year in the case of quarterly or
semi-annual dividends or not less than ten percent of its net profits for the
preceding two consecutive half-year periods in the case of annual dividends.
32
47
Under the Indiana Financial Institutions Act, an Indiana state bank
may not declare or pay any dividend unless its capital is unimpaired and a
surplus fund equal to 25 percent of such capital stock has been set apart and
retained unimpaired. Dividends may be declared and paid thereafter not more
frequently than quarterly and at a rate not greater than six percent per annum
on the book value of the stock, until the bank's unimpaired surplus fund is
equal to the amount of the capital stock, and such capital shall have remained
unimpaired. This limitation does not apply if the bank's common capital is
unimpaired, its unimpaired surplus is equal to 25 percent of its common
capital, and its sound capital is in excess of 20 percent of the average daily
deposit liability computed on an annual basis. Sound capital includes paid- in
and unimpaired capital, unimpaired surplus and unimpaired proceeds of notes and
debentures. First surplus and then capital is impaired to the extent a bank
has negative retained earnings.
Under the Illinois Banking Act, before any dividend may be declared by
an Illinois state bank, it must carry to its surplus, until such surplus equals
its capital stock, one-tenth of its net profit since the declaration date of
the last preceding dividend. No dividends may be paid in an amount greater
than net profits then on hand less losses and bad debts.
Under federal and state banking laws and regulations the term "net
profits" means the remainder of all earnings from current operations plus
actual recoveries on loans and investments and other assets, after deducting
from the total thereof all current operating expenses, actual losses, accrued
dividends on preferred stock, if any, and all federal and state taxes.
Dividends paid to First of America by its banking subsidiaries
amounted to $200.7 million in 1993 and $62.4 million during the first three
months of 1994. Unless prior regulatory approval is obtained, banking
regulations limit the dividends First of America's banking subsidiaries can
declare during 1994 to the amount of 1994 net profits, as defined in the
Federal Reserve Act, plus retained net profits for 1993 and 1992, which
amounted to $157.3 million.
MONETARY POLICY AND ECONOMIC CONDITIONS. The business of commercial
banks and savings associations is affected by the monetary and fiscal policies
of various regulatory agencies, including the FRB. Among the regulatory
techniques available to the FRB are open market operations in United States
government securities, changing the discount rate for member bank borrowings,
and imposing and changing the reserve requirements applicable to bank and
savings association deposits and to certain borrowings by banks, savings
associations and their affiliates (including parent companies). These policies
influence to a significant extent the overall growth and distribution of
financial institution loans, investments, and deposits, and the interest rates
charged on loans, as well as the interest rates paid on savings and time
deposits.
The monetary policies of the FRB have had a significant effect on the
operating results of commercial banks and savings associations in the past and
are expected to continue to do so in the future. In view of constantly changing
conditions in the national economy and the money market, as well as the effect
of acts by monetary and fiscal authorities, including the FRB, no definitive
predictions can be made by First of America or Park Ridge as to future changes
in interest rates, credit availability, or deposit levels or the effect of any
such changes on First of America's or Park Ridge's operations and financial
condition.
33
48
OTHER MATTERS
FEES AND EXPENSES. Park Ridge and First of America will each pay its
own fees and expenses incident to the negotiation and performance of the Merger
Agreement including the fees and expenses of counsel, accountants, and other
experts, whether or not the Merger is consummated.
SOURCES OF INFORMATION. All information about Park Ridge included in
this Prospectus/Proxy Statement has been prepared from information furnished by
Park Ridge for inclusion herein, and all information about First of America has
been furnished by First of America.
LEGAL MATTERS
Legal matters in connection with the Merger, including issuance of
First of America Common Stock, will be passed upon for First of America by
Howard & Howard Attorneys, P.C., Kalamazoo, Michigan. J. Michael Kemp,
managing partner of Howard & Howard, is a director of First of America. As of
__________, 199_, Mr. Kemp owned ______ shares of First of America Common Stock
jointly with his spouse, _____ shares individually, and ___ shares in a
retirement trust. As a co-trustee with two other co-trustees, Mr. Kemp has
voting and investment power over ______ shares of First of America Common
Stock. Other attorneys with Howard & Howard and members of their families own
shares of First of America Common Stock. Additionally, certain of Howard &
Howard's attorneys and members of their families are indebted to and have other
banking and trust relationships with certain of First of America's affiliate
banks.
Legal matters in connection with the Merger will be passed upon for
Park Ridge by Laser, Pokorny, Schwartz, Friedman and Economos, P.C. of Chicago,
Illinois. Jules M. Laser is a principal of Laser, Pokorny, Schwartz, Friedman
and Economos, P.C. As of __________________, 1994, Mr. Laser owned 21,486
shares of Park Ridge Common Stock. Upon effectiveness of the Merger, shares of
Park Ridge Common Stock owned by Mr. Laser will be converted into and exchanged
for shares of First of America Common Stock in accordance with the Exchange
Rate. See "The Merger - Consideration to be Received in the Merger".
EXPERTS
The consolidated financial statements of First of America Bank
Corporation as of December 31, 1993 and 1992, and for each of the years in the
three-year period ended December 31, 1993, incorporated by reference herein and
elsewhere in the registration statement have been incorporated by reference
herein and in the registration statement in reliance upon the report of KPMG
Peat Marwick, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
The consolidated financial statements of Park Ridge at December 31,
1993 and 1992, and for each of the three years in the period ended December 31,
1993, contained in this Prospectus/Proxy Statement and Registration Statement
have been audited by Grant Thornton, independent auditors, as set forth in
their reports thereon incorporated herein and in the Registration Statement,
and are included in reliance upon such reports given upon the authority of such
firm as experts in accounting and auditing.
34
49
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF
FIRST PARK RIDGE CORPORATION
UNAUDITED FINANCIAL STATEMENTS Page
- ------------------------------ -------------
First Park Ridge Corporation and Subsidiaries
Consolidated Condensed Financial Statements
Consolidated Condensed Balance Sheets as of March 31, 1994 and December 31, 1993 . . . . . . . F-3
Consolidated Condensed Statements of Income for the Three Months ended
March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Condensed Statements of Cash Flows for the Three Months ended
March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Condensed Financial Statements . . . . . . . . . . . . . . . . . . . . . F-8
AUDITED FINANCIAL STATEMENTS
- ----------------------------
Financial Statements and Report of Independent Certified Public Accountants
December 31, 1993 and 1992
Report of Independent Certified Public Accountants . . . . . . . . . . . . . . . . . . . . . . F-10
Consolidated Balance Sheets as of December 31, 1993 and 1992 . . . . . . . . . . . . . . . . . F-11
Consolidated Statements of Income for the Years ended December 31, 1993 and 1992 . . . . . . . F-12
Consolidated Statement of Changes in Shareholders' Equity
for the Two Years ended December 31, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . F-14
Consolidated Statements of Cash Flows for the Years ended December 31, 1993 and 1992 . . . . . F-15
Notes to Consolidated Financial Statements for Years ended December 31, 1993 and 1992 . . . . . F-17
Financial Statements and Report of Independent Certified Public Accountants
December 31, 1992 and 1991
Report of Independent Certified Public Accountants . . . . . . . . . . . . . . . . . . . . . . F-34
Consolidated Balance Sheets as of December 31, 1992 and 1991 . . . . . . . . . . . . . . . . . F-35
Consolidated Statements of Income for the Years ended December 31, 1992 and 1991 . . . . . . . F-36
Consolidated Statement of Changes in Shareholders' Equity for the Two Years
ended December 31, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-37
Consolidated Statements of Cash Flows for the Years ended December 31, 1992 and 1991 . . . . . F-38
Notes to Consolidated Financial Statements for Years ended December 31, 1992 and 1991 . . . . . F-39
F-1
50
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
F-2
51
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
ASSETS 1994 1993
---------------- ----------------
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,668,000 $ 12,805,000
Interest-bearing deposits with banks . . . . . . . . . . . . . . . . . . . 1,779,000 1,482,000
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900,000 9,400,000
Investment securities available for sale . . . . . . . . . . . . . . . . . 107,712,000 100,802,000
Investment securities held to maturity . . . . . . . . . . . . . . . . . . 7,687,000 8,443,000
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181,490,000 183,165,000
Less allowance for possible loan losses . . . . . . . . . . . . . . . . . . 2,056,000 2,012,000
------------ ------------
Loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,434,000 181,153,000
Bank premises and equipment, net . . . . . . . . . . . . . . . . . . . . . 4,697,000 3,859,000
Excess of cost over equity in net assets of subsidiary - net . . . . . . . 520,000 526,000
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . 722,000 1,000,000
Accrued interest receivable and other assets . . . . . . . . . . . . . . . 5,204,000 3,690,000
------------ ------------
$323,323,000 $323,160,000
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest bearing . . . . . . . . . . . . . . . . . . . . . . . . . . $ 61,844,000 $ 66,097,000
Interest bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212,732,000 203,174,000
----------- -----------
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . 274,576,000 269,271,000
Securities sold under agreements to repurchase . . . . . . . . . . . . . . 3,321,000 5,348,000
Federal funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000 5,500,000
Note payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500,000 4,500,000
Accrued interest, taxes and other liabilities . . . . . . . . . . . . . . . 1,665,000 1,643,000
------------ ------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 285,562,000 286,262,000
Shareholders' equity
Common stock, no par value; authorized, 200,000 shares;
issued and outstanding, 65,139 shares . . . . . . . . . . . . . . . . 604,000 604,000
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419,000 419,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,902,000 35,451,000
Unrealized gain (loss) on investment securities available
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (164,000) 424,000
------------ -------------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . 37,761,000 36,898,000
----------- ------------
$323,323,000 $323,160,000
----------- -----------
----------- -----------
The accompanying notes are an integral part of these statements.
F-3
52
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
1994 1993
------------ ------------
Interest income
Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . . $3,728,000 $3,757,000
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . 1,383,000 1,634,000
Federal funds sold and deposits with banks . . . . . . . . . . . . . . . 38,000 33,000
---------- ----------
Total interest income . . . . . . . . . . . . . . . . . . . . . . . 5,149,000 5,424,000
Interest expense
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463,000 500,000
Money market and NOW accounts . . . . . . . . . . . . . . . . . . . . . 466,000 472,000
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420,000 534,000
Securities sold under agreements to repurchase . . . . . . . . . . . . . 47,000 50,000
Note payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000 58,000
---------- ----------
Total interest expense . . . . . . . . . . . . . . . . . . . . . . 1,466,000 1,614,000
--------- ---------
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . 3,683,000 3,810,000
Provision for possible loan losses . . . . . . . . . . . . . . . . . . . . 60,000 60,000
---------- ----------
Net interest income after provision for possible loan losses . . . 3,623,000 3,750,000
Other income
Service charges on deposit accounts . . . . . . . . . . . . . . . . . . 275,000 239,000
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . 518,000 528,000
Net investment securities gains (losses) . . . . . . . . . . . . . . . . 61,000 (11,000)
---------- ----------
Total other income . . . . . . . . . . . . . . . . . . . . . . . . 854,000 756,000
Other expenses
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . 1,316,000 1,253,000
Occupancy and equipment expense . . . . . . . . . . . . . . . . . . . . 346,000 325,000
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . 681,000 764,000
--------- ---------
Total other expenses . . . . . . . . . . . . . . . . . . . . . . . 2,343,000 2,342,000
--------- ---------
F-4
53
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME - CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
1994 1993
------------ ------------
Income before income taxes and cumulative effect of
change in accounting principle . . . . . . . . . . . . . . . . . $2,134,000 $2,164,000
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 683,000 687,000
--------- ---------
Income before cumulative effect of change in
accounting principle . . . . . . . . . . . . . . . . . . . . . . . . . . 1,451,000 1,477,000
Cumulative effect of change in accounting for income taxes . . . . . . . . - 140,000
------------- ---------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,451,000 $1,617,000
--------- ---------
--------- ---------
Earnings per share before cumulative effect of change in
accounting principle . . . . . . . . . . . . . . . . . . . . . . . . . . $22.28 $21.32
Cumulative effect of change in accounting for income taxes . . . . . . . . - 2.02
-------- -----
Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . $22.28 $23.34
----- -----
----- -----
Weighted average common stock outstanding . . . . . . . . . . . . . . . . . 65,139 69,285
------ ------
------ ------
The accompanying notes are an integral part of these statements.
F-5
54
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
1994 1993
------------ -----------
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,451,000 $ 1,617,000
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,000 135,000
Provision for possible loan losses . . . . . . . . . . . . . . . . 60,000 60,000
Net investment securities (gains) losses . . . . . . . . . . . . . (61,000) 11,000
Gain on sales of other real estate . . . . . . . . . . . . . . . . (34,000) -
Amortization of excess of cost over equity in net assets
of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . 6,000 6,000
Cumulative effect of change in accounting for income taxes . . . . - (140,000)
Changes in assets and liabilities
Increase in accrued interest receivable and other assets . . . . (1,514,000) (349,000)
Decrease in accrued interest, taxes and other liabilities . . . 23,000 283,000
------------ -----------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . (1,379,000) 6,000
----------- ------------
Net cash provided by operating activities . . . . . . . . . . 72,000 1,623,000
Cash flows from investing activities:
Net increase (decrease) in interest-bearing deposits with banks . . . . (297,000) 99,000
Proceeds from sales and maturities of investment securities . . . . . . 27,115,000 19,036,000
Purchase of investment securities . . . . . . . . . . . . . . . . . . . (33,796,000) (17,576,000)
Net decrease in loans . . . . . . . . . . . . . . . . . . . . . . . . . 1,909,000 1,219,000
Additions to bank premises and equipment . . . . . . . . . . . . . . . . (979,000) (91,000)
Proceeds from sales of other real estate owned . . . . . . . . . . . . . 62,000 -
------------- ------------
Net cash used in investing activities . . . . . . . . . . . . (5,986,000) 2,687,000
F-6
55
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
1994 1993
----------- ------------
Cash flows from financing activities:
Net increase (decrease) in deposits . . . . . . . . . . . . . . . . . . $ 5,304,000 $ (499,000)
Net decrease in securities sold under agreements to repurchase . . . . . (2,027,000) (1,144,000)
Net decrease in note payable . . . . . . . . . . . . . . . . . . . . . . - (3,000,000)
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . - (20,000)
Decrease in federal funds purchased . . . . . . . . . . . . . . . . . . (4,000,000) -
----------- -----------
Net cash used in financing activities . . . . . . . . . . . . (723,000) (4,663,000)
----------- ----------
Net decrease in cash and cash equivalents . . . . . . . . . . (6,637,000) (353,000)
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . 22,205,000 18,237,000
----------- -----------
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . $ 15,568,000 $ 17,884,000
----------- -----------
----------- -----------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,396,000 $ 1,556,000
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520,000 100,000
Supplemental disclosure of non-cash investing activities:
Transfer of loans to other real estate owned, net . . . . . . . . . . . - 278,000
Loans extended for sale of other real estate owned . . . . . . . . . . . 250,000 -
Unrealized gain on investment securities available for sale . . . . . . (588,000) -
The accompanying notes are an integral part of these statements.
F-7
56
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1994 AND 1993
(UNAUDITED)
NOTE A
The unaudited interim financial statements of First Park Ridge Corporation and
Subsidiaries (the "Company") have been prepared in conformity with generally
accepted accounting principles and reporting practices. The more significant
policies are incorporated in the Notes to the Consolidated Financial Statements
elsewhere in the Proxy Statement and should be read in conjunction herewith.
In the opinion of management, all adjustments necessary for fair presentation
of the financial position and the results of operations for the interim periods
have been made. The results of operations for the interim periods are not
necessarily indicative of the results of operations expected for the year.
NOTE B
In connection with the proposed Agreement and Plan of Merger, as discussed
elsewhere in the Proxy Statement, certain expenses are anticipated to be
incurred at closing. Various legal fees and fees to the Company's Financial
Advisor will be due and payable at closing.
NOTE C
In March, 1994 the Company obtained permission from the Illinois Commissioner
of Banks to establish a new subsidiary bank, First Star Bank of Gurnee, in
Gurnee, Illinois. Management anticipates that the Bank will open for business
during June, 1994.
F-8
57
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1993 AND 1992
F-9
58
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
First Park Ridge Corporation
We have audited the accompanying consolidated balance sheets of First Park
Ridge Corporation and Subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for each of the two years in the period ended December 31, 1993.
These financial statements are the responsibility of the management of First
Park Ridge Corporation. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of First Park Ridge
Corporation and Subsidiaries as of December 31, 1993 and 1992, and the
consolidated results of their operations and their consolidated cash flows for
each of the two years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles.
As discussed in notes B and F to the consolidated financial statements, the
Company changed its method of accounting for investment securities and income
taxes in 1993.
Chicago, Illinois /s/ Grant Thornton
March 4, 1994 (except for note M, -------------------------
as to which the date is April 15, 1994) Grant Thornton
F-10
59
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
ASSETS 1993 1992
-------------- --------------
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,805,433 $ 14,136,911
Interest-bearing deposits in other banks . . . . . . . . . . . . . . . . . 1,482,000 582,000
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,400,000 4,100,000
Investment securities available for sale (note B) . . . . . . . . . . . . . 100,801,588 -
Investment securities held to maturity (note C) . . . . . . . . . . . . . . 8,443,497 112,100,205
Loans (note D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183,164,714 172,124,615
Less allowance for possible loan losses (note D) . . . . . . . . . . . . . 2,012,291 1,748,840
------------- -------------
Loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 181,152,423 170,375,775
Bank premises and equipment, net (note E) . . . . . . . . . . . . . . . . . 3,859,473 4,121,312
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . 3,288,946 3,126,428
Excess of cost over equity in net assets of subsidiary - net . . . . . . . 526,508 548,426
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . 999,807 2,215,065
Other assets (note F) . . . . . . . . . . . . . . . . . . . . . . . . . . . 399,909 589,686
-------------- --------------
$323,159,584 $311,895,808
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY 1993 1992
------------ ---------------
Deposits
Demand deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 66,096,545 $ 59,219,118
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,312,844 63,032,943
Money market and NOW accounts . . . . . . . . . . . . . . . . . . . . . 79,410,912 76,406,711
Time deposits, $100,000 and over . . . . . . . . . . . . . . . . . . . . 11,568,325 14,471,015
Other time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 38,882,447 41,453,620
------------ ------------
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . 269,271,073 254,583,407
Securities sold under agreements to repurchase . . . . . . . . . . . . . . 5,347,987 18,002,514
Federal funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . 5,500,000 -
Note payable (note G) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500,000 4,795,916
Accrued interest, taxes and other liabilities . . . . . . . . . . . . . . . 1,642,496 1,744,903
------------- -------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 286,261,556 279,126,740
Commitments and contingent liabilities (notes H and I) . . . . . . . . . . - -
Shareholders' equity
Common stock, no par value; authorized, 200,000 shares;
issued and outstanding, 65,139 shares and 69,310 shares,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . 604,046 642,725
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418,763 445,578
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,451,583 31,680,765
Unrealized gain on investment securities available for sale . . . . . . 423,636 -
------------- ------------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . 36,898,028 32,769,068
------------ ------------
$323,159,584 $311,895,808
----------- -----------
----------- -----------
The accompanying notes are an integral part of these statements.
F-11
60
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,
1993 1992
-------------- ---------------
Interest income
Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . . $15,844,564 $15,653,481
Investment securities
U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,764,022 4,456,134
U.S. government agency . . . . . . . . . . . . . . . . . . . . . . . 516,599 1,823,467
States and political subdivisions . . . . . . . . . . . . . . . . . . 796,610 1,165,559
Collateralized mortgage obligations . . . . . . . . . . . . . . . . . 100,264 160,980
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,083 13,155
Federal funds sold and deposits in other banks . . . . . . . . . . . . . 178,314 450,225
------------ ------------
Total interest income . . . . . . . . . . . . . . . . . . . . . 22,211,456 23,723,001
Interest expense
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,031,783 2,092,357
Money market and NOW accounts . . . . . . . . . . . . . . . . . . . . . 1,956,680 2,491,371
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,977,811 3,240,711
Securities sold under agreements to repurchase and Federal
funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . 265,046 245,017
Note payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,581 241,953
------------ ------------
Total interest expense . . . . . . . . . . . . . . . . . . . . . 6,446,901 8,311,409
----------- -----------
Net interest income . . . . . . . . . . . . . . . . . . . . . . 15,764,555 15,411,592
Provision for loan losses (note D) . . . . . . . . . . . . . . . . . . . . 280,000 510,000
------------ ------------
Net interest income after provision for loan losses . . . . . . 15,484,555 14,901,592
Other income
Service charges on deposit accounts . . . . . . . . . . . . . . . . . . 1,059,237 1,032,941
Credit card processing fees . . . . . . . . . . . . . . . . . . . . . . 1,116,710 895,901
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . 714,423 593,823
Net investment securities gains (losses) . . . . . . . . . . . . . . . . 17,631 (86,982)
------------- ------------
Total other income . . . . . . . . . . . . . . . . . . . . . . . 2,908,001 2,435,683
F-12
61
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - CONTINUED
YEARS ENDED DECEMBER 31,
1993 1992
-------------- --------------
Other expenses
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . $ 5,475,220 $ 5,221,139
Occupancy expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 714,446 672,492
Equipment expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 575,570 531,957
FDIC insurance premiums . . . . . . . . . . . . . . . . . . . . . . . . 590,413 580,027
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 306,647 437,622
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . 1,713,475 1,512,091
----------- -----------
Total other expenses . . . . . . . . . . . . . . . . . . . . . . 9,375,771 8,955,328
----------- -----------
Income before income taxes and cumulative
effect of change in accounting principle . . . . . . . . . . 9,016,785 8,381,947
Income taxes (note F) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,902,961 2,597,238
----------- -----------
Income before cumulative effect of change in
accounting principle . . . . . . . . . . . . . . . . . . . . . . . . . . 6,113,824 5,784,709
Cumulative effect of change in accounting for income taxes
(note F) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,000 -
------------ --------------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,253,824 $ 5,784,709
----------- -----------
----------- -----------
Earnings per share before cumulative effect of change
in accounting principle . . . . . . . . . . . . . . . . . . . . . . . . $90.87 $79.73
Cumulative effect of change in accounting for income taxes . . . . . . . . 2.08 -
------ ---------
Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . $92.95 $79.73
----- -----
----- -----
Weighted average number of common shares outstanding . . . . . . . . . . . 67,280 72,556
------ ------
------ ------
The accompanying notes are an integral part of these statements.
F-13
62
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY
TWO YEARS ENDED DECEMBER 31, 1993
Unrealized
gain on
investment
securities Total
Common Retained available shareholders'
stock Surplus earnings for sale equity
---------- ----------- ------------ -------------- ---------------
Balance, January 1, 1992 . . . . . . $688,905 $477,593 $28,440,661 $ - $29,607,159
Net income for the year . . . . . . . - - 5,784,709 - 5,784,709
Purchase and retirement of 4,980
shares of treasury stock . . . . . (46,180) (32,015) (2,544,605) - (2,622,800)
------- ------- ---------- ------- ----------
Balance, December 31, 1992 . . . . . 642,725 445,578 31,680,765 - 32,769,068
Net income for the year . . . . . . . - - 6,253,824 - 6,253,824
Purchase and retirement of 4,171
shares of treasury stock . . . . . (38,679) (26,815) (2,483,006) - (2,548,500)
Unrealized gain on investment
securities available for sale
(net of deferred tax) . . . . . . - - - 423,636 423,636
------- ------- ---------- ------- ----------
Balance, December 31, 1993 . . . . . $604,046 $418,763 $35,451,583 $423,636 $36,898,028
------- ------- ---------- ------- ----------
------- ------- ---------- ------- ----------
F-14
63
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
1993 1992
-------------- --------------
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,253,824 $ 5,784,709
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 569,153 490,933
Provision for possible loan losses . . . . . . . . . . . . . . . . 280,000 510,000
Cumulative effect of change in accounting
for income taxes . . . . . . . . . . . . . . . . . . . . . . . . (140,000) -
Net investment securities (gains) losses . . . . . . . . . . . . . (17,631) 86,982
Gain on sales of other real estate owned, net . . . . . . . . . . (204,171) (206,071)
Gain on sale of bank premises and equipment . . . . . . . . . . . - (1,000)
Amortization of excess of cost over equity
in net assets of subsidiary . . . . . . . . . . . . . . . . . . 21,917 21,917
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 50,514 44,231
Changes in assets and liabilities
Increase in accrued interest receivable . . . . . . . . . . . . (162,518) (368,630)
Decrease in other assets . . . . . . . . . . . . . . . . . . . . 279,263 276,349
Decrease in accrued interest, taxes
and other liabilities . . . . . . . . . . . . . . . . . . . . (320,645) (141,436)
------------ ------------
Total adjustments . . . . . . . . . . . . . . . . . . . . 355,882 713,275
------------ ------------
Net cash provided by operating activities . . . . . . . . 6,609,706 6,497,984
Cash flows from investing activities:
Net increase in interest-bearing deposits with banks . . . . . . . . . . (900,000) (89,000)
Proceeds from sales and maturities of investment securities . . . . . . 46,654,670 41,825,763
Purchase of investment securities . . . . . . . . . . . . . . . . . . . (43,140,045) (53,116,950)
Net increase in loans . . . . . . . . . . . . . . . . . . . . . . . . . (9,659,756) (8,305,264)
Additions to bank premises and equipment . . . . . . . . . . . . . . . . (307,313) (802,940)
Proceeds from sale of bank premises and equipment . . . . . . . . . . . - 1,000
Additions to other real estate owned . . . . . . . . . . . . . . . . . . - (20,466)
Net proceeds from sales of other real estate owned . . . . . . . . . . . 22,537 2,813,634
------------ ------------
Net cash used in investing activities . . . . . . . . . . (7,329,907) (17,694,223)
The accompanying notes are an integral part of these statements.
F-15
64
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
YEARS ENDED DECEMBER 31,
1993 1992
-------------- --------------
Cash flows from financing activities:
Net increase in deposits . . . . . . . . . . . . . . . . . . . . . . . . $14,687,666 $ 11,821,046
Net decrease in securities sold under
agreements to repurchase . . . . . . . . . . . . . . . . . . . . . . (12,654,527) (853,906)
Net (decrease) increase in note payable . . . . . . . . . . . . . . . . (295,916) 822,800
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . (2,548,500) (2,622,800)
Increase in federal funds purchased . . . . . . . . . . . . . . . . . . 5,500,000 -
----------- -----------------
Net cash provided by financing activities . . . . . . . . . . 4,688,723 9,167,140
----------- ------------
Net increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . . . . . 3,968,522 (2,029,099)
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . 18,236,911 20,266,010
---------- -----------
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . $22,205,433 $ 18,236,911
---------- -----------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,477,609 $ 8,619,650
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,032,000 2,600,000
Supplemental disclosure of non-cash investing activities:
Transfer of loans to other real estate owned . . . . . . . . . . . . $ 278,108 $ 400,653
Loans extended for sale of other real estate owned . . . . . . . . . 1,675,000 -
Unrealized gain on investment securities
available for sale . . . . . . . . . . . . . . . . . . . . . . . . 641,872 -
The accompanying notes are an integral part of these statements.
F-16
65
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1992
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of First Park Ridge Corporation (the
"Company") and its consolidated subsidiaries conform to generally accepted
accounting principles and general practice within the banking industry. The
following is a summary of the more significant of these policies.
Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, First State Bank and Trust Company of Park Ridge
and Bank of Buffalo Grove (the "Banks"). All significant intercompany accounts
and transactions have been eliminated.
Investment Securities
At December 31, 1993, investment securities available for sale are stated at
market value, with the unrealized gains or losses, net of deferred income
taxes, shown as a component of stockholders' equity in accordance with
Statement of Financial Accounting Standards No. 115. Gains or losses on
disposition are based on the net proceeds and the adjusted carrying amount of
the securities sold, using the specific identification method.
Investment securities held to maturity are those investment securities which
the Banks have the ability and intent to hold to maturity. These securities
are stated at cost, adjusted for amortization of premium and accretion of
discounts, which are recognized as adjustments to interest income over the life
of the investment.
Loans
Loans are stated net of unearned discount and deferred loan origination fees.
Unearned discount on installment loans is recognized as interest income over
the terms of the loans, using methods which approximate the interest method.
Loan origination fees, net of direct loan origination costs, are being deferred
and amortized as an adjustment of the loan's yield over the loan's contractual
life. Interest on other loans is accrued on the principal amount outstanding
during the period.
Loans are placed on a nonaccrual (cash) basis for recognition of interest
income when, in the opinion of management, there is reasonable doubt as to the
collectibility of interest. Nonaccrual loans are returned to an accrual status
when, in the opinion of management, there is no longer any reasonable doubt as
to the timely payment of principal or interest.
Allowance for Possible Loan Losses
The allowance for possible loan losses is maintained through a provision for
possible loan losses charged to expense. The allowance represents an amount
which, in management's judgment, will be adequate to absorb possible losses on
loans that may become uncollectible. Management's judgment in determining the
adequacy of the allowance is based on evaluations which take into consideration
such factors as the risks inherent in the loan portfolio, current and
prospective economic conditions that may affect the borrowers' ability to pay,
and such other factors that, in management's judgment, deserve recognition in
estimating loan losses.
F-17
66
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1993 AND 1992
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation
and amortization. For financial reporting purposes, depreciation and
amortization are charged to operating expense by the straight-line method over
the estimated useful lives of the related assets. Accelerated depreciation
methods are used for income tax purposes.
Excess of Cost Over Equity in Net Assets of Subsidiary
Excess of cost over equity in net assets of subsidiary is being amortized using
the straight-line method over a period of thirty-five years.
Other Real Estate Owned
Other real estate owned acquired through foreclosure is stated at the lower of
cost or fair market value, based on appraised values. Subsequent declines in
estimated market value and costs incurred in the ownership and maintenance of
the properties are recognized as expense when incurred.
Income Taxes
The Company files a consolidated Federal income tax return with its
subsidiaries. The subsidiaries provide for income taxes on a separate return
basis and remit to the Company amounts determined to be currently payable. The
provision for income taxes is based upon reported income and expense, adjusted
for differences that do not enter into the computation of taxes payable under
applicable income tax laws.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases at enacted tax rates which would apply in the period the taxes became
payable.
Statement of Cash Flows
Cash and due from banks and Federal funds sold are treated as cash and cash
equivalents in the Consolidated Statement of Cash Flows. Generally, Federal
funds are sold for one-day periods.
Reclassifications
Certain reclassifications were made to the 1992 consolidated financial
statements to conform to the current year's presentation.
NOTE B - INVESTMENT SECURITIES AVAILABLE FOR SALE
As of December 31, 1993, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Instruments." This standard requires the Company to designate its investment
securities as held to maturity, trading or available for sale. Investment
securities held to maturity are accounted for at amortized cost, and management
must express a positive intent to hold these securities to maturity (note C).
Available for sale securities are those that management designates as available
to be sold in
F-18
67
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1993 AND 1992
NOTE B - INVESTMENT SECURITIES AVAILABLE FOR SALE - CONTINUED
response to changes in market interest rates or liquidity needs. The Bank does
not invest in trading securities. Available for sale securities are accounted
for at estimated fair value with the unrealized gain or loss shown, net of
deferred income taxes, as a separate component of shareholders' equity. The
effect of this accounting change is to be applied as of December 31, 1993 and
prospectively; therefore, there is no restatement of prior year investments or
cumulative effect of a change in accounting principle for prior year income.
At December 31, 1993, investment securities available for sale consist of the
following:
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
--------------- ------------- -----------------------------
U.S. Treasury . . . . . . . . . . . . . . $ 93,004,874 $492,997 $ - $ 93,497,871
U.S. government agency . . . . . . . . . 5,511,724 99,928 13,609 5,598,043
Collateralized mortgage
obligations . . . . . . . . . . . . 1,582,318 6,768 162 1,588,924
Other . . . . . . . . . . . . . . . . . . 60,800 55,950 - 116,750
--------------- -------- ---------- --------------
Total investment securities . . . . . . . $100,159,716 $655,643 $13,771 $100,801,588
----------- ------- ------ -----------
----------- ------- ------ -----------
The amortized cost and estimated fair values of investment securities available
for sale at December 31, 1993, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
Estimated
Amortized fair
cost value
-------------- ---------------
Within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,271,239 $ 50,645,774
One to five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,893,022 43,011,649
------------ ------------
93,164,261 93,657,423
Collateralized mortgage obligations and mortgage-
backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . 6,995,455 7,144,165
------------- -------------
Total investment securities . . . . . . . . . . . . . . . . . . . . . . . . $100,159,716 $100,801,588
----------- -----------
----------- -----------
Investment securities available for sale, with amortized cost of approximately
$22,400,000, were pledged to secure certain deposits and for purposes as
required for or permitted by law.
F-19
68
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1993 AND 1992
NOTE C - INVESTMENT SECURITIES HELD TO MATURITY
The carrying value (amortized cost), estimated fair value and gross unrealized
gains and losses of investment securities held to maturity at December 31, 1993
and 1992 are summarized as follows:
Gross Gross Estimated
Amortized unrealized unrealized fair
December 31, 1993 cost gains losses value
- ----------------- --------------- ------------- -----------------------------
States and political subdivisions . . . . $ 8,443,497 $ 172,562 $ 8,059 $ 8,608,000
--------- ------- ------ ---------
--------- ------- ------ ---------
December 31, 1992
- -----------------
U.S. Treasury . . . . . . . . . . . . . . $ 83,045,345 $1,047,850 $ (97,195) $ 83,996,000
U.S. government agency . . . . . . . . . 14,620,977 146,613 (57,590) 14,710,000
States and political subdivisions . . . . 11,226,571 148,092 (22,663) 11,352,000
Collateralized mortgage
obligations . . . . . . . . . . . . 3,045,462 5,252 (714) 3,050,000
Other . . . . . . . . . . . . . . . . . . 161,850 92,150 - 254,000
-------------- ----------- -------------- --------------
Total investment securities . . . . . . . $112,100,205 $1,439,957 $(178,162) $113,362,000
----------- --------- -------- -----------
----------- --------- -------- -----------
The amortized cost and estimated fair values of investment securities, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
December 31, 1993
-------------------------------
Estimated
Amortized fair
cost value
------------------------------
Within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,223,579 $1,238,295
One to five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,949,210 6,096,572
Six to ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,439 109,907
After ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,171,269 1,163,226
--------- ---------
Total investment securities . . . . . . . . . . . . . . . . . . . . . . . . $8,443,497 $8,608,000
--------- ---------
--------- ---------
Proceeds from sales and calls of investment securities during 1993 and 1992,
respectively, were approximately $10,348,000 and $6,014,000. Gross gains of
$82,027 and $81,880 and gross losses of $64,396 and $168,862 were realized on
those sales and calls in 1993 and 1992, respectively.
Investment securities held to maturity with amortized cost of approximately
$1,215,000 and $33,535,000 at December 31, 1993 and 1992, respectively, were
pledged to secure certain deposits and for other purposes as required or
permitted by law.
F-20
69
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1993 AND 1992
NOTE D - LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
A summary of loans by major category is as follows:
December 31,
-----------------------------------
1993 1992
-------------- --------------
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,479,629 $ 59,660,542
Commercial real estate mortgage . . . . . . . . . . . . . . . . . . . . . . 55,346,200 54,710,304
Residential real estate mortgage . . . . . . . . . . . . . . . . . . . . . 54,398,345 51,576,820
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,687,996 6,503,465
Overdrafts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 929,247 497,135
-------------- --------------
183,841,417 172,948,266
Less:
Unearned discount . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,951 137,395
Deferred loan origination fees . . . . . . . . . . . . . . . . . . . . . 634,752 686,256
-------------- --------------
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 183,164,714 $ 172,124,615
----------- -----------
----------- -----------
The Banks grant commercial loans, commercial and residential real estate
mortgages, and consumer loans to customers in the Chicago metropolitan area.
Although the Banks have diversified portfolios, exposure to credit loss can be
adversely impacted by downturns in local economic conditions.
The principal balances of nonaccrual loans outstanding at December 31, 1993 and
1992 were approximately $1,088,000 and $1,559,000, respectively. The effect on
interest income attributable to these loans was approximately $40,000 and
$235,000 for 1993 and 1992, respectively.
Loans to directors, officers and their related interests approximated
$4,022,000 and $4,716,000 at December 31, 1993 and 1992, respectively. During
1993, new loans totaled $1,153,000 and repayments totaled $1,847,000. In the
opinion of management, these loans were made in the normal course of business
and do not involve more than a normal risk of collectibility.
Changes in the allowance for possible loan losses for the years ended December
31 were as follows:
1993 1992
-------------- --------------
Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . $1,748,840 $1,804,768
Provision charged to operating expense . . . . . . . . . . . . . . . . . . 280,000 510,000
Recoveries on loans previously charged off . . . . . . . . . . . . . . . . 13,043 89,128
Loans charged off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (29,592) (655,056)
----------- ---------
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,012,291 $1,748,840
--------- ---------
--------- ---------
F-21
70
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1993 AND 1992
NOTE E - BANK PREMISES AND EQUIPMENT
Bank premises and equipment consist of the following:
December 31,
-------------------------------
1993 1992
----------- -----------
Land and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 840,484 $ 840,484
Buildings and leasehold improvements . . . . . . . . . . . . . . . . . . . 3,854,162 3,834,737
Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 4,750,830 4,462,942
--------- ---------
Total cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,445,476 9,138,163
Less accumulated depreciation and amortization . . . . . . . . . . . . . . 5,586,003 5,016,851
--------- ---------
Total bank premises and equipment, net . . . . . . . . . . . . . . . . . . $3,859,473 $4,121,312
--------- ---------
--------- ---------
NOTE F - INCOME TAXES
The components of income tax provision for the years ended December 31 are as
follows:
1993 1992
-------------- --------------
Current provision
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,828,840 $2,375,224
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,635 177,783
---------- ----------
2,953,475 2,553,007
Deferred income tax (benefit) provision . . . . . . . . . . . . . . . . . . (50,514) 44,231
----------- -----------
Total income tax provision . . . . . . . . . . . . . . . . . . . . . . . . $2,902,961 $2,597,238
--------- ---------
--------- ---------
On January 1, 1993, the Company changed its method of accounting for income
taxes from Accounting Principles Board Opinion No. 11 (APB 11) to Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). The adoption of SFAS 109 changes the Company's method of accounting for
income taxes from the deferred method to an asset and liability approach.
Previously, the Company recognized the tax effects of timing differences
between financial reporting and taxable income using rates in effect when the
differences arose. The asset and liability approach requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of assets
and liabilities using tax rates in effect when the differences become payable.
As allowed under the provisions of SFAS 109, prior year's financial statements
were not restated, and the amounts shown for 1992 reflect accounting for income
taxes under APB 11.
As a result of the adoption of SFAS 109, the Company recorded net deferred tax
assets of $364,914 as of January 1, 1993, reflecting the tax benefits of net
future tax deductions and carryforwards. SFAS 109 requires a valuation
F-22
71
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1993 AND 1992
NOTE F - INCOME TAXES - CONTINUED
reserve to be set up if it is "more likely than not" that realization of the
tax benefits will not occur. At December 31, 1993, the Company believes that
it is more likely than not that the realization of tax benefits will occur,
and, therefore, no valuation reserve has been established.
The cumulative effect of adopting SFAS No. 109 was an increase in income of
$140,000 and is reported in the Statement of Income for the year ended December
31, 1993.
At December 31, 1993, significant components of the net deferred tax balances
included in other assets are as follows:
Deferred tax assets:
Provision for possible loan loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 475,115
Deferred loan fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,640
---------
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 534,755
Deferred tax liabilities:
Unrealized gain on investments available for sale . . . . . . . . . . . . . . . . . . . (218,236)
Accretion of discount on investment securities . . . . . . . . . . . . . . . . . . . . . (28,710)
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (90,617)
-------
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . (337,563)
--------
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 197,192
--------
--------
The sources of timing differences for the year ended December 31, 1992
resulting in deferred income taxes and the income tax effect of each are as
follows:
Accretion of discount on investment securities . . . . . . . . . . . . . . . . . . . . . . $ (2,616)
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,577
Provision for possible loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,913
Deferred loan fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,357
------
Deferred (benefit) provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $44,231
------
------
F-23
72
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1993 AND 1992
NOTE F - INCOME TAXES - CONTINUED
Income tax expense was less than the amount computed by applying the Federal
statutory rate of 34% for each of the years ended December 31 because of the
following:
1993 1992
-------------- --------------
Tax expense at statutory rate . . . . . . . . . . . . . . . . . . . . . . . $3,065,708 $2,849,862
Increase (decrease) in taxes resulting from:
Tax-exempt interest . . . . . . . . . . . . . . . . . . . . . . . . . . (262,026) (377,257)
State income taxes, net of applicable Federal income tax
benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,990 81,281
Nondeductible amortization . . . . . . . . . . . . . . . . . . . . . . . 7,452 7,452
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,837 35,900
----------- -----------
Total income tax provision . . . . . . . . . . . . . . . . . . . . . . . . $2,902,961 $2,597,238
--------- ---------
--------- ---------
NOTE G - NOTE PAYABLE
The note payable is collateralized by the common stock of the Company's
subsidiaries. The note matures on May 28, 1994 and bears interest at the prime
rate of the lending bank (6.0% at December 31, 1993) plus 1%. Principal and
interest are payable at maturity, and the note is renewable every six months.
NOTE H - EMPLOYEE PROFIT-SHARING PLANS
Substantially all full-time employees of both subsidiary banks are covered by
separate, noncontributory defined contribution profit-sharing plans. The
Banks' contributions are determined annually at the discretion of the Board of
Directors. Aggregate contributions to the plans totaled $125,000 and $121,000
for the years ended December 31, 1993 and 1992, respectively.
NOTE I - COMMITMENTS AND CONTINGENT LIABILITIES
Financial Instruments
The Company is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and stand-by
letters of credit. These instruments involve elements of credit risk in excess
of the amounts recognized in the balance sheets. The contract amounts of these
instruments reflect the extent of involvement the Company has in particular
classes of financial instruments.
F-24
73
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1993 AND 1992
NOTE I - COMMITMENTS AND CONTINGENT LIABILITIES - CONTINUED
The Company's exposure to credit loss, in the event of non-performance by the
other party to the financial instrument for commitments to extend credit and
stand-by letters of credit, is represented by the contractual amount of those
instruments. The Company uses the same credit policies in making commitments
and conditional obligations as it does for on-balance sheet instruments.
Financial instruments whose approximate contract amounts represent credit risk
are as follows:
December 31,
--------------------------------
1993 1992
-------------- --------------
Commitments to extend credit . . . . . . . . . . . . . . . . . . . . . . . $62,551,000 $39,743,000
Stand-by letters of credit . . . . . . . . . . . . . . . . . . . . . . . . 3,388,000 3,037,000
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Company evaluates each
customer's credit worthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Company upon extension of credit, is based
on management's credit evaluation of the counterparty. Collateral held varies
but may include accounts receivable, inventory, property, plant and equipment
and income-producing commercial properties.
Stand-by letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The Company obtains various
collateral supporting those commitments for which collateral is deemed
necessary.
Cash and Due from Banks
The subsidiary banks are required to maintain certain average cash reserve
balances with the Federal Reserve Bank. The average daily reserve balances
required for the years ended December 31, 1993 and 1992 were approximately
$2,314,000 and $1,997,000, respectively.
Litigation
Because of the nature of its activities, the Company is subject to pending and
threatened legal actions which arise in the normal course of business. In the
opinion of management, and based upon opinions of legal counsel, the
disposition of all outstanding legal actions will not have a material effect on
the consolidated financial position of the Company.
F-25
74
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1993 AND 1992
NOTE I - COMMITMENTS AND CONTINGENT LIABILITIES - CONTINUED
Severance Plan
During 1993, the Company adopted a severance plan for its employees and
officers in the event of a sale or merger of the Banks or the Company. Under
the plan, any employee who is discharged within one year of the date of sale or
merger for other than illegal or serious improper activity will receive
severance pay equal to six months salary and the payment of medical insurance
premiums for the same period. (If the employee is an officer, the officer will
receive nine months salary). In the event that the compensation of an officer
or employee is reduced during the one year period subsequent to a sale or
merger, the amount of the reduction will be reimbursed to the officer or
employee.
NOTE J - REGULATORY CAPITAL REQUIREMENTS
The Company is required to maintain minimum amounts of "Leverage Capital" and
"Risk Weighted Capital" as defined by banking regulations. At December 31,
1993, the Company's Tier 1 Leverage Capital ratio was 11.1%, which is in excess
of minimum requirements which range from 3% to 5%. At December 31, 1993, the
Company's Tier 1 and Total Risk Weighted Capital ratios were 17.6% and 18.8%,
respectively, which were in excess of the minimum required ratios of 4% and 8%,
respectively.
The bank subsidiaries are required to maintain the same minimum capital ratios.
At December 31, 1993, the First State Bank and Trust Company of Park Ridge's
Leverage Capital ratio was 13.4%, and Tier 1 and Total Risk Weighted Capital
ratios were 21.5% and 22.8%, respectively. The Bank of Buffalo Grove's
Leverage Capital ratio was 11.1%, and Tier 1 and Total Risk Weighted Capital
ratios were 17.0% and 18.2%, respectively.
NOTE K - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 ("FAS 107") requires
disclosure of the estimated fair value of the Company's financial instrument
assets and liabilities. For the Company and its bank subsidiaries, as for most
financial institutions, the majority of their assets and liabilities are
considered financial instruments as defined in FAS 107. However, many of such
instruments (principally loans) lack an available trading market, as
characterized by a willing buyer and seller engaging in an exchange
transaction. Also, it is the Company's general practice and intent to hold
its financial instruments to maturity and not engage in trading. Therefore,
the Company's management had to use significant estimations and present value
calculations to prepare this disclosure.
Changes in the assumptions or methodologies used to estimate fair values may
materially affect the estimated amounts. Also, management is concerned that
there may not be reasonable comparability between institutions due to the wide
range of permitted assumptions and methodologies in the absence of active
markets. This lack of uniformity gives rise to a high degree of subjectivity
in estimating financial instrument fair values.
Fair values have been estimated using data which management considered the best
available and estimation methodologies deemed suitable for the pertinent
category of financial instrument. The estimation methodologies and resulting
fair values, and recorded carrying amounts at December 31, 1993 and 1992 were
as follows:
F-26
75
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1993 AND 1992
NOTE K - FAIR VALUE OF FINANCIAL INSTRUMENTS - CONTINUED
Cash Equivalents
Fair values of cash, cash equivalents, Federal funds sold and interest-bearing
deposits in financial institutions approximate their carrying amounts.
Investments
Fair values of investments held to maturity are disclosed in note C.
Loans
Fair values of loans with floating interest rates are generally presumed to
approximate the recorded carrying amounts. The remaining loans with fixed
payment amounts have been estimated using the present value of estimated future
cash flows at rates comparable to or currently offered for loans with similar
terms to borrowers of similar credit quality. The carrying amount of accrued
interest approximates its fair value.
December 31, 1993 December 31, 1992
------------------------ -------------------------
Estimated Estimated
Carrying fair Carrying fair
Loan Category amount value amount value
- ------------- ------------- -------------- ------------ --------------
Floating rate loans . . . . . . . . . $103,791,807 $103,792,000 $ 93,605,991 $ 93,606,000
Fixed rate loans . . . . . . . . . . 78,961,610 83,178,000 77,783,275 83,719,000
------------ ------------ ------------ ------------
$182,753,417 $186,970,000 $171,389,266 $177,325,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Management has determined that they would incur excessive amounts of time and
money to estimate the fair value of non-performing loans (loans that are not
accruing interest), primarily due to the uncertainty of cash flows and the
difficulty in predicting the timing of such cash flows. The following
aggregate data is provided for such loans:
1993 1992
---------------- ----------------
Aggregate carrying amount . . . . . . . . . . . . . . . . . . . . . . . . . $1,088,000 $1,559,000
Average contractual rate . . . . . . . . . . . . . . . . . . . . . . . . . 8.00% 11.25%
Average term to maturity . . . . . . . . . . . . . . . . . . . . . . . . . 43 months 61 months
Deposits and Other Liabilities
Fair values of deposits and other liabilities with no stated maturities
(demand, NOW, money market and savings) are estimated to approximate their
carrying amounts which are the amounts due on demand. Fair value of short-term
borrowings with floating rates is generally presumed to approximate the
recorded carrying amounts.
Fair values of certificates of deposit with stated maturities have been
estimated using the present value of estimated future cash flows discounted at
rates currently offered for similar instruments. Fair values of certificates
maturing within one year approximate their carrying amounts. Time deposits
also include public funds time deposits, which mature within one year. The
fair values of these time deposits also approximate their carrying amounts.
F-27
76
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1993 AND 1992
NOTE K - FAIR VALUE OF FINANCIAL INSTRUMENTS - CONTINUED
December 31, 1993 December 31, 1992
------------------------ ------------------------
Estimated Estimated
Carrying market Carrying market
Deposit Category amount value amount value
- ---------------- ------------- -------------- ------------- --------------
Deposits with no stated
maturities . . . . . . . . . . . . $218,820,301 $218,820,000 $198,658,772 $198,659,000
Deposits with stated
maturities . . . . . . . . . . . . 50,450,772 50,449,000 55,924,635 55,924,000
----------- ----------- ----------- -----------
$269,271,073 $269,269,000 $254,583,407 $254,583,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Fair values of securities sold under agreements to repurchase and borrowed
funds with floating interest rates are generally presumed to approximate their
recorded carrying amounts.
Off-Balance Sheet Items
There is no material difference between the carrying amounts and estimated fair
values of off-balance sheet items at December 31, 1993 and 1992, which are
primarily comprised of unfunded loan commitments which are generally priced at
fair value at the time of funding.
The Company's remaining assets and liabilities are not considered financial
instruments.
F-28
77
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1993 AND 1992
NOTE L - PARENT COMPANY ONLY FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
December 31,
--------------------------------
1993 1992
-------------- --------------
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 107,470 $ 69,048
Tax payments receivable from subsidiaries . . . . . . . . . . . . . . . 91,821 104,046
Investment in subsidiaries
First State Bank and Trust Company of Park Ridge . . . . . . . . . . 25,421,549 23,698,553
Bank of Buffalo Grove . . . . . . . . . . . . . . . . . . . . . . . . 15,786,303 13,724,645
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 -
----------- -----------
$41,432,143 $37,596,292
----------- -----------
----------- -----------
Liabilities
Note payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,500,000 $ 4,795,916
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . 22,500 23,878
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . 11,615 7,430
----------- -----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 4,534,115 4,827,224
Shareholders' equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 604,046 642,725
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418,763 445,578
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,451,583 31,680,765
Unrealized gain on investment securities
available for sale . . . . . . . . . . . . . . . . . . . . . . . . . 423,636 -
----------- ----------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . 36,898,028 32,769,068
---------- ----------
$41,432,143 $37,596,292
----------- -----------
----------- -----------
F-29
78
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1993 AND 1992
NOTE L - PARENT COMPANY ONLY FINANCIAL INFORMATION - CONTINUED
CONDENSED STATEMENTS OF INCOME
Years ended
December 31,
-------------------------------
1993 1992
-------------- --------------
Income
Dividends from subsidiaries . . . . . . . . . . . . . . . . . . . . . . $3,053,825 $2,014,225
Expenses
Interest expense on note payable . . . . . . . . . . . . . . . . . . . . 215,581 241,953
Amortization of excess of cost over equity in
net assets of subsidiary . . . . . . . . . . . . . . . . . . . . . . 21,917 21,917
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,259 26,630
---------- ----------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 284,757 290,500
---------- ----------
Income before income tax benefit and equity
in undistributed earnings of subsidiaries . . . . . . . . . . . 2,769,068 1,723,725
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,821 110,830
--------- ---------
Income before equity in undistributed earnings of
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 2,870,889 1,834,555
Equity in undistributed earnings of subsidiaries . . . . . . . . . . . . . 3,382,935 3,950,154
--------- ---------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,253,824 $5,784,709
---------- ----------
---------- ----------
F-30
79
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1993 AND 1992
NOTE L - PARENT COMPANY ONLY FINANCIAL INFORMATION - CONTINUED
CONDENSED STATEMENTS OF CASH FLOWS
Years ended
December 31,
-------------------------------
1993 1992
-------------- --------------
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,253,824 $ 5,784,709
Adjustments to reconcile net income to net
cash provided by operating activities
Equity in undistributed earnings of subsidiaries . . . . . . . . . (3,382,935) (3,950,154)
Amortization of excess of cost over equity
in net assets of subsidiary . . . . . . . . . . . . . . . . . . 21,917 21,917
Changes in operating assets and liabilities
(Increase) decrease in income tax payments
receivable from subsidiaries . . . . . . . . . . . . . . . . . 12,225 (12,356)
Increase in other assets . . . . . . . . . . . . . . . . . . . . (25,000) -
Increase in other liabilities . . . . . . . . . . . . . . . . . 2,807 9,788
--------- ---------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . (3,370,986) (3,930,805)
----------- -----------
Net cash provided by operating activities . . . . . . . . . . 2,882,838 1,853,904
Cash flows from financing activities:
Net (decrease) increase in note payable . . . . . . . . . . . . . . . . (295,916) 822,800
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . (2,548,500) (2,622,800)
----------- -----------
Net cash used in financing activities . . . . . . . . . . . . (2,844,416) (1,800,000)
----------- -----------
Net increase in cash . . . . . . . . . . . . . . . . . . . . . 38,422 53,904
Cash, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . 69,048 15,144
--------- ---------
Cash, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 107,470 $ 69,048
---------- ----------
---------- ----------
Supplemental disclosure of cash flow information:
Cash paid (received) during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 216,959 $ 239,595
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,000 (98,474)
Supplemental disclosure of non-cash investing transaction:
Unrealized gain on securities available for sale . . . . . . . . . . . . $ 641,872 $ -
F-31
80
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1993 AND 1992
NOTE M - SUBSEQUENT EVENTS
On April 15, 1994, the Company entered into an Agreement and Plan of Merger
under which the Company will merge with a wholly-owned subsidiary of First of
America Bank Corporation, Kalamazoo, Michigan. Pursuant to the Agreement,
shares of the Company's stock will be converted into shares of First of America
common stock based upon an exchange ratio defined in the Agreement. The
Agreement requires approval by the Company's stockholders. The Agreement is
also subject to certain conditions, including various regulatory approvals.
In March, 1994, the Company obtained permission from the Illinois Commissioner
of Banks to establish a newly chartered subsidiary bank, First State Bank of
Gurnee, in Gurnee, Illinois.
F-32
81
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1992 AND 1991
F-33
82
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
First Park Ridge Corporation
We have audited the accompanying consolidated balance sheets of
First Park Ridge Corporation and Subsidiaries as of December 31, 1992 and 1991,
and the related consolidated statements of income, changes in shareholders'
equity, and cash flows for the years then ended. These financial statements
are the responsibility of the management of First Park Ridge Corporation. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of First
Park Ridge Corporation and Subsidiaries as of December 31, 1992 and 1991, and
the consolidated results of their operations and their consolidated cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
/s/ Grant Thornton
------------------
Grant Thornton
Chicago, Illinois
March 5, 1993
F-34
83
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
ASSETS 1992 1991
----------- -----------
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . $ 14,136,911 $ 12,566,010
Interest-bearing deposits with banks . . . . . . . . . . . . . . . . . 582,000 493,000
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . 4,100,000 7,700,000
Investment securities (estimated market value $113,362,000 and
$103,316,000 at December 31, 1992 and 1991, respectively) (note B) . 112,100,205 100,896,000
Loans (note C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,124,615 164,785,932
Less allowance for possible loan losses . . . . . . . . . . . . . . . . 1,748,840 1,804,768
----------- -----------
Loans, net . . . . . . . . . . . . . . . . . . . . . . . 170,375,775 162,981,164
Bank premises and equipment, net (note D) . . . . . . . . . . . . . . . 4,121,312 3,809,305
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . 3,126,428 2,757,798
Excess of cost over equity in net assets of subsidiary, net of accumulated
amortization of $212,229 in 1992 and $190,312 in 1991 . . . . . . . 548,426 570,343
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . 2,215,065 4,401,509
Other assets (note E) . . . . . . . . . . . . . . . . . . . . . . . . . 589,686 910,266
----------- -----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . $311,895,808 $297,085,395
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand deposits . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,219,118 $ 50,360,388
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 63,032,943 52,068,868
Money market and NOW accounts . . . . . . . . . . . . . . . . . . . 76,406,711 73,720,299
Time deposits, $100,000 and over . . . . . . . . . . . . . . . . . . 14,471,015 16,721,330
Other time deposits . . . . . . . . . . . . . . . . . . . . . . . . 41,453,620 49,891,476
----------- -----------
Total deposits . . . . . . . . . . . . . . . . . . . . . 254,583,407 242,762,361
Securities sold under agreements to repurchase . . . . . . . . . . . . 18,002,514 18,856,420
Note payable (note F) . . . . . . . . . . . . . . . . . . . . . . . . . 4,795,916 3,973,116
Accrued interest, taxes and other liabilities . . . . . . . . . . . . . 1,744,903 1,886,339
----------- -----------
Total liabilities . . . . . . . . . . . . . . . . . . . 279,126,740 267,478,236
Commitments and contingent liabilities (note H) . . . . . . . . . . . . - -
Shareholders' equity
Common stock, no par value; authorized, 200,000 shares; issued
and outstanding, 69,310 shares at December 31, 1992 and
74,290 shares at December 31, 1991 . . . . . . . . . . . . . . . 642,725 688,905
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445,578 477,593
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 31,680,765 28,440,661
----------- -----------
Total shareholders' equity . . . . . . . . . . . . . . . 32,769,068 29,607,159
----------- -----------
Total Liabilities and shareholders' equity . . . . . . . $311,895,808 $297,085,395
----------- -----------
----------- -----------
The accompanying notes are an integral part of these statements.
F-35
84
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,
1992 1991
----------- -----------
Interest income
Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . $15,653,481 $16,790,777
Investment securities
U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,456,134 4,016,480
U.S. government agency . . . . . . . . . . . . . . . . . . . . . . 1,823,467 1,993,800
States and political subdivisions . . . . . . . . . . . . . . . . . 1,165,559 1,509,118
Collateralized mortgage obligations . . . . . . . . . . . . . . . . 160,980 278,458
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,155 12,925
Federal funds sold and deposits with banks . . . . . . . . . . . . . . 450,225 299,332
---------- ----------
Total interest income . . . . . . . . . . . . . . . . . . . . . 23,723,001 24,900,890
Interest expense
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,092,357 2,513,256
Money market and NOW accounts . . . . . . . . . . . . . . . . . . . . 2,491,371 3,613,496
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,240,711 5,104,652
Securities sold under agreements to repurchase . . . . . . . . . . . . 245,017 270,878
Note payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241,953 347,205
---------- ----------
Total interest expense . . . . . . . . . . . . . . . . . . . . . 8,311,409 11,849,487
---------- ----------
Net interest income . . . . . . . . . . . . . . . . . . . . . . 15,411,592 13,051,403
Provision for possible loan losses (note C) . . . . . . . . . . . . . . . 510,000 230,000
---------- ----------
Net interest income after provision for possible loan losses . . 14,901,592 12,821,403
Other income
Service charges on deposit accounts . . . . . . . . . . . . . . . . . 1,032,941 1,046,771
Credit card processing fees . . . . . . . . . . . . . . . . . . . . . 895,901 512,814
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . 593,823 535,933
Investment securities gains (losses) . . . . . . . . . . . . . . . . . (86,982) 8,275
---------- ----------
Total other income . . . . . . . . . . . . . . . . . . . . . . . 2,435,683 2,103,793
Other expenses
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . 5,221,139 4,772,064
Occupancy expense . . . . . . . . . . . . . . . . . . . . . . . . . . 672,492 600,183
Equipment expense . . . . . . . . . . . . . . . . . . . . . . . . . . 531,957 416,218
FDIC insurance premiums . . . . . . . . . . . . . . . . . . . . . . . 580,027 512,784
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . 437,622 457,930
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . 1,512,091 1,533,107
---------- ----------
Total other expenses . . . . . . . . . . . . . . . . . . . . . . 8,955,328 8,292,286
---------- ----------
Income before income taxes . . . . . . . . . . . . . . . . . . . 8,381,947 6,632,910
Income taxes (note E) . . . . . . . . . . . . . . . . . . . . . . . . . . 2,597,238 1,790,163
---------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,784,709 $ 4,842,747
---------- ----------
---------- ----------
Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 79.73 $ 65.19
------- -------
------- -------
Weighted average number of common shares outstanding . . . . . . . . . . 72,556 74,290
------ ------
------ ------
The accompanying notes are an integral part of these statements.
F-36
85
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY
TWO YEARS ENDED DECEMBER 31, 1992
Total
Common Retained shareholders'
stock Surplus earnings equity
---------- --------- ----------- --------------
Balance, January 1, 1991 . . . . . . . $688,905 $477,593 $23,597,914 $24,764,412
Net income for the year . . . . . . . . - - 4,842,747 4,842,747
--------- --------- ---------- -----------
Balance, December 31, 1991 . . . . . . 688,905 477,593 28,440,661 29,607,159
Net income for the year . . . . . . . . - - 5,784,709 5,784,709
Purchase and retirement of
4,980 shares of treasury stock . . . (46,180) (32,015) (2,544,605) (2,622,800)
--------- --------- ----------- -----------
Balance, December 31, 1992 . . . . . . $ 642,725 $ 445,578 $ 31,680,765 $32,769,068
--------- --------- ----------- ----------
--------- --------- ----------- ----------
The accompanying notes are an integral part of this statement.
F-37
86
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
1992 1991
------------ ------------
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,784,709 $ 4,842,747
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation . . . . . . . . . . . . . . . . . . . . . . . 490,933 342,615
Provision for possible loan losses . . . . . . . . . . . . 510,000 230,000
Investment securities (gains) losses . . . . . . . . . . . 86,982 (8,275)
Gain on sales of other real estate . . . . . . . . . . . . (206,071) -
Gain on sale of property, plant and equipment . . . . . . (1,000) -
Amortization of excess of cost over equity
in net assets of subsidiary . . . . . . . . . . . . . . 21,917 21,917
Deferred income tax (benefit) provision . . . . . . . . . 44,231 (14,071)
Changes in assets and liabilities
(Increase) decrease in accrued interest receivable . . (368,630) 293,647
(Increase) decrease in other assets . . . . . . . . . . 276,349 (173,584)
Increase (decrease) in accrued interest,
taxes and other liabilities . . . . . . . . . . . . . (141,436) 62,509
----------- -----------
Total adjustments . . . . . . . . . . . . . . . . . . 713,275 754,758
----------- -----------
Net cash provided by operating activities . . . . . . 6,497,984 5,597,505
Cash flows from investing activities:
Net increase in interest-bearing deposits with banks . . . . . . (89,000) (493,000)
Proceeds from sales and maturities of investment securities . . 41,825,763 33,950,678
Purchase of investment securities . . . . . . . . . . . . . . . (53,116,950) (39,932,141)
Net increase in loans . . . . . . . . . . . . . . . . . . . . . (8,305,264) (7,001,701)
Additions to bank premises and equipment . . . . . . . . . . . . (802,940) (837,054)
Proceeds from sale of bank premises and equipment . . . . . . . 1,000 -
Additions to other real estate owned . . . . . . . . . . . . . . (20,466) (395,398)
Proceeds from sales of other real estate owned . . . . . . . . . 2,813,634 372,816
----------- -----------
Net cash used in investing activities . . . . . . . . . (17,694,223) (14,335,800)
Cash flows from financing activities:
Net increase (decrease) in deposits . . . . . . . . . . . . . . 11,821,046 (574,188)
Net increase (decrease) in securities sold
under agreements to repurchase . . . . . . . . . . . . . . . (853,906) 14,302,892
Net increase in note payable . . . . . . . . . . . . . . . . . . 822,800 -
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . (2,622,800) -
----------- -----------
Net cash provided by financing activities . . . . . . . 9,167,140 13,728,704
----------- -----------
Net (decrease) increase in cash and cash equivalents . (2,029,099) 4,990,409
Cash and cash equivalents, beginning of year . . . . . . . . . . . 20,266,010 15,275,601
----------- -----------
Cash and cash equivalents, end of year . . . . . . . . . . . . . . $ 18,236,911 $ 20,266,010
----------- -----------
----------- -----------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,619,650 $ 12,091,182
Income taxes . . . . . . . . . . . . . . . . . . . . . . . 2,600,000 1,815,000
Supplemental disclosure of non-cash investing activities:
Transfer of loans to other real estate owned, net . . . . . . $ 400,653 $ 1,793,267
The accompanying notes are an integral part of these statements.
F-38
87
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
NOTE A - SUMMARY OF The accounting and reporting policies
SIGNIFICANT ACCOUNTING of First Park Ridge Corporation (the
POLICIES "Company") and its consolidated subsidiaries
conform to generally accepted accounting
principles and general practice within the
banking industry. The following is a summary
of the more significant of these policies.
CONSOLIDATION. The consolidated
financial statements include the accounts of
the Company and its wholly-owned
subsidiaries, First State Bank and Trust
Company of Park Ridge and Bank of Buffalo
Grove (the "Banks"). All significant
intercompany accounts and transactions have
been eliminated.
INVESTMENT SECURITIES. Investment
securities are reported at cost, adjusted for
amortization of premium and accretion of
discount, in accordance with management's
ability and intent to hold these securities
on a long-term basis. Premium and discount
on investment securities are amortized
(deducted) and accreted (added),
respectively, to interest income from
investment securities, using the effective
interest method over the period from
acquisition to maturity. Gains or losses on
the sale or call of investment securities are
determined based on the adjusted cost of such
securities.
LOANS. Loans are stated net of
unearned discount and deferred loan
origination fees. Unearned discount on
installment loans is recognized as interest
income over the terms of the loans, using
methods which approximate the interest
method. Loan origination fees, net of direct
loan origination costs, are being deferred
and amortized as an adjustment of the loan's
yield over the loan's contractual life.
Interest on other loans is accrued on the
principal amount outstanding during the
period.
Loans are placed on a nonaccrual (cash)
basis for recognition of interest income
when, in the opinion of management, there is
reasonable doubt as to the collectibility of
interest. Nonaccrual loans are returned to an
accrual status when, in the opinion of
management, there is no longer any reasonable
doubt as to the timely payment of principal
or interest.
ALLOWANCE FOR POSSIBLE LOAN LOSSES.
The allowance for possible loan losses is
maintained through a provision for possible
loan losses charged to expense. The
allowance represents an amount which, in
management's judgment, will be adequate to
absorb possible losses on loans that may
become uncollectible. Management's judgment
in determining the adequacy of the allowance
is based on evaluations which take into
consideration such factors as the risks
inherent in the loan portfolio, current and
prospective economic conditions that may
affect the borrowers' ability to pay, and
such other factors that, in management's
judgement, deserve recognition in estimating
loan losses.
F-39
88
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1992 AND 1991
NOTE A - SUMMARY OF BANK PREMISES AND EQUIPMENT. Bank
SIGNIFICANT ACCOUNTING premises and equipment are stated at cost
POLICIES - CONTINUED less accumulated depreciation and
amortization. For financial reporting
purposes, depreciation and amortization are
charged to operating expense by the
straight-line method over the estimated
useful lives of the related assets.
Accelerated depreciation methods are used for
income tax purposes.
EXCESS OF COST OVER EQUITY IN NET
ASSETS OF SUBSIDIARY. Excess of cost over
equity in net assets of subsidiary is being
amortized using the straight-line method over
a period of thirty-five years.
OTHER REAL ESTATE OWNED. Other real
estate owned represents properties acquired
through foreclosure proceedings or receipt of
a deed of trust in lieu of foreclosure. At
the time of obtaining title, the properties
are stated at the lower of cost or fair
market value, based on appraised values.
Subsequent declines in estimated market value
and costs incurred in the ownership and
maintenance of the properties are recognized
as expense when incurred.
INCOME TAXES. The Company files a
consolidated Federal income tax return with
its subsidiaries. The subsidiaries provide
for income taxes on a separate return basis
and remit to the Company amounts determined
to be currently payable. The provision for
income taxes is based upon reported income and
expense, adjusted for differences that do not
enter into the computation of income taxes
payable under applicable income tax laws.
Deferred income taxes are provided for
certain income and expense items recognized
in different time periods for financial
reporting and income tax reporting purposes.
The Financial Accounting Standards
Board issued a new standard on accounting for
income taxes. The Company is required to
adopt the new accounting and disclosure rules
in 1993. Management believes that the
adoption of the new standard will not have a
material effect on the 1993 consolidated
financial statements.
STATEMENT OF CASH FLOWS. Cash and due
from banks and Federal funds sold are treated
as cash and cash equivalents in the Statement
of Cash Flows. Generally, Federal funds are
sold for one-day periods.
RECLASSIFICATIONS. Certain
reclassifications have been made to the 1991
presentation to conform with the 1992
presentation.
F-40
89
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1992 AND 1991
NOTE B - INVESTMENT A comparison of the carrying amounts and the
SECURITIES estimated market value of investment securities
is as follows:
December 31, 1992
-----------------------------------------------------------------
Gross Gross Estimated
Carrying unrealized unrealized market
amount gains losses value
------------ ----------- ---------- -------------
U.S. Treasury . . . . . . . . . . . . $ 83,045,345 $1,047,850 $ (97,195) $ 83,996,000
U.S. government agency . . . . . . . 14,620,977 146,613 (57,590) 14,710,000
States and political
subdivisions . . . . . . . . . . . 11,226,571 148,092 (22,663) 11,352,000
Collateralized mortgage
obligations . . . . . . . . . . . . 3,045,462 5,252 (714) 3,050,000
Other . . . . . . . . . . . . . . . . 161,850 92,150 - 254,000
----------- --------- ----------- -----------
Total investment
securities . . . . . . . . . . $112,100,205 $1,439,957 $(178,162) $113,362,000
----------- --------- -------- -----------
----------- --------- -------- -----------
December 31, 1991
----------------------------------------------------------------
Gross Gross Estimated
Carrying unrealized unrealized market
amount gains losses value
------------ ----------- ---------- -------------
U.S. Treasury . . . . . . . . . . . . $ 53,193,878 $1,330,122 $ - $ 54,524,000
U.S. government agency . . . . . . . 26,615,812 814,188 - 27,430,000
States and political
subdivisions . . . . . . . . . . . 17,090,089 167,096 (4,185) 17,253,000
Collateralized mortgage
obligations . . . . . . . . . . . . 3,834,301 13,340 (641) 3,847,000
Other . . . . . . . . . . . . . . . . 161,920 100,080 - 262,000
----------- --------- ------ -----------
Total investment
securities . . . . . . . . . . 100,896,000 $2,424,826 $(4,826) $103,316,000
----------- --------- ------ -----------
----------- --------- ------ -----------
F-41
90
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1992 AND 1991
NOTE B - INVESTMENT The carrying amounts and estimated
SECURITIES - CONTINUED market values of investment securities, by
contractual maturity, are shown below.
Expected maturities will differ from
contractual maturities because borrowers may
have the right to call or prepay obligations
with or without call or prepayment penalties.
December 31, 1992 December 31, 1991
----------------------------- ------------------------------
Estimated Estimated
Carrying market Carrying market
amount value amount value
------------ ------------ ------------ ------------
Within one year . . . . . . . . . . . $ 32,910,381 $ 33,423,000 $ 33,643,569 $ 34,219,000
One to five years . . . . . . . . . . 65,369,153 65,978,000 43,320,536 44,708,000
Six to ten years . . . . . . . . . . 1,416,099 1,425,000 7,531,918 7,569,000
After ten years . . . . . . . . . . . 2,735,753 2,759,000 4,169,569 4,170,000
----------- ----------- ----------- -----------
102,431,386 103,585,000 88,665,592 90,666,000
Collateralized mortgage obligations and
mortgage-backed securities . . . . 9,668,819 9,777,000 12,230,408 12,650,000
----------- ----------- ----------- -----------
Total investment securities . . . $112,100,205 $113,362,000 $100,896,000 $103,316,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Proceeds from sales and calls of investment
securities during 1992 and 1991,
respectively, were approximately $6,014,000
and $6,852,000. Gross gains of $81,880 and
$34,668 and gross losses of $168,862 and
$26,393 were realized on those sales and
calls in 1992 and 1991, respectively.
Investment securities with approximate
carrying amounts of $33,535,000 and
$30,118,000 at December 31, 1992 and 1991,
respectively, were pledged to secure certain
deposits and for other purposes as required
or permitted by law.
F-42
91
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1992 AND 1991
NOTE C - LOANS AND A summary of loans by major category is as follows:
ALLOWANCE FOR POSSIBLE
LOAN LOSSES
December 31,
------------------------------
1992 1991
------------- ------------
Commercial . . . . . . . . . . . . . . . . . $ 59,660,542 $ 73,788,459
Commercial real estate mortgage . . . . . . 54,710,304 39,713,000
Residential real estate mortgage . . . . . . 51,576,820 42,969,776
Installment . . . . . . . . . . . . . . . . 6,503,465 9,009,573
Overdrafts . . . . . . . . . . . . . . . . . 497,135 387,664
----------- -----------
172,948,266 165,868,472
Less:
Unearned discount . . . . . . . . . . . . 137,395 437,604
Deferred loan origination fees . . . . . . 686,256 644,936
----------- -----------
Total loans . . . . . . . . . $172,124,615 $164,785,932
----------- -----------
----------- -----------
The Banks grant commercial loans, commercial and residential real
estate mortgages, and consumer loans to customers in the Chicago
metropolitan area. Although the Banks have diversified portfolios,
exposure to credit loss can be adversely impacted by downturns
in local economic conditions.
Nonaccrual loans outstanding at December 31, 1992 and 1991 were
approximately $1,559,000 and $2,885,000, respectively. The effect
on interest income attributable to these loans was approximately
$235,000 and $280,000 for 1992 and 1991, respectively.
Loans to directors, officers and their related interests totalled
approximately $4,716,000 and $3,041,000 at December 31, 1992 and
1991, respectively. In the opinion of management, these loans were
made in the normal course of business and do not involve more than
a normal risk of collectibility.
Changes in the allowance for possible loan losses for the years
ended December 31 were as follows:
1992 1991
--------- ---------
Balance, beginning of year . . . . . . . . . $1,804,768 $1,805,051
Provision charged to operating expense . . 510,000 230,000
Recoveries on loans previously charged off 89,128 37,080
Loans charged off . . . . . . . . . . . . (655,056) (267,363)
--------- ---------
Balance, end of year . . . . . . . . . . . . $1,748,840 $1,804,768
--------- ---------
--------- ---------
F-43
92
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1992 AND 1991
NOTE D - BANK PREMISES Bank premises and equipment consist of
AND EQUIPMENT the following:
December 31,
--------------------------
1992 1991
---------- ----------
Land and improvements . . . . . . . . . . . . $ 840,484 $ 841,811
Buildings and leasehold improvements . . . . 3,834,737 3,677,794
Furniture and equipment . . . . . . . . . . . 4,462,942 3,877,199
--------- ---------
Total cost . . . . . . . . . . . . . . . 9,138,163 8,396,804
Less: accumulated depreciation and amortization 5,016,851 4,587,499
--------- ---------
Total bank premises and equipment, net . $4,121,312 $3,809,305
--------- ---------
--------- ---------
NOTE E - INCOME TAXES The components of income tax provision
for the years ended December 31 are as
follows:
1992 1991
---------- ----------
Current provision
Federal . . . . . . . . . . . . . . . . . . $2,375,224 $1,878,735
State . . . . . . . . . . . . . . . . . . . 177,783 (74,501)
--------- ---------
2,553,007 1,804,234
Deferred income tax (benefit) provision . . . 44,231 (14,071)
--------- ---------
Total income tax provision . . . . . . . . $2,597,238 $1,790,163
--------- ---------
--------- ---------
The sources of timing differences
resulting in deferred income taxes and
the income tax effect of each are as
follows:
1992 1991
--------- ---------
Accretion of discount on investment securities $(2,616) $(13,985)
Depreciation . . . . . . . . . . . . . . . . 8,577 (3,563)
Provision for possible loan losses . . . . . 1,913 (15,594)
Deferred loan fees . . . . . . . . . . . . . 36,357 36,356
Other, net . . . . . . . . . . . . . . . . . - (17,285)
--------- -------
Deferred (benefit) provision . . . . . . $44,231 $(14,071)
------ -------
------ -------
F-44
93
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1992 AND 1991
NOTE E - INCOME TAXES - Accumulated deferred income tax
CONTINUED benefits included in other assets on the
Company's Balance Sheets amounted to
approximately $225,000 and $269,000 at
December 31, 1992 and 1991, respectively.
Income tax expense was less than the
amount computed by applying the Federal
statutory rate of 34% for the years ended
December 31 because of the following:
1992 1991
---------- ----------
Tax expense at statutory rate . . . . . . . . . . $2,849,862 $2,255,190
Increase (decrease) in taxes resulting from:
Tax-exempt interest . . . . . . . . . . . . . (377,257) (481,526)
State income taxes, net of applicable Federal
income tax benefit . . . . . . . . . . . . 81,281 45,302
Refund of prior years' state income taxes,
net of Federal income tax provision . . . (19,715) (94,473)
Nondeductible amortization . . . . . . . . . 7,452 7,452
Other, net . . . . . . . . . . . . . . . . 55,615 58,218
--------- ---------
Total income tax provision . . . . . . . $2,597,238 $1,790,163
--------- ---------
--------- ---------
NOTE F - NOTE PAYABLE The note payable is collateralized by
the common stock of the Company's
subsidiaries. The note matures on May 28,
1993 and bears interest at the prime rate of
the lending bank (6.0% at December 31, 1992)
plus 1%. Principal and interest are payable
at maturity, and the note is renewable every
six months.
NOTE G - EMPLOYEE PROFIT- Substantially all full-time employees of
SHARING PLANS both subsidiary banks are covered by
separate, noncontributory defined contribution
profit-sharing plans. The Banks' contributions
are determined annually at the discretion of
the Board of Directors. Aggregate
contributions to the plans totalled $121,000
and $111,000 for the years ended December 31,
1992 and 1991, respectively.
NOTE H - COMMITMENTS AND FINANCIAL INSTRUMENTS. The Company is a
CONTINGENT LIABILITIES party to financial instruments with
off-balance sheet risk in the normal course of
business to meet the financing needs of its
customers. These financial instruments
include commitments to extend credit and
stand-by letters of credit. These instruments
involve elements of credit risk in excess of
the amounts recognized in the balance sheets.
The contract amounts of these instruments
reflect the extent of involvement the Company
has in particular classes of financial
instruments.
F-45
94
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1992 AND 1991
NOTE H - COMMITMENTS AND The Company's exposure to credit loss,
CONTINGENT LIABILITIES - in the event of non-performance by the other
CONTINUED party to the financial instrument for
commitments to extend credit and stand-by
letters of credit, is represented by the
contractual amount of those instruments. The
Company uses the same credit policies in
making commitments and conditional
obligations as it does for on-balance sheet
instruments.
Financial instruments whose approximate
contract amounts represent credit risk are as
follows:
December 31,
--------------------------------
1992 1991
------------- ------------
Commitments to extend credit . . . . . $39,743,000 $34,982,000
Stand-by letters of credit . . . . . . 3,037,000 3,371,000
Commitments to extend credit are
agreements to lend to a customer as long as
there is no violation of any condition
established in the contract. Commitments
generally have fixed expiration dates or other
termination clauses and may require payment of
a fee. Since many of the commitments are
expected to expire without being drawn upon,
the total commitment amounts do not
necessarily represent future cash
requirements. The Company evaluates each
customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained, if
deemed necessary by the Company upon extension
of credit, is based on management's credit
evaluation of the counterparty. Collateral
held varies but may include accounts
receivable, inventory, property, plant and
equipment and income-producing commercial
properties.
Stand-by letters of credit are
conditional commitments issued by the Company
to guarantee the performance of a customer to
a third party. The credit risk involved in
issuing letters of credit is essentially the
same as that involved in extending loan
facilities to customers. The Company obtains
various collateral supporting those
commitments for which collateral is deemed
necessary.
LITIGATION. Because of the nature of
its activities, the Company is subject to
pending and threatened legal actions which
arise in the normal course of business. In
the opinion of management, and based upon
opinions of legal counsel, the disposition of
all outstanding legal actions will not have a
material effect on the consolidated financial
position of the Company.
F-46
95
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1992 AND 1991
NOTE I - REGULATORY CAPITAL The Company and its bank subsidiaries
REQUIREMENTS are required to maintain minimum amounts of
"Leverage Capital and Total Risk Weighted
Capital," as defined by banking regulations.
The Company's ratios at December 31,
1992 were 10.3% and 17.1%, respectively.
First State Bank and Trust Company of Park
Ridge's ratios at December 31, 1992 were
approximately 12.6% and 22.0%, respectively.
Bank of Buffalo Grove's ratios at December
31, 1992 were 10.6% and 16.1%, respectively.
All ratios are in excess of the minimum
requirements of 3% and 8%, respectively.
NOTE J - FAIR VALUE OF Statement of Financial Accounting
FINANCIAL INSTRUMENTS Standards No. 107 ("FAS 107") requires
disclosure of the estimated fair value of the
Company's financial instrument assets and
liabilities. For the Company and its bank
subsidiaries, as for most financial
institutions, the majority of their assets
and liabilities are considered financial
instruments as defined in FAS 107. However,
many of such instruments (principally loans)
lack an available trading market, as
characterized by a willing buyer and seller
engaging in an exchange transaction. Also,
it is the Company's general practice and
intent to hold its financial instruments to
maturity and not engage in trading.
Therefore, the Company's management had to
use significant estimations and present value
calculations to prepare this disclosure.
Changes in the assumptions or
methodologies used to estimate fair values
may materially affect the estimated amounts.
Also, management is concerned that there may
not be reasonable comparability between
institutions due to the wide range of
permitted assumptions and methodologies in
the absence of active markets. This lack of
uniformity gives rise to a high degree of
subjectivity in estimating financial
instrument fair values.
Fair values have been estimated using
data which management considered the best
available and estimation methodologies deemed
suitable for the pertinent category of
financial instrument. The estimation
methodologies and resulting fair values, and
recorded carrying amounts at December 31,
1992 were as follows:
CASH EQUIVALENTS. Fair values of cash,
cash equivalents, Federal funds sold and
interest-bearing deposits in financial
institutions approximate their carrying
amounts.
INVESTMENTS. Fair values of
investments are based on quoted market prices
and are disclosed in note B.
F-47
96
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1992 AND 1991
NOTE J - FAIR VALUE OF LOANS. Fair values of loans with
FINANCIAL INSTRUMENTS - floating interest rates are generally
CONTINUED presumed to approximate the recorded carrying
amounts. The remaining loans with fixed
payment amounts have been estimated using the
present value of estimated future cash flows
at rates comparable to or currently offered
for loans with similar terms to borrowers of
similar credit quality. The carrying amount
of accrued interest approximates its fair
value.
Carrying Estimated
Loan Category amount fair value
------------- ----------- -------------
Floating rate loans . . . . . . . $ 93,605,991 $ 93,606,000
Fixed rate loans . . . . . . . . 77,783,275 83,719,000
----------- -----------
$171,389,266 $177,325,000
----------- -----------
----------- -----------
Management has determined that they
would incur excessive amounts of time and
money to estimate the fair value of
non-performing loans (loans that are not
accruing interest), primarily due to the
uncertainty of cash flows and the difficulty
in predicting the timing of such cash flows.
The following aggregate data is provided for
such loans:
Aggregate carrying amount . . . . . . . . . . . $1,559,000
Average contractual rate . . . . . . . . . . . 11.25%
Average term to maturity . . . . . . . . . . . 61 months
DEPOSITS AND OTHER LIABILITIES. Fair
values of deposits and other liabilities with
no stated maturities (demand, NOW, money
market and savings) are estimated to
approximate their carrying amounts which are
the amounts due on demand.
Fair values of certificates of deposit
with stated maturities have been estimated
using the present value of estimated future
cash flows discounted at rates currently
offered for similar instruments. Fair values
of certificates maturing within one year
approximate their carrying amounts. Time
deposits also include public funds time
deposits, which mature within one year. The
fair values of these time deposits also
approximate their carrying amounts.
Carrying Estimated
Deposit Category amount fair value
---------------- ------------- ------------
Deposits with no stated maturities $198,658,772 $198,659,000
Deposits with stated maturities 55,924,635 55,924,000
----------- -----------
$254,583,407 $254,583,000
------------ -------------
------------ -------------
F-48
97
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1992 AND 1991
NOTE J - FAIR VALUE OF Fair values of securities sold under
FINANCIAL INSTRUMENTS - agreements to repurchase and borrowed funds
CONTINUED with floating interest rates are generally
presumed to approximate their recorded
carrying amounts.
OFF-BALANCE SHEET ITEMS. There is no
material difference between the carrying
amounts and estimated fair values of
off-balance sheet items at December 31, 1992,
which are primarily comprised of unfunded loan
commitments which are generally priced at fair
value at the time of funding.
The Company's remaining assets and
liabilities are not considered financial
instruments.
NOTE K - PARENT COMPANY
ONLY FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
December 31,
------------------------------
1992 1991
------------ ------------
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 69,048 $ 15,144
Tax payments receivable from subsidiaries . . . . . . . . . . . . . 104,046 91,690
Investment in subsidiaries
First State Bank and Trust Company of Park Ridge . . . . . . . . 23,698,553 21,493,462
Bank of Buffalo Grove . . . . . . . . . . . . . . . . . . . . . . 13,724,645 12,001,499
---------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . $37,596,292 $33,601,795
---------- ----------
---------- ----------
Liabilities
Note payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,795,916 $ 3,973,116
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . 23,878 21,520
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . 7,430 -
---------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . 4,827,224 3,994,636
Shareholders' equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 642,725 688,905
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445,578 477,593
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 31,680,765 28,440,661
---------- ----------
Total shareholders' equity . . . . . . . . . . . . . . . . 32,769,068 29,607,159
---------- ----------
Total liabilities and shareholders' equity . . . . . . . . $37,596,292 $33,601,795
---------- ----------
---------- ----------
F-49
98
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1992 AND 1991
NOTE K - PARENT COMPANY
ONLY FINANCIAL INFORMATION - CONTINUED
CONDENSED STATEMENTS OF INCOME
Years ended December 31,
------------------------------
1992 1991
------------ ------------
Income
Dividends from subsidiaries . . . . . . . . . . . . . . . . . . . . . $ 2,014,225 $ 91,800
Expenses
Interest expense on note payable . . . . . . . . . . . . . . . . . . 241,953 347,205
Amortization of excess of cost over equity in
net assets of subsidiary . . . . . . . . . . . . . . . . . . . . 21,917 21,917
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,630 32,627
---------- ----------
Total expenses . . . . . . . . . . . . . . . . . . . . . . 290,500 401,749
---------- ----------
Income (loss) before income tax benefit and equity
in undistributed earnings of subsidiaries . . . . . . . . . . . . . 1,723,725 (309,949)
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . 110,830 234,833
---------- ----------
Income (loss) before equity in undistributed
earnings of subsidiaries . . . . . . . . . . . . . . . . . . . . . . 1,834,555 (75,116)
Equity in undistributed earnings of subsidiaries . . . . . . . . . . . 3,950,154 4,917,863
---------- ----------
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 5,784,709 $ 4,842,747
---------- ----------
---------- ----------
F-50
99
FIRST PARK RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1992 AND 1991
CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31,
--------------------------------
1992 1991
----------- ------------
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,784,709 $ 4,842,747
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in undistributed earnings of subsidiaries . . . . . . . (3,950,154) (4,917,863)
Amortization of excess of cost over equity
in net assets of subsidiary . . . . . . . . . . . . . . . . 21,917 21,917
Changes in operating assets and liabilities:
(Increase) decrease in income tax payments
receivable from subsidiaries . . . . . . . . . . . . . . (12,356) 66,677
Increase (decrease) in other liabilities . . . . . . . . . 9,788 (1,766)
---------- ----------
Total adjustments . . . . . . . . . . . . . . . . . (3,930,805) (4,831,035)
----------- ----------
Net cash provided by operating activities . . . . . . 1,853,904 11,712
Cash flows from financing activities:
Net increase in note payable . . . . . . . . . . . . . . . . . . . . 822,800 -
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . (2,622,800) -
----------- ----------
Net cash used in financing activities . . . . . . . . . (1,800,000) -
----------- ----------
Net increase in cash . . . . . . . . . . . . . . . . . . 53,904 11,712
Cash, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . 15,144 3,432
---------- ----------
Cash, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 69,048 $ 15,144
---------- ----------
---------- ----------
Supplemental disclosure of cash flow information:
Cash paid (received) during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 239,595 $ 348,972
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . (98,474) (158,368)
F-51
100
EXHIBIT A
April 15, 1994
Board of Directors
First Park Ridge Corporation
205 North Michigan Avenue
38th Floor
Chicago, Illinois 60611
Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of common stock, without par value (the "Shares"), of First
Park Ridge Corporation (the "Company") of the consideration of $1,228.14,
payable in common stock, par value $10 per share, of First of America Bank
Corporation ("First of America") to be received per Share by such holders (the
"Stock Consideration") pursuant to the Agreement and Plan of Merger dated as of
April 15, 1994 among First of America, First of America - Acquisition Company
("Acquisition Company"), a wholly-owned subsidiary of First of America, and
the Company (the "Agreement"). The Agreement provides for the merger of the
Company with and into Acquisition Company.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as its financial advisor in connection
with and having participated in certain of the negotiations leading to, the
Agreement. We also have provided certain investment banking services to First
of America from time to time, including acting as co-manager of a public
offering of subordinated notes of First of America in January 1992.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
First of America for the five years ended December 31, 1993 and audited
financial statements of the Company for the four years ended December 31, 1992;
certain interim reports to stockholders and Quarterly Reports on Form 10-Q of
First of America and certain reports on Form FR Y-9C and other interim
reports of the Company; certain other communications from First of America to
its stockholders; and certain internal financial analyses and forecasts for the
Company prepared by its management. We also have held discussions with members
of the senior management of the Company and First of America regarding the past
and current business operations, regulatory relationships, financial condition
and future prospects of their respective companies. We also have reviewed with
members of the senior management of the Company the results of the Company's
due diligence examination of First of America. We also have held discussions
with the independent auditors of the Company regarding the financial and
accounting affairs of the Company. In addition, we have reviewed the reported
price and trading activity for the common stock of First of America, compared
certain financial information for the Company and certain financial and stock
market information for First of America with similar information for certain
other companies the securities of which are publicly traded, reviewed the
financial terms of certain recent business combinations in the bank and thrift
industries specifically and in other industries generally and performed such
other studies and analyses as we considered appropriate.
A-1
101
First Park Ridge Corporation
April 15, 1994
Page Two
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In that regard, we have assumed, with your consent,
that the financial forecasts have been reasonably prepared on a basis
reflecting the best currently available judgments and estimates of the Company
that such forecasts will be realized in the amounts and at the times
contemplated thereby. We are not experts in the evaluation of loan portfolios
or the allowances for loan losses with respect thereto and have assumed, with
your consent, that such allowances for each of the Company and First of America
are in the aggregate adequate to cover all such losses. In addition, we have
not reviewed individual credit files nor have we made an independent
evaluation or appraisal of the assets and liabilities of the Company or First
of America or any of their subsidiaries and we have not been furnished with any
such evaluation or appraisal.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Stock
Consideration to be received by the holders of Shares pursuant to the Agreement
is fair to such holders.
Very truly yours,
/s/ Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
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EXHIBIT B
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Merger Agreement") is entered into
as of this 15th day of April, 1994 by and among First of America Bank
Corporation (the "Purchaser"), First of America-Acquisition Company (the
"Acquisition Sub") and First Park Ridge Corporation ("Park Ridge").
WHEREAS, Acquisition Sub is a wholly owned subsidiary of Purchaser and has
been organized by Purchaser for the sole purpose of consummating the merger
transaction hereinafter described; and
WHEREAS, the Boards of Directors of Purchaser, Acquisition Sub and Park Ridge
have determined that it is in the respective best interests of each of the
parties hereto to consummate the merger of Park Ridge with and into Acquisition
Sub as hereinafter described in this Merger Agreement (the "Merger"); and
WHEREAS, as a result of the Merger, all of the issued and outstanding common
stock, no par value of Park Ridge (the "Park Ridge Common Stock") will be
converted into common stock $10.00 par value of Purchaser (the "Purchaser
Common Stock") upon the terms and subject to the conditions set forth in this
Merger Agreement; and
WHEREAS, Park Ridge owns all of the issued and outstanding capital stock of
First State Bank & Trust Company of Park Ridge ("FSB"), Bank of Buffalo Grove
("BBG") and First State Bank of Gurnee ("Gurnee") (FSB, BBG and Gurnee being
hereinafter referred to individually as a "Subsidiary" and collectively as the
"Subsidiaries");
WHEREAS, Purchaser, Acquisition Sub and Park Ridge desire that the Merger be
made upon the terms and subject to the conditions set forth in this Merger
Agreement and that the Merger qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code");
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained herein, the parties hereto agree as follows:
ARTICLE I
RECITALS
The Recitals hereinabove set forth are incorporated by reference and made a
part of this Merger Agreement.
ARTICLE II
MERGER
2.1 Merger. Subject to satisfaction or waiver of the conditions set forth in
Article VIII, on the last day of the month in which there occurs receipt of
the latest approval of the Board of Governors of the Federal Reserve System
("FRB") specified in Section 1842(a) of Title 12, United States Code, the
Commissioner of Banks and Trust Companies of the State of Illinois (the
"Illinois Commissioner") pursuant to the Illinois Bank Holding Company Act (the
"Illinois Act") and the Michigan Financial Institutions Bureau (the "FIB")
pursuant to the Michigan Banking Code of 1969, as amended (the "Michigan Act"),
and the lapse of any applicable statutory and regulatory waiting periods or on
such other date as shall be agreed upon by the parties hereto, Park Ridge will
merge with and into Acquisition Sub and Acquisition Sub shall be the surviving
corporation of the Merger. (Acquisition Sub, in its capacity as the corporation
surviving the Merger, is sometimes referred to herein as the "Surviving
Corporation".) The Merger will be effected pursuant to the provisions of and in
accordance with Section 11.05 of the Illinois Business Corporation Act of 1983
as Amended (the "BCA").
2.2 Effective Date Of Merger. The Merger shall become effective as of the
date specified in
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the Certificate of Merger issued by the Illinois Secretary of State as provided
for in accordance with the BCA (the "Effective Date").
2.3 Effect of Merger. On the Effective Date and upon completion of the
Merger: (a) the separate corporate existence of Park Ridge shall cease and
title to all property and rights owned by Park Ridge, including the capital
stock of the Subsidiaries, shall be vested in the Surviving Corporation without
reversion or impairment; (b) the Surviving Corporation shall have and be
responsible and liable for all liabilities of every kind and description of
each of Park Ridge and Acquisition Sub; (c) any proceeding pending against
either Park Ridge or Acquisition Sub may be continued against the Surviving
Corporation as if the Merger did not occur or the Surviving Corporation may be
substituted in any proceeding for Park Ridge or Acquisition Sub; and (d) the
Surviving Corporation shall thereupon and thereafter possess all the rights,
privileges, immunities and franchises, of a public as well as a private nature,
of each of Park Ridge and Acquisition Sub.
2.4 Articles of Incorporation And Directors. The Articles of Incorporation
of Acquisition Sub in effect on the Effective Date shall continue to be the
Articles of Incorporation of the Surviving Corporation, and the Bylaws of
Acquisition Sub in effect on the Effective Date shall continue to be the Bylaws
of the Surviving Corporation. The Directors and Officers of Acquisition Sub
immediately prior to the Effective Date will continue to be the Directors and
Officers of the Surviving Corporation until their successors are duly elected
and qualified.
2.5 Regulatory Approvals. Each of the parties hereto shall use their
respective best efforts to obtain all regulatory or other approvals as are
required to consummate the Merger and to effect such other actions as are
necessary or appropriate to consummate the Merger.
ARTICLE III
CONVERSION OF PARK RIDGE COMMON STOCK
3.1 Certain Definitions. For purposes of this Merger Agreement, the terms
hereinafter defined shall have the following meanings:
(a) "Exchange Price" shall mean $1,228.14.
(b) "Valuation Period" shall mean the period of twenty (20) consecutive
business days on which trading of the Purchaser Common Stock takes place on
the New York Stock Exchange ("NYSE") and ending on the tenth day prior to
the Effective Date, or, if such day shall not be a day on which trading in
the Purchaser Common Stock takes place, the next preceding day on which
trading so takes place.
(c) "Average Closing Price" shall mean the average (rounded to the nearest
penny) of each Daily Sales Price of the Purchaser Common Stock for each
business day during the Valuation Period.
(d) "Daily Sales Price" shall mean for any trading day, the last reported
sale price of the Purchaser Common Stock as reported by the NYSE.
3.2 Conversion of Park Ridge Common Stock; Issuance of Purchaser Common
Stock. To effectuate the Merger, and subject to the terms and conditions of
this Merger Agreement, each issued and outstanding share of the Park Ridge
Common Stock immediately prior to the Effective Date shall, on the Effective
Date, be converted into that number of shares of Purchaser Common Stock equal
to the quotient determined by dividing (i) the Exchange Price by (ii) the
Average Closing Price (the "Exchange Rate"). Subject to Section 3.3, Purchaser
shall issue to each holder of the Park Ridge Common Stock that number of shares
of Purchaser Common Stock equal to the product determined by multiplying (iii)
the number of issued and outstanding shares of Park Ridge Common Stock held by
such shareholder immediately prior to the Effective Date by (iv) the Exchange
Rate.
3.3 No Fractional Shares. No fractional shares of Purchaser Common Stock,
and no certificates representing such fractional shares, shall be issued upon
the surrender for exchange of certificates representing Purchaser Common Stock.
In lieu of any fractional share, Purchaser shall pay to each holder of Park
Ridge Common Stock who otherwise would be entitled to receive a fractional
share of Purchaser Common Stock an amount of cash (without interest) equal to
the product determined by multiplying (i) the Average Closing Price by
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(ii) the fractional share interest to which such holder would otherwise be
entitled.
3.4 No Dilution. The total consideration to be received by any holder of
Park Ridge Common Stock may not be decreased as a result of any stock dividend,
or extraordinary distribution upon, or subdivision, reclassification or
combination of, or any other similar transaction with respect to the Purchaser
Common Stock. In the event that Purchaser shall declare any stock dividend or
make any extraordinary distribution upon its common stock to holders of record
during the Valuation Period, each holder of Park Ridge Common Stock shall
receive a like stock dividend or distribution with respect to the Purchaser
Common Stock received in the Merger determined as if the Merger had been
consummated immediately prior to the record date of such stock dividend or
distribution.
3.5 Additional Consideration. In the event that the Merger is not
consummated on or before October 14, 1994, (the "Interest Date") each holder of
Park Ridge Common Stock shall receive as additional consideration hereunder,
Purchaser Common Stock having a value equivalent to the product determined by
multiplying (i) the Exchange Price by (ii) the number of shares of Park Ridge
Common Stock held by such shareholder immediately prior to the Effective Date
by (iii) the Interest Rate (as hereinafter defined) by (iv) a fraction with a
numerator equal to the number of days elapsed between the Interest Date and the
Effective Date and a denominator of 365. For purposes hereof, the Interest
Rate shall be 7.75% per annum. In the event that additional consideration is
payable pursuant to this Section 3.5, Purchaser shall issue additional shares
of Purchaser Common Stock to each holder of Park Ridge Common Stock determined
in the manner provided in this Section 3.5 and cash payments in lieu of
fractional shares as provided in Section 3.3.
3.6 Procedure For Exchange Of Stock.
(a) After the Effective Date, holders of certificates theretofore
evidencing outstanding shares of Park Ridge Common Stock, upon surrender of
such certificates to an exchange agent appointed by Purchaser (the "Exchange
Agent"), shall be entitled to receive certificates representing the number of
whole shares of Purchaser Common Stock into which such shares of Park Ridge
Common Stock theretofore represented by the certificates so surrendered shall
have been converted as provided in Section 3.2 and cash payments in lieu of
fractional shares, if any, as provided in Section 3.3. As soon as
practicable after the Effective Date, the Exchange Agent will send a notice
and transmittal form to each holder of Park Ridge Common Stock of record as
of the Effective Date advising such holder of the effectiveness of the Merger
and the procedure for surrendering to the Exchange Agent outstanding
certificates formerly evidencing Park Ridge Common Stock in exchange for new
certificates for Purchaser Common Stock. Upon surrender to the Exchange Agent
of outstanding certificates evidencing Park Ridge Common Stock, each such
certificate evidencing Park Ridge Common Stock shall be canceled and
Purchaser shall cause the Exchange Agent to issue and distribute to holders
of the Park Ridge Common Stock certificates of Purchaser Common Stock and
cash payment in lieu of fractional shares as determined in accordance with
terms of this Merger Agreement. All certificates of Purchaser Common Stock
distributed in exchange for the Park Ridge Common Stock shall bear the legend
set forth in Section 3.3 of the Rights Agreement, as that term is hereinafter
defined.
(b) Until outstanding certificates formerly representing Park Ridge Common
Stock are surrendered as provided in Section 3.6(a), no dividend or
distribution payable to holders of record of Purchaser Common Stock shall be
paid to any holder of such outstanding certificates, but upon surrender of
such outstanding certificates by such holder there shall be paid to such
holder the amount of any dividends or distributions, without interest,
theretofore paid with respect to such whole shares of Purchaser Common Stock,
but not paid to such holder, and provided that such dividends or
distributions had a record date occurring on or subsequent to the Effective
Date. After the Effective Date, there shall be no further registration of
transfers on the records of Park Ridge of outstanding certificates formerly
representing shares of Park Ridge Common Stock and, if a certificate formerly
representing such shares is presented to Park Ridge or Purchaser, it shall be
forwarded to the Exchange Agent for cancellation and exchanged for
certificates representing shares of Purchaser Common Stock and, if
applicable, cash in lieu of fractional shares as herein provided.
(c) All shares of Purchaser Common Stock and cash for any fractional shares
issued and paid upon the surrender for exchange of Park Ridge Common Stock in
accordance with the above terms and conditions shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares
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of Park Ridge Common Stock.
(d) In the event any certificate of Park Ridge Common Stock shall have been
lost, stolen or destroyed, the Exchange Agent shall issue in exchange for
such lost, stolen or destroyed certificate, upon the making of an affidavit
of that fact by the holder thereof, and, at Purchaser's option, a bond
adequate to indemnify it and the Exchange Agent against any claims relating
thereto, such shares of Purchaser Common Stock and cash for fractional
shares, if any, as may be required pursuant to this Merger Agreement.
(e) Any shares of Park Ridge Common Stock held by a Dissenting Shareholder
(as hereinafter defined) shall not be converted into shares, or the right to
receive shares, of Purchaser Common Stock unless and until such holder shall
have effectively withdrawn or otherwise lost the right to appraisal of and
payment for his shares of Park Ridge Common Stock under the BCA, at which
time such shares shall upon surrender in accordance with Section 3.6(a)
hereof be converted into shares, and cash payment in lieu of fractional
shares of Purchaser Common Stock, as provided in Sections 3.2, 3.3 and 3.5
(if applicable) hereof. Park Ridge shall give prompt notice to Purchaser of
any demands received from any Dissenting Shareholder for appraisal of and
payment for their shares of Park Ridge Common Stock. Park Ridge shall not,
except with the prior written consent of Purchaser, voluntarily make any
payment with respect to, or settle or offer to settle, any such demands for
appraisal. As used herein, the term Dissenting Shareholder means any holder
of Park Ridge Common Stock who exercises dissent rights under Section 11.65
of the BCA.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND ACQUISITION SUB
Purchaser and Acquisition Sub hereby jointly and severally represent and
warrant to Park Ridge as follows:
4.1 Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan, and has
the requisite corporate power and authority to carry on its business as now
conducted. Acquisition Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of Illinois, and has the
requisite corporate power to carry on its business as now conducted. Each of
Purchaser and Acquisition Sub is registered as a bank holding company under
Section 1481 et seq. of Title 12, United States Code (the "Bank Holding Company
Act"). Each of Purchaser and Acquisition Sub is duly qualified and in good
standing to do business in each jurisdiction where it is required to be so
qualified, except where the failure to so qualify would not have a material
adverse effect upon the business of Purchaser or Acquisition Sub as the case
may be.
4.2 Authority Relative to this Agreement; Non-Contravention. Each of
Purchaser and Acquisition Sub has the requisite corporate power and authority
to enter into this Merger Agreement and to perform its respective obligations
hereunder. The execution and delivery of this Merger Agreement by Purchaser
and Acquisition Sub and the consummation by each of them of the transactions
contemplated hereby have been duly authorized and Purchaser, as sole
shareholder of Acquisition Sub, has approved this Merger Agreement, and no
other corporate proceedings on the part of Purchaser or Acquisition Sub are
necessary to authorize this Merger Agreement, the Merger and the transactions
contemplated hereby. This Merger Agreement has been duly executed and
delivered by each of Purchaser and Acquisition Sub and constitutes a valid and
binding obligation of each of them, enforceable in accordance with its terms.
Neither Purchaser nor Acquisition Sub is subject to, or obligated under, any
provision of (a) its respective Charter (as hereinafter defined) or Bylaws, (b)
any agreement, arrangement or understanding, (c) any license, franchise or
permit or (d) subject to obtaining the approvals referred to in the next
sentence, any law, regulation, order, judgment or decree, which would be
breached or violated, or in respect of which a right of termination or
acceleration or any encumbrance on any of its or any of its subsidiaries'
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assets would be created, by its execution, delivery and performance of this
Merger Agreement and the consummation by it of the transactions contemplated
hereby, other than any such breaches or violations which will not, individually
or in the aggregate, have a material adverse effect on the business, operations
or financial condition of Purchaser and its subsidiaries, taken as a whole, or
the consummation of the transactions contemplated hereby. Other than in
connection with obtaining approvals of, and making filings with, any
governmental or regulatory authority pursuant to the Bank Holding Company Act,
Illinois Act, the Michigan Act, the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "1933 Act"), the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "1934 Act"), rules of the NYSE, and state securities or blue
sky laws, and the rules and regulations thereunder ("Blue Sky Laws"), no
authorization, consent or approval of, or filing with, any public body, court
or authority is necessary on the part of Purchaser or Acquisition Sub for the
consummation by them of the transactions contemplated by this Merger Agreement,
except for such authorizations, consents, approvals and filings as to which the
failure to obtain or make would not, individually or in the aggregate, have a
material adverse effect on the business, operations or financial condition of
Purchaser and its subsidiaries taken as a whole or the consummation of the
transactions contemplated hereby. As used herein, the term "Charter" with
respect to any corporation or banking association shall mean those instruments
that at that time constitute its charter or articles of incorporation as filed
or recorded under the general corporation or other applicable law of the
jurisdiction of incorporation or association, including the articles or
certificate of incorporation or association, any amendments thereto and any
articles or certificate of merger or consolidation.
4.3 Validity of Purchaser Common Stock. The shares of Purchaser Common
Stock to be issued pursuant to this Merger Agreement will be, when issued, duly
authorized, validly issued, fully paid and nonassessable. Subject to the
restrictions set forth in Securities and Exchange Commission Rule 145 under the
1933 Act, the shares of Purchaser Common Stock to be issued pursuant to the
Merger Agreement will be, when issued, fully registered under the 1933 Act and
under all applicable Blue Sky Laws and shall be free from all restrictions or
limitations upon the transfer or sale thereof.
4.4 Capital Structure. As of December 31, 1993, the authorized
capitalization of Purchaser consisted of 100,000,000 shares of Common Stock,
par value $10.00 per share, of which 59,520,710 shares were outstanding;
10,000,000 shares of Preferred Stock, without par value, which have been
divided into and issued in series as follows: 500,000 shares have been
designated as Series A Junior Participating Preferred Stock of which no shares
are outstanding. The authorized capital stock of Acquisition Sub consists of
1,000 shares, no par value, all of which are issued and outstanding.. All of
the issued and outstanding shares of Acquisition Sub are owned by Purchaser.
All of the issued and outstanding capital stock of Purchaser and Acquisition
Sub is validly issued and fully paid and nonassessable and none of such issued
and outstanding capital stock is issued in violation of preemptive rights of
any shareholder or in violation of any agreement binding upon either Purchaser
or Acquisition Sub. Except incident to Purchaser's Shareholders' Investment
Plan, Employee Service/Retirement Award Program, the Restated First of America
Bank Corporation 1987 Stock Option Plan, the First of America Bank Corporation
Reserve Plus Savings Plan, the rights to acquire shares pursuant to the Rights
Agreement dated July 18, 1990, (the "Rights Agreement"), between Purchaser and
First of America Bank-Michigan, N.A., as Rights Agent, the possible offering,
pursuant to a "shelf" registration statement on Form S-3 filed by Purchaser
under the Securities Act of 1933, as amended (the "Securities Act"), of shares
of Purchaser's Preferred Stock, and any conversion rights applicable thereto,
and conversion rights incident to the Purchaser's Preferred Stock, and except
pursuant to the terms of an Agreement and Plan of Reorganization dated as of
October 12, 1993, between Purchaser and LGF Bancorp, Inc., there were, as of
December 31, 1993, no outstanding warrants, options, rights, calls or other
commitments of any nature relating to the authorized but unissued shares of
Purchaser's Common Stock or Purchaser's Preferred Stock or concerning the
authorization, issuance or sale of any other class of equity securities of
Purchaser. Except incident to the foregoing plans, programs and rights,
between December 31, 1993, and the date of this Merger Agreement there has been
no material change in the capitalization of Purchaser. The number of shares
set forth above is subject to change before the Effective Date by affiliation
with other banks, bank holding companies or bank-related businesses or by
purchase, sale, issuance, redemption, conversion, distribution or other
transactions. A vote of the shares set forth above is not required to approve
this Merger Agreement. Each of the holders of shares of Purchaser Common Stock
distributed in exchange for the Park Ridge Common Stock shall have Rights (as
defined in the Rights Agreement) with respect to such shares of Purchaser
Common Stock to the same extent as if such Purchaser Common Stock had been
issued and outstanding on July 30, 1990.
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4.5 1934 Act Reports. Prior to the execution of this Merger Agreement,
Purchaser has delivered to Park Ridge complete and accurate copies of (a)
Purchaser's Annual Reports on Form 10-K for the years ended December 31, 1991,
1992 and 1993 (the "Purchaser 10-K Reports") as filed under the 1934 Act with
the Securities and Exchange Commission (the "SEC"), (b) all Purchaser proxy
statements and annual reports to shareholders used in connection with meetings
of Purchaser's shareholders held since January 1, 1991 and (c) Purchasers'
Quarterly Reports on Form 10-Q for the quarters ended September 30, 1993 and
June 30, 1993 (the "Purchaser 10-Q Reports") as filed under the 1934 Act with
the SEC. As of their respective dates, such documents (i) did not contain any
untrue statements of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and (ii) complied
as to form in all material respects with the applicable laws and rules and
regulations of the SEC. Since January 1, 1991, Purchaser has filed in a timely
manner all reports and other documents that it was required to file with the
SEC pursuant to the 1934 Act and the rules and regulations thereunder. Since
December 31, 1993, there has not been any material adverse change in the
financial condition, results of operation or business of Purchaser and it
subsidiaries on a consolidated basis.
4.6 Litigation. There are no actions, suits, proceedings, orders or
investigations pending or, to the best knowledge of Purchaser or Acquisition
Sub threatened, against Purchaser, or any of its subsidiaries or Acquisition
Sub or against any of their respective assets or properties which if determined
adversely to Purchaser or its subsidiaries or Acquisition Sub could reasonably
be expected to have a material adverse effect on the financial condition,
business or operations of Purchaser and its subsidiaries or Acquisition Sub,
taken as a whole, or which would have a material adverse effect on the ability
of Purchaser or Acquisition Sub to consummate the Merger and the other
transactions contemplated hereby.
4.7 Reports and Filings. Since January 1, 1991, each of Purchaser and its
subsidiaries has filed each report or other filing it was required to file with
any federal or state banking or bank holding company regulatory authority
having jurisdiction over it (together with all exhibits thereto, the "Purchaser
Regulatory Reports") and has paid all fees and assessments due and payable in
connection therewith, except for such reports and filings which the failure to
so file would not have a material adverse effect on the business, operations or
financial condition of Purchaser and its subsidiaries, taken as a whole. As of
their respective dates or as subsequently amended prior to the date hereof,
each of the Purchaser Regulatory Reports was true and correct in all material
respects and complied in all material respects with applicable laws, rules and
regulations.
4.8 Compliance with Laws. Each of Purchaser, its subsidiaries and
Acquisition Sub has complied in all material respects with all applicable laws
and regulations of foreign, federal, state and local governments and all
agencies thereof and with all judgments, decrees and orders of any governmental
agency or Court which affect the business of Purchaser, its subsidiaries or
Acquisition Sub or any owned or leased properties of Purchaser, its
subsidiaries or Acquisition Sub and to which Purchaser, any of its subsidiaries
or Acquisition Sub may be subject, except where the failure to so comply would
not, individually or in the aggregate, have a material adverse effect on the
business, operations or financial condition of Purchaser, its subsidiaries and
Acquisition Sub, taken as a whole.
4.9 Absence of Governmental Proceedings. Neither Purchaser, nor any of its
subsidiaries or Acquisition Sub is a party defendant or respondent to any
pending legal, equitable or other proceeding commenced by any governmental
agency, where such proceeding, if concluded adversely to Purchaser, its
subsidiaries or Acquisition Sub, would have a material adverse effect on the
business, operations or financial condition of Purchaser, its subsidiaries and
Acquisition Sub, taken as a whole, and to the best of their knowledge, no such
proceeding is threatened.
4.10 Absence of Undisclosed Liabilities. Except as disclosed in Purchaser's
10-K Report for the year ended December 31, 1993, neither Purchaser nor any of
its subsidiaries has any indebtedness, obligation or liability (contingent or
otherwise) that would have a material adverse effect on the business,
operations or financial condition of Purchaser and its subsidiaries, taken as a
whole.
4.11 Regulatory Approvals. As of the date hereof, Purchaser is not aware of
any reason that the regulatory approvals specified in Section 4.2 and required
hereunder to be obtained by it will not be obtained.
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4.12 Taxes. To the best of Purchaser's knowledge, Purchaser and its
subsidiaries have 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 up to the date
hereof. All such returns are true and correct in all material respects, and
Purchaser or its subsidiaries have paid or, prior to the Effective Date, will
pay all taxes, interest and penalties shown on such returns or reports as being
due or (except to the extent the same are contested in good faith) claimed to
be due to any Federal state, county, local or other taxing authority, and there
is, and on the Effective Date will be, no basis for any additional claim or
assessment which might materially and adversely affect Purchaser and its
subsidiaries on a consolidated basis, except for those being contested in good
faith which have been fully disclosed to Park Ridge.
4.13 Title To Assets. To the best of Purchaser's knowledge, Purchaser and
each of its subsidiaries have good and marketable title to all their respective
assets and properties, whether real or personal, tangible or intangible, which
they purport to own, including without limitation, the capital stock of
Purchaser's subsidiaries. Such assets and properties are subject to no liens,
mortgages, security interests, encumbrances, pledges or charges of any kind,
except (i) statutory liens for taxes not yet delinquent; and (ii) such liens,
mortgages, security interests, encumbrances and charges which do not, in the
aggregate, have a material adverse effect on the business, operations or
financial condition of Purchaser and its subsidiaries, taken as a whole.
4.14 Environmental Liabilities.
(a) Neither Purchaser, nor any of its subsidiaries, have received any
notices from any governmental agency that it is in violation of any judgment,
decree, order, law, license, rule or regulation pertaining to environmental
matters, including those arising under the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986,
the Federal Water Pollution Control Act, the Federal Clean Air Act, the Toxic
Substances Control Act or any state or local statute, regulation, ordinance,
order or decree relating to health, safety or the environment (collectively
"Environmental Law") where such event, if determined adversely to Purchaser,
would have a material adverse effect on the business, operations, or
financial condition of Purchaser, its subsidiaries or Acquisition Sub, taken
as a whole.
(b) To the best knowledge of Purchaser and Acquisition Sub, no portion of
any real property at any time owned or leased by Purchaser or any of its
subsidiaries has been used by Purchaser or any of its subsidiaries for the
handling, processing, storage or disposal of Hazardous Substances (as
hereinafter defined) in a manner which violates any Environmental Law where
such event, if determined adversely to Purchaser, would have a material
adverse effect on the business, operations, or financial condition of
Purchaser, its subsidiaries or Acquisition Sub, taken as a whole, and, to the
best knowledge of Purchaser and Acquisition Sub, no underground tank or other
underground storage receptacle for Hazardous Substances is located on any
such real estate. To the best knowledge of Purchaser and Acquisition Sub,
there has been no past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping (collectively, a "Release") of Hazardous Substances by
Purchaser or any of its subsidiaries on, upon, or into any of such real
estate, where such event, if determined adversely to Purchaser, would have a
material adverse effect on the business, operations, or financial condition
of Purchaser, its subsidiaries or Acquisition Sub, taken as a whole. As used
herein, the term Hazardous Substances includes all toxic or hazardous
substances, pollutants, or contaminants described in or regulated by any
Environmental Law.
4.15 Disclosure. The representations and warranties contained in this Merger
Agreement and in any other written documents executed and/or delivered by or on
behalf of Purchaser or Acquisition Sub pursuant to the terms of this Merger
Agreement are true and correct in all material respects, and such statements
and other documents do not omit any material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. The statements made in such other documents shall
be deemed to constitute representations and warranties of Purchaser and
Acquisition Sub under this Merger Agreement to the same extent as if herein set
forth in full. All such statements are made exclusively for the benefit of
Park Ridge and its shareholders in connection with the transactions
contemplated by this Merger Agreement and
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may not be relied upon by any other party. No representation or warranty made
herein or in any other written document shall be affected or deemed waived by
reason of the fact that Park Ridge or any shareholder of Park Ridge knew or
should have known that any such representation or warranty might be untrue or
inaccurate in any respect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARK RIDGE
Park Ridge represents and warrants to Purchaser and Acquisition Sub as
follows:
5.1 Organization. Park Ridge is a corporation which is duly organized,
validly existing, and in good standing under the laws of the State of Illinois
and has the requisite corporate power and authority to carry on its business as
now conducted. Each of the Subsidiaries is an Illinois banking corporation
duly organized, validly existing and in good standing under the laws of the
State of Illinois. Park Ridge and the Subsidiaries own or possess in the
operation of their respective businesses all franchises, licenses, permits,
certificates, consents, approvals, waivers, and other authorizations,
governmental or otherwise, which are necessary for them to conduct their
business as now conducted, except for those where the failure of such ownership
or possession would not have a material adverse effect on the business,
operations, or financial condition of Park Ridge or any of the Subsidiaries.
5.2 Execution and Performance of Agreement. Park Ridge has the requisite
corporate power and authority to enter into this Merger Agreement and perform
its obligations hereunder. The execution and delivery of this Merger Agreement
by Park Ridge has been duly authorized by its Board of Directors and no other
corporate actions, except for approval of the merger by Park Ridge's
shareholders, are necessary to authorize this Merger Agreement, the Merger, or
the transactions contemplated hereby. This Merger Agreement has been duly
executed and delivered by Park Ridge and, subject to shareholder approval,
constitutes a valid and binding obligation of Park Ridge, enforceable in
accordance with its terms. Neither Park Ridge nor any Subsidiary is subject
to, or obligated under, any provision of (a) its respective Charter or Bylaws,
(b) any agreement, arrangement or understanding, (c) any license, franchise or
permit or (d) subject to obtaining the approvals referred to in the next
sentence, any law, regulation, order, judgment or decree, which would be
breached or violated, or in respect of which a right of termination or
acceleration or any encumbrance on any of its or any of its subsidiaries'
assets would be created, by its execution, delivery and performance of this
Merger Agreement and the consummation by it of the transactions contemplated
hereby, other than any such breaches or violations which will not, individually
or in the aggregate, have a material adverse effect on the business, operations
or financial condition of Park Ridge or the Subsidiaries, or the consummation
of the transactions contemplated hereby. Other than as set forth in Schedule
5.2 or in connection with obtaining approvals of, and making filing with, any
governmental or regulatory authority pursuant to the Bank Holding Company Act,
the Illinois Act, and the HSR Act, no authorization, consent or approval of, or
filing with, any public body, court or authority is necessary on the part of
Park Ridge or the Subsidiaries for the consummation by them of the transactions
contemplated by this Merger Agreement, except for such authorizations,
consents, approvals and filings as to which the failure to obtain or make would
not, individually or in the aggregate, have a material adverse effect on the
business, operations or financial condition of Park Ridge or the Subsidiaries,
taken as a whole, or the consummation of the transactions contemplated hereby.
5.3 Absence of Violations. To the best of its best knowledge, neither Park
Ridge nor the Subsidiaries is in violation of their respective Charter or
Bylaws, or of any applicable law or ordinance or any order, rule, or regulation
of any federal, state, local, or other governmental agency or body, in any
material respect, or in default with respect to any order, writ, injunction, or
decree of any court, in any material respect, any of which violations or
defaults might have a materially adverse effect on the business, operations or
financial condition of Park Ridge or the Subsidiaries.
5.4 Compliance with Agreements. Park Ridge and the Subsidiaries are not in
violation of any material term of any material security agreement, mortgage,
indenture, or any other contract, agreement, instrument, lease, or certificate
to which they are a party. The capital ratios of Park Ridge and the
Subsidiaries comply fully with all terms of all currently outstanding
supervisory and regulatory requirements.
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5.5 Subsidiaries. The Subsidiaries are direct, wholly owned subsidiaries of
Park Ridge and they are the only subsidiaries of Park Ridge. Park Ridge does
not directly or indirectly own, control, or hold with the power to vote, any
shares of the capital stock or other equity interests in any corporation,
organization or other entity except for the Subsidiaries.
5.6 Capital Structure of Park Ridge. The authorized capital stock of Park
Ridge consists of 200,000 shares of common stock of no par value, of which, as
of the date of this Merger Agreement, 65,139 shares have been duly issued and
are validly outstanding and fully paid. The aforementioned shares of Park
Ridge Common Stock are the only shares of capital stock of Park Ridge
authorized, issued, or outstanding as of such date and no subscriptions,
warrants, options, rights, convertible securities, or similar arrangements or
commitments in respect of securities of Park Ridge are authorized, issued, or
outstanding which would enable the holder thereof to purchase or otherwise
acquire shares of any class of capital stock of Park Ridge. No other voting
securities or subscriptions, warrants, options, rights, convertible securities,
or similar arrangements or commitments in respect of securities of Park Ridge
are issued or outstanding. Park Ridge is neither a party to, nor is obligated
by, any commitment, plan, or arrangement to issue or to sell any shares of
capital stock or any other equity interest in Park Ridge. The number of shares
of Park Ridge issued and outstanding, as set forth above, is not subject to
change before the Effective Date.
5.7 Capital Structure of the Subsidiaries. The authorized capital stock of
the Subsidiaries is set forth in Schedule 5.7 attached hereto. The capital
stock of the Subsidiaries (the "Subsidiary Shares") described in Schedule 5.7
is duly issued, validly outstanding, fully paid and held by Park Ridge. The
Subsidiary Shares are the only issued and outstanding capital stock of the
Subsidiaries. Except as set forth in said Schedule 5.7, no subscriptions,
warrants, pledges, options, rights, convertible securities or similar
arrangements in respect of the securities of the Subsidiaries are authorized,
issued or outstanding which would enable the holder thereof to purchase or
otherwise acquire shares of any class of capital stock of the Subsidiaries.
Except as set forth in said Schedule 5.7, no other voting securities or
subscriptions, warrants, pledges, rights, convertible securities or similar
arrangements in respect of the securities of the Subsidiaries are issued or
outstanding. The Subsidiaries are neither a party to, nor obligated by, any
commitment, plan or arrangement to issue or to sell any shares of capital stock
or any other equity interest in the Subsidiaries.
5.8 Charter and Bylaws. The copies of the Charter and all amendments thereto
and of the Bylaws, as amended, of Park Ridge and the Subsidiaries have been
made or will be made available to Purchaser and are true, correct, and complete
copies thereof.
5.9 Books and Records. The books and records of Park Ridge and the
Subsidiaries fairly reflect the transactions to which each is a party or by
which their properties are subject or bound. Such books and records have been
properly kept and maintained and are in compliance in all material respects
with all applicable legal and accounting requirements. Park Ridge and the
Subsidiaries follow generally accepted accounting principles applied on a
consistent basis in the preparation and maintenance of their books of account
and financial statements. Park Ridge and the Subsidiaries have filed all
material reports and returns required by any law or regulation to be filed by
them.
5.10 Regulatory Approvals and Filings, Contracts, Commitments etc. Park Ridge
has made available to Purchaser and will grant to Purchaser continuing access
until the Effective Date, to originals or copies of the following documents
relating to Park Ridge and the Subsidiaries:
(a) All employment contracts, deferred compensation, non-competition,
bonus, (except as set forth in 7.1(d), all of the foregoing, if any,
contracts, or arrangements are terminable at will without further liability
on not more than 60 days written notice) profit-sharing, pension, retirement,
consultation after retirement, incentive, insurance arrangements or plans
(including medical, disability, group life or other insurance plans), and any
other remuneration or fringe benefit arrangements applicable to employees,
officers, or directors of Park Ridge or the Subsidiaries, accompanied by any
agreements, embodying such contracts, plans, or arrangements, and all
employee manuals and memoranda relating to employment and benefit policies
and practices of any nature whatsoever (whether or not distributed to
employees or any of them);
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(b) All contracts, agreements, leases, mortgages, and commitments, with an
aggregate liability in excess of $100,000 per annum, to which Park Ridge or
the Subsidiaries are parties or may be bound;
(c) All material contracts, agreements, leases, mortgages, and commitments,
whether or not entered into in the ordinary course of business, to which Park
Ridge or the Subsidiaries is a party or may be bound and which require the
consent or approval of third parties to the execution and delivery of this
Merger Agreement or to the consummation or performance of any of the
transactions contemplated thereby;
(d) All deeds, leases, contracts, agreements, mortgages, and commitments,
whether or not entered into in the ordinary course of business, to which Park
Ridge or the Subsidiaries is a party or may be bound and which relate to
land, buildings, fixtures, or other real property upon or within which Park
Ridge or the Subsidiaries operate their businesses or are authorized to
operate their businesses, or with respect to which Park Ridge or the
Subsidiaries have any application pending for authorization to operate their
businesses; and
(e) Any pending application, including any documents or materials related
thereto, which has been filed by Park Ridge or the Subsidiaries with any
federal or state regulatory agency with respect to the establishment of a new
office or the acquisition or establishment of any additional banking or
non-banking subsidiary.
5.11 Financial Statements. Park Ridge has furnished to Purchaser its
consolidated statement of condition as of each of December 31, 1988, December
31, 1989, December 31, 1990, December 31, 1991, and December 31, 1992,(and will
furnish its December 31, 1993 consolidated statement of condition when
available), and its related consolidated statement of income, consolidated
statement of changes in financial position, and consolidated statement of
changes in stockholders' equity for each of the periods then ended, and the
notes thereto (collectively, the "Park Ridge Financial Statements"). The Park
Ridge Financial Statements, including the related notes, (a) were prepared in
accordance with generally accepted accounting principles applied in all
material respects and as to each category of assets and liabilities and each
category of income and expense on a consistent basis throughout the periods
involved, and (b) are in accordance with the books and records of Park Ridge
which have been maintained in accordance with generally accepted accounting
principles or the requirements of financial institution regulatory authorities,
as the case may be, and (c) fairly reflect the consolidate financial position
of Park Ridge and the Subsidiaries as of such dates, and the consolidated
results of operations of Park Ridge and the Subsidiaries for the periods ended
on such dates, and do not fail to disclose any material extraordinary or
out-of-period items.
5.12 Call Reports, Subsidiaries Holding Company Reports.
(a) The Subsidiaries have furnished or will, no later than ten business
days after the date hereof, furnish to Purchaser their Consolidated Reports
of Condition and Income for the calendar quarters ended December 31, 1993 and
thereafter. All of such Consolidated Reports of Condition and Income,
including the related schedules and memorandum items, were prepared in
accordance with generally accepted accounting principles applied in all
material respects and as to each category of assets and liabilities and each
category of income and expense on a consistent basis throughout the periods
involved, except as expressly stated therein.
(b) Park Ridge has furnished to Purchaser reports on Forms FRY-9LP and
FRY-9C (the "FRB Reports") as filed with the FRB as of December 31, 1993 on
behalf of Park Ridge.
5.13 Absence of Undisclosed Liabilities. Park Ridge and the Subsidiaries
have no obligation or liability of any nature (whether absolute, accrued,
contingent, or otherwise, and whether due or to become due) which is material,
or that when combined with all similar obligations or liabilities would be
material, to Park Ridge and the Subsidiaries except (a) as disclosed in the
Park Ridge Financial Statements or the FRB Reports, or (b) as set forth on
Schedule 5.13 hereof, or (c) trade payables in the ordinary course of business,
or (d) for unfunded loan commitments made by the Subsidiaries in the ordinary
course of their business consistent with past practice.
5.14 Absence of Certain Developments. Since December 31, 1993, except as set
forth on Schedule 5.14 hereof, there has been no material adverse change in the
condition, financial or otherwise, assets, properties, liabilities, or
businesses of Park Ridge or the Subsidiaries. Since December 31, 1993 Park
Ridge and the Subsidiaries have conducted their business only in the ordinary
course of such business and consistent with past
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practice; provided, however, that Gurnee is, as of the date hereof, an inactive
subsidiary and has not engaged in any business in the ordinary course.
5.15 Tax Matters. To the best of Park Ridge's knowledge, all federal, state,
local, and foreign tax returns and reports (including, without limitation, all
income tax, unemployment compensation, social security, payroll, sales and use,
excise, privilege, property, ad valorem, franchise, license, and any other tax
under laws of the United States or any state or municipal or political
subdivision thereof) required to be filed by or on behalf of Park Ridge and the
Subsidiaries have been timely filed with the appropriate governmental agencies
in all jurisdictions in which such returns and reports are required to be
filed, or requests for extensions have been timely filed, granted, and have not
expired for periods ending on or before December 31, 1993, and all returns
filed are complete and accurate to the best of the knowledge of the management
of Park Ridge and the Subsidiaries and properly reflect the taxes of Park Ridge
and the Subsidiaries for the periods covered thereby, provided, however, that
income tax returns for calendar 1993 are not yet due and have not been filed.
All taxes shown on filed returns have been paid. As of the date hereof, there
is no audit examination, deficiency, or refund litigation or tax claim or any
notice of assessment or proposed assessment by the IRS or any other taxing
authority, or any other matter in controversy with respect to any taxes that
might result in a determination adverse to Park Ridge and the Subsidiaries,
except as reserved against in the Park Ridge Financial Statements.
5.16 Reports. Since December 31, 1993, Park Ridge and the Subsidiaries have
effected all registrations and filed all reports described in Section 5.12 and
all material reports and statements, together with any amendments required to
be made with respect thereto, which Park Ridge or the Subsidiaries were
required to effect or file with (a) the FRB, (b) the FDIC, (c) the United
States Department of the Treasury, (d) the Illinois Commissioner, and (e) any
other governmental or regulatory authority or agency having jurisdiction over
the operations of Park Ridge and the Subsidiaries. Each of such registrations,
reports, and documents, including the financial statements, exhibits, and
schedules thereto, does not contain any statement which, at the time and in the
light of the circumstances under which it was made, is false or misleading with
respect to any material fact or which omits to state any material fact
necessary in order to make the statements contained therein not false or
misleading.
5.17 Legal Proceedings. Except as disclosed in the Park Ridge Financial
Statements or in Schedule 5.17 hereto, there is no claim, action, suit,
arbitration, investigation, or other proceeding pending before any court,
governmental agency, authority or commission, arbitrator, or impartial mediator
(of which Park Ridge or the Subsidiaries has been served with process or
otherwise been given notice) or, to the knowledge of Park Ridge or the
Subsidiaries, threatened or contemplated against or affecting them or their
property, assets, interests, or rights, or any basis therefor of which notice
has been given, which, if adversely determined, would have a material adverse
effect (financial or otherwise) on the business, operating results, or
financial condition of Park Ridge or the Subsidiaries, or the consummation of
the transactions contemplated by this Merger Agreement.
5.18 Absence of Governmental Proceedings. Neither Park Ridge nor the
Subsidiaries is a party defendant or respondent to any pending legal,
equitable, or other proceeding commenced by any governmental agency and, to the
best of its knowledge, no such proceeding is threatened.
5.19 Federal Deposit Insurance. The deposits held by the Subsidiaries are
insured up to the statutory limits by the Insurance Fund of the FDIC pursuant
to the provisions of the Federal Deposit Insurance Act, as amended (12 U.S.C.
1811 et seq), and each of the Subsidiaries has paid all assessments and filed
all related reports and statements required under the Federal Deposit Insurance
Act.
5.20 Other Insurance. Park Ridge and the Subsidiaries carry insurance with
reputable insurers, including blanket bond coverage, in such amounts as are
reasonable to cover such risks as are customary in relation to the character
and location of their properties and the nature of their businesses. All such
policies of insurance are in full force and effect, and no notice of
cancellation has been received.
5.21 Labor Matters. Neither Park Ridge nor the Subsidiaries is a party to or
bound by any collective bargaining contracts with any of its employees. As of
the date hereof, neither Park Ridge nor the Subsidiaries is aware of any
attempts to organize a collective bargaining unit to represent any of its
employee groups.
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5.22 Employee Benefit Plans.
(a) Park Ridge has previously made available or will make available to
Purchaser for its continuing review until the Effective Date, true, complete,
and accurate copies of all pension, retirement, savings, or profit-sharing
plans, any employment or deferred compensation, agreement, or group insurance
contract or any other incentive, welfare, life insurance, death or survivor's
benefit, health insurance, sickness, disability, medical, surgical, hospital,
severance, layoff or vacation plans, contracts, and arrangements or employee
benefit plans or agreements sponsored, maintained, or contributed to by Park
Ridge or the Subsidiaries for the employees or former employees of Park
Ridge or the Subsidiaries and the most recent annual reports, if any, filed
with any government agency and all IRS rulings and determination letters and
any open requests for such rulings and letters that pertain to any such plan.
(b) Except for liabilities to the Pension Benefit Guaranty Corporation
("PBGC") pursuant to Section 4007 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), all of which have been fully paid, and
except for liabilities to the IRS under Section 4971 of the Code, all of
which have been fully paid, Park Ridge and the Subsidiaries have no material
liability with respect to any pension plan (within the meaning of Section
401(a) of the Code) that is qualified under Section 401 of the Code.
(c) All "employee benefit plans," as defined in Section 3(3) of ERISA, that
cover one or more employees employed by the Subsidiaries (each individually a
"Plan" and collectively the "Plans"), comply in all material respects with
ERISA and, where applicable for tax-qualified or tax-favored treatment, with
the Code. To the best of its knowledge, as of December 31, 1993, neither of
the Subsidiaries had any material liability under any Plan which is not
reflected in the FRB Reports (other than such normally unrecorded liabilities
under the Plans for sick leave, holiday, education, bonus, vacation,
incentive compensation, and anniversary awards, provided that such
liabilities are not in any event material). To the best of its knowledge,
neither the Plans, Park Ridge and the Subsidiaries, nor any trustee or
administrator of the Plans, has ever engaged in a "prohibited transaction"
with respect to the Plans within the meaning of Section 406 of ERISA or,
where applicable, Section 4975 of the Code for which no exemption is
applicable, nor have there been any "reportable events" within Section 4043
of ERISA for which the thirty-day notice therefor has not been waived. Park
Ridge and the Subsidiaries have not incurred any material liability under
Section 4201 of ERISA for a complete or partial withdrawal from a
multi-employer plan.
5.23 Environmental Liability.
(a) Neither Park Ridge nor the Subsidiaries have received any notices from
any governmental agency that it is in violation of any judgment, decree,
order, law, license, rule or regulation pertaining to environmental matters,
including those arising under any Environmental Law.
(b) To the best of its knowledge, no portion of any real property at any
time owned or leased by Park Ridge and the Subsidiaries has been used by Park
Ridge and the Subsidiaries for the handling, processing, storage or disposal
of Hazardous Substances in a manner which violates any Environmental Law and,
to the best of its knowledge, no underground tank or other underground
storage receptacle for Hazardous Substances is located on any such real
estate. To the best of its knowledge , there has been no past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, disposing or dumping
(collectively, a "Release") of Hazardous Substances by Park Ridge or any of
the Subsidiaries on, upon, or into any of such real estate.
5.24 Real and Personal Property. Except for as set forth in Schedule 5.24
hereto or property and assets disposed of in the ordinary course of business,
Park Ridge and the Subsidiaries possess good and marketable title to and own,
free and clear of any mortgage, pledge, lien, charge, or other encumbrance or
other third party interest of any nature whatsoever which would materially
interfere with the business or operations of Park Ridge and the Subsidiaries,
their real and personal property and other assets, including without limitation
those properties and assets reflected in the FRB Reports , or acquired by Park
Ridge and the Subsidiaries subsequent to the date thereof. The leases pursuant
to which the Subsidiaries lease real or personal property are valid and
effective in accordance with their respective terms; and there is not, under
any such lease, any material existing default or any event which, with the
giving of notice or lapse of time or otherwise, would constitute a material
default. The real
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and personal property leased by the Subsidiaries is free from any adverse claim
which would materially interfere with the business or operation of the
Subsidiaries.
5.25 Material Contract Defaults. Neither Park Ridge nor the Subsidiaries is
in default in any material respect under any material contract, agreement,
commitment, arrangement, lease, insurance policy, or other instrument to which
it is a party or by which its assets, business, or operations may be bound or
affected or under which it or its assets, business, or operations receive
benefits; and there has not occurred any event that with the lapse of time or
the giving of notice or both would constitute such a default.
5.26 Brokers and Advisers. Neither Park Ridge nor the Subsidiaries have
incurred or will incur any liability for brokers', finders', agents' or
investment advisory fees or commissions in connection with this Merger
Agreement or the transactions contemplated hereby except for the investment
advisory fee payable to Goldman Sachs & Co. pursuant to an agreement dated
December 2, 1993 (the "Goldman Agreement"), a copy of which has been provided
to Purchaser. Except for the Goldman Agreement, Park Ridge has fee agreements
with all outside attorneys, accountants, and other independent experts and
advisors it has used or plans to use in connection with the transactions
contemplated in this Merger Agreement, which provide that such attorneys,
accountants, and other independent experts and advisors will be compensated
only at their normal hourly or per diem rates plus reasonable out-of-pocket
expenses.
5.27 Regulatory and Other Approvals. As of the date hereof, Park Ridge is not
aware of any reason that the regulatory approvals specified in Section 5.2 and
required to be obtained by it will not be obtained.
5.28 Shareholders of the Company. Schedule 5.28 accurately identifies the
names and addresses of all of the shareholders of Park Ridge. From the date
hereof until the Effective Date, Park Ridge shall, upon request, provide
Purchaser with a complete list of all of its shareholders, including the names,
addresses and number of shares of Park Ridge common stock held by each
shareholder. Without the advance written consent of Park Ridge, Purchaser will
not disclose or make use of the information provided by Park Ridge pursuant
hereto except as may be required in connection with regulatory or other filings
permitted by this Agreement, the mailing of the Prospectus/Proxy Statement (as
hereinafter defined) or as is otherwise specifically permitted by this Merger
Agreement.
5.29 Loans. All loans and loan commitments extended by the Subsidiaries (the
"Loans") have been made in accordance with the Subsidiaries' customary lending
standards in the ordinary course of business. The Loans are evidenced by
appropriate and sufficient documentation and constitute valid and binding
obligations of the borrowers enforceable in accordance with their terms, except
as limited by applicable bankruptcy, insolvency, or other similar laws
affecting the enforcement of creditors' rights and remedies generally from time
to time in effect and by applicable law which may affect the availability of
equitable remedies. All such Loans are, and at the Effective Date will be,
free and clear of any security interest, lien, encumbrance or other charge,
except for rights of participating banks pursuant to participation agreements
entered into in the ordinary course of business, and Park Ridge and the
Subsidiaries have complied, and at the Effective Date will have complied, in
all material respects with all laws and regulations relating to such Loans.
The Loans are not subject to any material offsets, or to the knowledge of Park
Ridge, claims of material offset, or claims of other material liability on the
part of Park Ridge or the Subsidiaries, except, in each case, claims of offset
or liability which in the aggregate would not have a material adverse effect on
the business, operations or financial condition of Park Ridge or the
Subsidiaries taken as a whole.
5.30 Fiduciary Responsibilities. To the best of Park Ridge's knowledge, Park
Ridge and the Subsidiaries have performed all of their duties in their
capacities as trustees, executors, administrators, registrars, guardians,
custodians, escrow agents, receivers or any other fiduciary capacity in a
manner which complies in all material respects with all applicable laws,
regulations, orders, agreements, wills, instruments and common law standards.
5.31 Insider Interests. All loans, extensions of credit, and other
contractual arrangements (including deposit relationships) between Park Ridge
or the Subsidiaries and any officer or director of the Park Ridge or the
Subsidiaries, or any affiliate of any such officer or director conform to
applicable rules and regulations and
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requirements of all applicable regulatory agencies. No officer or director of
Park Ridge or the Subsidiaries has any material interest in any property, real
or personal, tangible or intangible, used in or pertaining to the business of
Park Ridge or the Subsidiaries.
5.32 No Sensitive Transactions. Within the past five (5) years, neither the
Company nor the Subsidiaries nor, to Park Ridge's knowledge, any director,
employee, or agent of Park Ridge or the Subsidiaries, has directly or
indirectly used funds or other assets of Park Ridge or the Subsidiaries for (a)
illegal contributions, gifts, entertainment, or other expenses related to
political activities; (b) payments to or for the benefit of any governmental
official or employee, other than payments required or permitted by law; (c)
illegal payments to or for the benefit of any person, firm, corporation, or
other entity, or any officer, employee, agent, or representative thereof; or
(d) the establishment or maintenance of a secret or unrecorded fund.
5.33 Community Reinvestment Act Compliance. Park Ridge and each of the
Subsidiaries is in substantial compliance with the applicable provisions of the
Community Reinvestment Act of 1977 (the "CRA Act") and the regulations
promulgated thereunder. As of the date of this Agreement, Park Ridge has not
been advised of the existence of any act or circumstance or set of facts or
circumstances which, if true, would cause Park Ridge or any of the Subsidiaries
to fail to be in substantial compliance with such provisions. The Subsidiaries
have not received a rating from the FDIC pursuant to the CRA Act which is less
than "satisfactory."
5.34 Disclosure. The representations and warranties contained in this Merger
Agreement and in any other written documents executed and/or delivered by or on
behalf of Park Ridge pursuant to the terms of this Merger Agreement are true
and correct in all material respects, and such statements and other documents
do not omit any material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading. The statements made in such other documents shall be deemed to
constitute representations and warranties of Park Ridge under this Merger
Agreement to the same extent as if herein set forth in full. All such
statements are made exclusively for the benefit of Purchaser or Acquisition Sub
in connection with the transactions contemplated by this Merger Agreement and
may not be relied upon by any other party. No representation or warranty made
herein or in any other written document shall be affected or deemed waived by
reason of the fact that Purchaser or Acquisition Sub knew or should have known
that any such representation or warranty might be untrue or inaccurate in any
respect.
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 Filings and Approvals. Each party will use all reasonable efforts and
will cooperate with the other parties in the preparation and filing, as soon as
practicable, of all applications or other documents required to obtain
regulatory approvals and consents from the FRB, the FIB and the Illinois
Commissioner, and any other applicable regulatory authorities and shall provide
copies of such applications, filings and related correspondence to the other
parties. Without limiting the foregoing, Purchaser shall promptly make
application to the FRB under the provisions of the Bank Holding Company Act
of 1956, as amended, for approval of the Merger in accordance with the terms of
this Merger Agreement. Prior to filing each application, registration statement
or other document with the applicable regulatory authority, each party will
provide the other party with an opportunity to review and comment on the
nonconfidential portions of each such application, registration statement, or
other document. Each party will use all reasonable efforts and will cooperate
with the other parties in taking any other actions necessary to obtain such
regulatory or other approvals and consents, including participating in any
required hearings or proceedings. Subject to the terms and conditions herein
provided, each party will use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Merger Agreement.
6.2 Interim Financial Statements. Park Ridge shall furnish Purchaser with
Park Ridge's and each of the Subsidiaries' internal unaudited balance sheets
and the related statements of income on a periodic basis as from time to time
requested by Purchaser. Such financial statements shall be prepared on a basis
consistent with its prior financial statements and on a consistent basis during
the periods involved and shall fairly present the financial positions of Park
Ridge and each of the Subsidiaries as of the dates thereof and the results of
operations of Park Ridge and each of the Subsidiaries for the periods then
ended.
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6.3 Updated Schedules. Fifteen business days prior to the Effective Date
and as of the Effective Date, each party will update each Schedule referred to
in this Merger Agreement in the event that changes with respect to items
required to be set forth in any such Schedule result in any such Schedule
omitting or misstating information.
6.4 Expenses. Except as otherwise expressly provided in this Merger
Agreement, all costs and expenses incurred in connection with this Merger
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
6.5 No Negotiations, etc. Park Ridge will not, and will cause the
Subsidiaries and Park Ridge's and the Subsidiaries' respective officers,
directors, employees, agents or affiliates, not to directly or indirectly,
solicit, authorize, initiate or encourage submission of, any proposal, offer,
tender offer or exchange offer from any person or entity (including any of its
or their officers or employees) relating to any liquidation, dissolution,
recapitalization, merger, consolidation or acquisition or purchase of all or a
material portion of the assets of, or any equity interest in, Park Ridge or any
of the Subsidiaries or other similar transaction or business combination
involving Park Ridge or any of the Subsidiaries. Park Ridge shall promptly
notify Purchaser if any such proposal or offer, or any inquiry from or contact
with any person with respect thereto, is made, and shall promptly provide
Purchaser with such information regarding such proposal, offer, inquiry or
contact as Purchaser may request.
6.6. Notification of Certain Matters. Each party shall give prompt notice to
the other parties of (a) the occurrence or failure to occur of any event or the
discovery of any information, which occurrence, failure or discovery would be
likely to cause any representation or warranty on its part contained in this
Merger Agreement to be materially untrue or inaccurate when made, at the
Effective Date or at any time prior to the Effective Date or (b) any material
failure of such party to comply with or satisfy any covenant, condition or
agreement to be compiled with or satisfied by it hereunder.
6.7. Access to Information; Confidentiality.
(a) Subject to the procedure described in Section 6.7(d) hereof, Park Ridge
shall permit, and shall cause each of the Subsidiaries to permit, Purchaser
access on reasonable notice and at reasonable hours to its properties and
shall disclose and make available (together with the right to copy) to
Purchaser and to the internal auditors, loan review officers, employees,
attorneys, accountants and other representatives of Purchaser all books,
papers and records relating to the assets, stock, properties, operations,
obligations and liabilities of Park Ridge and the Subsidiaries, including,
without limitation, all books of account (including, without limitation, the
general ledger), tax records, minute books of directors' and shareholders'
meetings, organizational documents, bylaws, contracts and agreements, filings
with any regulatory authority, accountants' work papers, litigation files
(including, without limitation legal research memoranda), documents relating
to assets and title thereto (including, without limitation, abstracts, title
insurance policies, surveys, environmental reports, opinions of title and
other information relating to the real and personal property), plans
affecting employees, securities transfer records and shareholder lists, and
any books, papers and records, relating to other assets, business activities
or prospects in which Purchaser may have a reasonable interest, including,
without limitation, its interest in planning for integration and transition
with respect to the business of Park Ridge and the Subsidiaries.
Additionally, Purchaser and its agents, contractors and environmental
consultants shall also have the right of access to the real estate owned or
operated by Park Ridge or the Subsidiaries (the "Real Estate") before the
Effective Date for the purpose of undertaking such environmental
investigation and testing as Purchaser deems necessary or appropriate.
Purchaser and its agents, contractors and environmental consultants shall
also have the right of access to Park Ridge's and the Subsidiaries records or
employees for the purpose of carrying out necessary investigation and
testing. Purchaser shall indemnify Park Ridge and the Subsidiaries and hold
them harmless for any damage to the Real Estate resulting from any such
environmental investigations and shall cause its agents, contractors and
consultants to restore the Real Estate to its original condition as it
existed prior to the initiation of any such environmental investigation;
provided, however, that Purchaser shall have no liability to Park Ridge or
the Subsidiaries for any regulatory enforcement action or any reporting
obligation which results from any such environmental investigation. The
foregoing rights granted to Purchaser shall, whether or not and regardless of
the extent to which the same are exercised, in no way
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affect the nature or scope of the representations, warranties and covenants
of Park Ridge set forth herein. Subject to Section 6.7(d), Park Ridge shall
cause each of the Subsidiaries to instruct its officers, employees, counsel
and accountants to be available for, and respond to questions of Purchaser's
representatives at reasonable hours and with reasonable notice by Purchaser
to such individuals.
(b) Purchaser shall permit reasonable access to its properties and shall
disclose and make available (together with the right to copy) to Park Ridge
and to its representatives Purchasers' financial books and records, minute
books of directors' and shareholders' meetings, organizational documents,
bylaws, filings with any regulatory authority and accountants' work papers,
litigation files (including, without limitation legal research memoranda),
documents relating to assets and title thereto, plans affecting employees,
and other books, papers and records relating to other assets, business
activities or prospects of Purchaser or its subsidiaries in which Park Ridge
may have a reasonable interest; provided, however, that the foregoing rights
granted to Park Ridge shall, whether or not and regardless of the extent to
which the same are exercised, in no way affect the nature or scope of the
representations, warranties and covenants of Purchaser set forth herein. In
addition, Purchaser shall instruct its officers, employees, counsel and
accountants to be available for, and respond to reasonable questions of,
representatives of Park Ridge at reasonable hours and with reasonable notice
by Park Ridge to such individuals.
(c) All information furnished by Park Ridge or Purchaser pursuant hereto
shall be treated as the sole property of the party furnishing the information
until the Effective Date, and, if the Merger shall not occur, the receiving
party shall return to the party which furnished such information, or destroy,
all documents or other materials (including copies thereof) containing,
reflecting or referring to such information. In addition, the receiving
party shall keep confidential all such information and shall not directly or
indirectly use such information for any competitive or other commercial
purpose. The obligation to keep such information confidential shall not
apply to (i) any information which (A) was already in the receiving party's
possession prior to the disclosure thereof to the receiving party by the
party furnishing the information, (B) was then generally known to the public,
(C) became known to the public through no fault of the receiving party or its
representatives or (D) was disclosed to the receiving party by a third party
not bound by an obligation of confidentiality or (ii) disclosures required by
law or by governmental or regulatory authority.
(d) All requests for information regarding Park Ridge and the Subsidiaries
pursuant to Section 6.7(a) hereof shall be transmitted to and initiated
through the employees of Park Ridge or the Subsidiaries set forth in Schedule
6.7(d) hereof (the "Information Officers"). Thereafter, the Information
Officers shall take all steps reasonably necessary to provide information
required pursuant to the terms of this Merger Agreement. Purchaser shall not
contact any employee or agent of Park Ridge or the Subsidiaries other than
the Information Officers for purposes of conducting investigations of Park
Ridge or the Subsidiaries without Park Ridge's prior consent.
6.8 Park Ridge Shareholder Approval. As soon as is reasonably practicable
after the date hereof, this Merger Agreement shall be submitted to the
shareholders of Park Ridge for approval in accordance with the BCA and the
Charter and Bylaws of Park Ridge. Any required shareholders' meeting will be
scheduled and held at a time mutually acceptable to Park Ridge and Purchaser
not more than thirty (30) days following the mailing by Park Ridge of the
Prospectus/Proxy Statement (as hereinafter defined) to its shareholders, which
mailing will promptly follow the effective date of the Registration Statement
of Purchaser to be filed by Purchaser with the SEC as provided in Section 6.9
hereof. Park Ridge and Purchaser will cooperate with each other in order to
facilitate the preparation, filing and clearance of the Registration Statement
and the Prospectus/Proxy Statement in accordance with federal and state
securities laws to be used with respect to such shareholder approval and the
exchange of shares as contemplated by this Merger Agreement.
6.9 Registration Statement.
(a) For the purposes (i) obtaining approval of the shareholders of Park
Ridge to this Merger Agreement and the Merger and (ii) of registering the
Purchaser Common Stock to be issued to holders of Park Ridge Common Stock in
connection with the Merger with the SEC and with applicable state securities
authorities, Purchaser will promptly prepare an appropriate registration
statement (such registration
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statement, together with all and any amendments and supplements thereto,
being herein referred to as the "Registration Statement"), which shall
include a prospectus and a proxy or information statement satisfying all
applicable requirements of the 1933 Act, the 1934 Act, applicable state
securities laws and the rules and regulations thereunder (such prospectus and
proxy statement, together with any and all amendments or supplements thereto,
being herein referred to as the "Prospectus/Proxy Statement"). The parties
shall cooperate in furnishing such information as is required to prepare to
Prospectus/Proxy Statement.
(b) Purchaser shall promptly file the Registration Statement with the SEC
and applicable state securities agencies. Purchaser shall use reasonable
efforts to cause the Registration Statement to become effective under the
1933 Act and applicable state securities laws at the earliest practicable
date. Park Ridge authorizes Purchaser to utilize in the Registration
Statement the information concerning Park Ridge and the Subsidiaries provided
to Purchaser for the purpose of inclusion in the Prospectus/Proxy Statement.
Park Ridge shall have the right to review and comment on the form of Proxy
Statement included in the Registration Statement. Purchaser shall advise
Park Ridge promptly when the Registration Statement has become effective and
of any supplements or amendments thereto, and Purchaser shall furnish Park
Ridge with copies of all such documents and with copies of all correspondence
with the SEC with respect thereto. Prior to the Effective Date or the
termination of this Merger Agreement, each party shall consult with the other
with respect to any material (other than the Prospectus/Proxy Statement) that
might constitute a "prospectus" relating to the Merger within the meaning of
the 1933 Act.
(c) Purchaser shall bear (i) all legal or other expenses, if any, incurred
in connection with the registration of the Purchaser's Common Stock under
federal and state securities laws, including the costs of all SEC filing fees
with respect to the Registration Statement and the costs of qualifying the
shares of Purchaser Common Stock under state blue sky laws to the extent
necessary, (ii) all printing and mailing costs in connection with the
preparation of the Prospectus/Proxy Statement, and (iii) all of its legal and
other expenses incident to the obtaining of all required regulatory consents
and approvals to the Merger. Park Ridge shall bear all mailing costs in
connection with the mailing of the Prospectus/Proxy Statement to Park Ridge
shareholders.
6.10 Regulatory Application. Following the execution of this Merger
Agreement, Purchaser will promptly prepare and file an application (believed in
good faith by Purchaser to be substantially complete in form and substance)
with the FRB under appropriate provisions of Section 3 of the Bank Holding
Company Act of 1956, as amended, for prior approval of the Merger and the
proposed acquisition of Park Ridge and the Subsidiaries by Purchaser. Park
Ridge will furnish Purchaser such information, appropriate representations and
documents as may be reasonably requested by Purchaser in connection therewith.
Purchaser will use its best efforts to cause such applications to be approved
and to obtain such other regulatory consents and approvals as may be necessary
to facilitate the Merger, in each case as soon as possible, and will promptly
provide Park Ridge with copies of all such applications together with
correspondence related thereto.
6.11 Indemnification and Insurance.
(a) From and after the Effective Date, Purchaser shall indemnify, defend
and hold harmless each person who is now, or has been at any time prior to
the date hereof or who becomes prior to the Effective Date, an officer,
director or employee of Park Ridge or any of the Subsidiaries (the
"Indemnified Parties") against all losses, claims, damages, costs, expenses
(including attorney's fees), liabilities or judgments or amounts that are
paid in settlement (which settlement shall require the prior written consent
of Purchaser, which consent shall not be unreasonably withheld) of or in
connection with any claim, action, suit, proceeding or investigation (a
"Claim") in which an Indemnified Party is, or is threatened to be made, a
party or a witness based in whole or in part on or arising in whole or in
part out of the fact that such person is or was a director, officer or
employee of Park Ridge or any of the Subsidiaries if such Claim pertains to
any matter or fact arising, existing or occurring prior to the Effective Date
(including, without limitation, the Merger and other transactions
contemplated by this Merger Agreement), regardless of whether such Claim is
asserted or claimed prior to, at or after the Effective Date (the
"Indemnified Liabilities") to the full extent permitted under Park Ridge's or
any Subsidiaries' Charter, Bylaws or as otherwise in effect pursuant to any
policy or resolution effective on the date hereof, subject to applicable law
(and Purchaser shall pay expenses in advance of the final disposition of any
such action or proceeding to each Indemnified Party to the full extent
permitted under such Articles of Incorporation or Bylaws,
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subject to applicable law, upon receipt of any undertaking required by such
Articles of Incorporation, Bylaws, or applicable law). Any Indemnified Party
wishing to claim indemnification under this Section 6.11(a), upon learning of
any Claim, shall notify Purchaser (but the failure so to notify Purchaser
shall not relieve Purchaser from any liability which Purchaser may have under
this Section 6.11(a), except to the extent such failure prejudices Purchaser)
and shall deliver to Purchaser any undertaking required by such Articles of
Incorporation, Bylaws or applicable law. Purchaser shall use its best
efforts to assure, to the extent permitted under applicable law, that all
limitations of liability existing in favor of the Indemnified Parties as
provided in the Articles of Incorporation and Bylaws, as in effect as of the
date hereof, with respect to claims or liabilities arising from facts or
events existing or occurring prior to the Effective Date (including, without
limitation, the transactions contemplated by this Merger Agreement), shall
survive the Merger. The obligations of Purchaser described in this Section
6.11(a) shall continue in full force and effect, without any amendment
thereto, for a period of not less than five years from the Effective Date;
provided, however, that all rights to indemnification in respect of any Claim
asserted or made within such period shall continue until the final
disposition of such Claim.
(b) The obligations of Purchaser provided under Section 6.11(a) are
intended to benefit, and to be enforceable against Purchaser directly by the
Indemnified Parties and shall be binding on all respective successors of
Purchaser.
(c) For a period of three (3) years after the Effective Date, Purchaser
shall use its best efforts to provide directors' and officers' liability
insurance with respect to claims arising from facts or events which occurred
before the Effective Date. Such liability insurance shall provide at least
the same coverage and amounts, and contain terms and conditions no less
advantageous than the coverage currently provided by Park Ridge or the
Subsidiaries .
6.12 SEC Reports. Purchaser agrees to provide Park Ridge copies of all
reports and other documents filed with the SEC by Purchaser relating to the
transactions contemplated hereby between the date hereof and the Effective Date
within five days after the date such reports or other documents are filed with
the SEC.
6.13 Current Public Information. For not less than the three-year period
following the Effective Date, Purchaser shall make available current public
information as that terminology is used and required by Rule 144(c) under the
1933 Act.
ARTICLE VII
CONDUCT OF BUSINESS PENDING THE MERGER
7.1 Conduct of Park Ridge Business. From the date of this Agreement to the
Effective Date, unless Purchaser shall otherwise agree in writing or as
otherwise expressly contemplated or permitted by other provisions of this
Merger Agreement:
(a) the business of Park Ridge and each of the Subsidiaries shall be
conducted only in, and neither Park Ridge nor any of the Subsidiaries shall
take any action except in, the ordinary course, on an arms-length basis and
in accordance, in all material respects, with all applicable laws, rules and
regulations and past practices;
(b) Park Ridge and the Subsidiaries will:
(i) maintain a loan loss reserve at an adequate level based on past loan
loss experience and evaluation of potential losses in current portfolios;
(ii) remain in good standing with all applicable banking regulatory
authorities and preserve each of its and their existing banking locations;
and
(iii) consult with Purchaser prior to acquiring any interest in real
property.
(c) neither Park Ridge nor any of the Subsidiaries shall, directly or
indirectly, (i) issue or sell any additional shares of, or any options,
warrants, conversion privileges or rights of any kind to acquire any shares
of any of its capital stock; (ii) sell, assign, transfer, mortgage, pledge or
encumber any of its material assets except (x) in the ordinary course of
business, (y) liens and encumbrances for current property taxes not yet due
and payable and (z) liens and encumbrances which do not materially affect the
value of, or interfere with the past or future use or ability to convey, the
property subject thereto or
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affected thereby; (iii) amend or propose to amend its Charter or Bylaws; (iv)
split, combine or reclassify any outstanding shares of capital stock of Park
Ridge or any of the Subsidiaries, or declare, set aside or pay any dividend
or other distribution payable in cash, property or otherwise with respect to
shares of capital stock of Park Ridge or any of the Subsidiaries, except for
dividends payable in cash by any of the Subsidiaries in sums sufficient to
enable Park Ridge to pay amounts due in connection with indebtedness due to
Continental Bank, N.A.; (v) increase the number of shares of capital stock of
Park Ridge or the Subsidiaries outstanding or redeem, purchase or acquire or
offer to acquire, directly or indirectly, any shares of capital stock of Park
Ridge or any of the Subsidiaries or other securities of Park Ridge or of any
of the Subsidiaries; (vi) acquire by merger, exchange, consolidation,
acquisition of stock or assets or otherwise any corporation, partnership,
joint venture or other business organization or division or material assets
thereof, except in exchange for debt previously contracted; (vii) borrow any
amount or incur or become subject to any material liability, except
liabilities incurred in the ordinary course of business, but in no event will
Park Ridge or any of the Subsidiaries enter into any long-term borrowings
with a term of greater than one year, except for certificates of deposit and
interest rate swaps, in each case with terms not to exceed five years; (viii)
discharge or satisfy any material lien or encumbrance on the properties or
assets of Park Ridge or any of the Subsidiaries or pay any material
liability, except in the ordinary course of business, (ix) cancel any
material debt or claims or waive any rights of material value, except in the
ordinary course of business; (x) other than with respect to loan transactions
(including without limitation, letters of credit and purchase of leases),
make or enter into any material transaction, contract or agreement or incur
any other material commitment which is defined for purposes of this provision
as any transaction, contract, agreement or commitment in excess of
$100,000.00; (xi) incur any indebtedness for borrowed money, except for
deposit liabilities and except for indebtedness incurred in the ordinary
course of business the repayment term of which does not exceed one year;
(xii) cancel or compromise any debt or claim, which has not previously been
charged off, other than in the ordinary course of business in an aggregate
amount which is not materially adverse; (xiii) enter into any transaction
other than in the ordinary course of business, provided, however,
notwithstanding the foregoing, Gurnee may construct a permanent banking
facility on the vacant real estate owned by Gurnee in Gurnee, Illinois and
furnish and equip the banking facility so constructed in a manner reasonably
necessary for the conduct of Gurnee's business; provided, further, Park Ridge
will cause Gurnee to periodically consult with representatives of Purchaser
concerning such construction to obtain Purchaser's input regarding design
plans and expenditures relating thereto; (xiv) invite or initiate or engage
in discussions or negotiations for the acquisition or merger of Park Ridge or
the Subsidiaries by or with any corporation or other entity other than
Purchaser or its affiliates; and (xv) take any action which constitutes a
breach or default of its obligations under this Agreement or which is
reasonably likely to delay or jeopardize the receipt of any of the regulatory
approvals required hereby.
(d) Except as set forth in Schedule 7.1(d), neither Park Ridge nor any of
the Subsidiaries shall, directly or indirectly, enter into or modify any
employment, severance or similar agreements or arrangements with, or grant
any bonuses, wage, salary or compensation increases, or severance or
termination pay to, any director, officer, employee, group of employees or
consultant, other than bonuses or increases calculated in a manner consistent
with past practices;
(e) neither Park Ridge nor any of the Subsidiaries shall adopt or amend any
bonus, profit sharing, stock option, pension, retirement, deferred
compensation, or other employee benefit plan, trust, fund contract or
arrangement for the benefit or welfare of any employees, except as required
by law, and except if requested by Purchaser, Park Ridge and the Subsidiaries
shall, at or prior to the Effective Date, adopt, by appropriate resolution in
form and substance acceptable to Purchaser, the First of America Bank
Corporation Employees' Retirement Plan and the First of America Bank
Corporation Reserve Plus Savings Plan, contingent upon consummation of the
Merger, and shall take all such other action as is reasonably requested by
Purchaser with respect thereto;
(f) each of Park Ridge and the Subsidiaries shall use reasonable efforts to
cause its current insurance policies not to be canceled or terminated or any
of the coverage thereunder to lapse, unless simultaneously with such
termination, cancellation or lapse, replacement policies providing coverage
substantially equal to the coverage under the canceled, terminated or lapsed
policies are in full force and effect;
(g) neither Park Ridge nor any of the Subsidiaries shall enter into any
settlement or similar agreement with respect to, or take any other
significant action with respect to the conduct of, any action, suit,
proceeding, order or investigation which is set forth on Schedule 5.17 or to
which Park Ridge or any
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of the Subsidiaries becomes a party after the date of this Merger Agreement,
without at least five business days prior notice to Purchaser; provided that
no such notice shall be required for settlement of any action, suit or
proceeding involving less than $50,000;
(h) each of Park Ridge and the Subsidiaries shall use commercially
reasonable efforts to present intact, in all material respects, the business
organization and the goodwill of each of Park Ridge and the Subsidiaries and
to keep available the services of its officers and employees as a group and
preserve intact material agreements, and Park Ridge shall confer on a regular
and frequent basis with representatives of Purchaser as reasonably requested
by Purchaser, to report on operational matters and the general status of
ongoing operations; and
(i) neither Park Ridge nor any of the Subsidiaries shall take any action
with respect to investment securities held or controlled by any of them
inconsistent with past practices.
7.2 No Accounting Changes. Park Ridge will not change its or its
Subsidiaries' methods of accounting in effect at December 31, 1993, except as
required by changes in generally accounting principles or change any of its or
its Subsidiaries' methods or reporting income and deductions for federal income
tax purposes from those employed in the preparation of Park Ridge's federal
income tax returns for the taxable year ended December 31, 1992, except as
required by changes in law.
7.3 No Changes in Purchaser Common Stock. Purchaser will not adopt or
implement any amendment to its Charter or any plan of reorganization which
would affect in any manner the terms and provisions of the shares of Purchaser
Common Stock to be issued in connection with the Merger.
7.4 Affiliate Agreements. At or prior to the Effective Date, Park Ridge
shall furnish to Purchaser an agreement in the form set forth in Exhibit A,
executed by each person, other than Purchaser and any of its affiliates, who is
an affiliate of Park Ridge as such term is defined in Rule 145 under the 1933
Act. Not less than five days prior to the Effective Date, Park Ridge shall
deliver to Purchaser a list identifying all persons who may be deemed to be
affiliates as such term is hereinbefore defined.
7.5 Recommendation of Merger to Shareholders. The Board of Directors of
Park Ridge will unanimously recommend in the Prospectus/Proxy Statement
approval of the Merger by all shareholders of Park Ridge entitled to vote
thereon.
7.6 Bank Merger. Park Ridge agrees and acknowledges that it is Purchaser's
intent that, as soon after the Effective Date as is reasonably practicable, the
Subsidiaries shall be merged (the "Bank Merger") with and into Purchaser's
affiliate, First of America Bank-Northeast Illinois, National Association
("FOA-Bank"). Park Ridge will cause the Subsidiaries to take all such
corporate action as is reasonably required to complete the Bank Merger,
including approval by the Boards of Directors of the Subsidiaries and execution
by appropriate officers of the Subsidiaries of an appropriate agreement to
accomplish the Bank Merger and joining in the filing with FOA-Bank of any
required regulatory applications. Following the Bank Merger, the Board of
Directors of FOA-Bank shall consist of those persons who are currently serving
in such capacity of FOA-Bank and Jules M. Laser, and Mr. Laser shall remain a
Director of the Bank for not less than two years from the date of the Bank
Merger.
ARTICLE VIII
CONDITIONS
8.1 Conditions to Obligations of Each Party. The respective obligations of
each party to effect the transactions contemplated hereby shall be subject to
the fulfillment at or prior to the Effective Date of the following conditions:
(a) Regulatory Approval. Regulatory approval for the consummation of the
transaction contemplated hereby shall have been obtained from the FRB, the
FIB and the Illinois Commissioner and any other governmental authority from
whom approval is required, the applicable waiting periods, if any, under the
HSR Act shall have expired or been terminated, and all other statutory or
regulatory waiting periods shall have lapsed. None of such approvals shall
contain any conditions or restrictions that
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Purchaser reasonably believes will materially restrict or limit the business or
activities of Purchaser, Surviving Corporation or the Subsidiaries or have a
material adverse effect on, or would be reasonably likely to have a material
adverse effect on, the business, operations or financial condition of Purchaser
and its subsidiaries, taken as a whole, on the one hand, or Park Ridge or the
Subsidiaries , on the other hand.
(b) No Injunction. No injunction or other order entered by a state or
federal court of competent jurisdiction shall have been issued and remain in
effect which would materially impair the consummation of the transactions
contemplated hereby.
(c) No Prohibitive Change of Law. There shall have been no law, statute,
rule or regulation, domestic or foreign, enacted or promulgated which would
materially impair the consummation of the transactions contemplated hereby.
(d) No Termination. No party hereto shall have terminated this Merger
Agreement as permitted herein.
(e) Registration Statements. The Registration Statement shall have been
declared effective and shall not be subject to a stop order of the SEC, and,
if the offer and sale of Purchaser Common Stock in the Merger pursuant to
this Merger Agreement is required to be registered under the securities laws
of any state, the Registration Statement shall not be subject to a stop order
of the securities commission in such state.
(f) Federal Tax Opinion. An opinion of Howard & Howard Attorneys, P.C.
shall have been obtained with respect to the Merger to the effect that for
federal income tax purposes:
(i) The Merger will qualify as a "reorganization" under Section 368(a) of
the Code;
(ii) No gain or loss will be recognized by any Park Ridge shareholder
(except in connection with the receipt of cash in lieu of a fractional share
of Purchaser Common Stock) upon the exchange of Park Ridge Common Stock for
Purchaser Common Stock in the Merger;
(iii) The basis of the Purchaser Common Stock received by any Park Ridge
shareholder who exchanges Park Ridge Common Stock for Purchaser Common Stock
will be the same as the basis of the Park Ridge Common Stock surrendered in
exchange therefor (subject to any adjustments required as the result of
receipt of cash in lieu of a fractional share of Purchaser Common Stock);
(iv) The holding period of the Purchaser Common Stock received by any
Park Ridge shareholder receiving Purchaser Common Stock will include the
period during which the Park Ridge Common Stock surrendered in exchange
therefor was held (provided that the Park Ridge Common Stock of such Park
Ridge shareholder was held as a capital asset at the Effective Date); and
(v) Cash received by a Park Ridge shareholder in lieu of a fractional
share interest of Purchaser Common Stock will be treated as having been
received as a distribution in full payment in exchange for the fractional
share interest of Purchaser Common Stock which he would otherwise be
entitled to receive, and will qualify as capital gain or loss (assuming the
Park Ridge Common Stock was a capital asset in his hands on the Effective
Date).
(g) The Purchaser Common Stock to be issued to the Park Ridge
shareholders in the Merger shall have been approved for listing on the NYSE
subject only to the effectiveness of the Merger and subject to official
notice of issuance.
(h) Fairness Opinion. Park Ridge shall have received an opinion from
Goldman Sachs & Co. dated as of the date of this Merger Agreement to the
effect that the terms of the Merger are fair to the shareholders of Park
Ridge and a copy of such opinion shall have been delivered to Purchaser not
later than 14 days after the date of this Merger Agreement.
(i) Other Consents. All other consents or approvals required to be
secured by either party by the terms of this Merger Agreement or
otherwise reasonably necessary in the opinion of Purchaser or Park Ridge to
consummate the transactions contemplated by this Merger Agreement shall have
been obtained and shall be satisfactory to Purchaser and Park Ridge.
8.2 Additional Conditions to Obligations of Park Ridge. The obligation of
Park Ridge to consummate the transactions contemplated hereby in accordance
with the terms of this Merger Agreement is also subject to the following
conditions:
(a) Representations and Compliance. The representations and warranties
of Purchaser and
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Acquisition Sub set forth in Article IV shall have been true and correct as
of the date hereof, and shall be true and correct as of the Effective Date as
if made at and as of the Effective Date, except where the failure to be true
and correct would not have, or would not reasonably be expected to have, a
material adverse effect on the business, operations or financial condition of
Purchaser and its subsidiaries, taken as a whole; and Purchaser and
Acquisition Sub shall in all material respects have performed each obligation
and agreement and complied with each covenant to be performed and complied
with by each of them hereunder at or prior to the Effective Date.
(b) Officer's Certificate. Purchaser shall have furnished to Park Ridge a
certificate of the Chairman and Chief Executive Officer, the President and
Chief Operating Officer, any Executive Vice President or the Senior Vice
President-Corporate Development, or any of them, of Purchaser, dated as of
the Effective Date, in which such officer shall certify that each has no
reason to believe that the conditions set forth in Section 8.2(a) have not
been fulfilled.
(c) Purchaser Secretary's Certificate. Purchaser shall have furnished to
Park Ridge (i) copies of the text of the resolutions by which the corporate
action on the part of Purchaser necessary to approve this Merger Agreement
and the transactions contemplated hereby were taken, (ii) a certificate dated
as of the Effective Date executed on behalf of Purchaser by its corporate
secretary or one of its assistant corporate secretaries certifying to Park
Ridge that such copies are true, correct and complete copies of such
resolutions and that such resolutions were duly adopted and have not been
amended or rescinded and (iii) an incumbency certificate dated as of the
Effective Time executed on behalf of Purchaser by its corporate secretary or
one of its assistant corporate secretaries certifying the signature and
office of each officer of Purchaser executing this Merger Agreement or any
other agreement, certificate or other instrument executed pursuant thereto.
(d) Acquisition Sub Secretary's Certificate. Acquisition Sub shall have
furnished to Park Ridge (i) copies of the text of the resolutions by which
the corporate action necessary to approve this Agreement and the transactions
contemplated hereby were taken, (ii) a certificate dated as of the Effective
Date executed on behalf of Acquisition Sub by its corporate secretary or one
of its assistant corporation secretaries certifying to Park Ridge that such
copies are true, correct and complete copies of such resolutions and that
such resolutions were duly adopted and have not been amended or rescinded and
(iii) an incumbency certificate dated as of the Effective Time executed on
behalf of Acquisition Sub by its corporate secretary or one of its assistant
corporate secretaries certifying the signature and office of each officer of
Acquisition Sub executing this Merger Agreement or any other agreement
certificate or other instrument executed pursuant hereto.
(e) Material Adverse Change. Since the date of this Merger Agreement,
there shall have been no material adverse change in, and no event, occurrence
or development in the business of Purchaser or its subsidiaries that, taken
together with other events, occurrences and developments with respect to such
business, would have or would reasonably be expected to have a material
adverse effect on, the business, operations or financial condition of
Purchaser and its subsidiaries, taken as a whole (other than changes in
banking laws or regulations, changes in generally accepted accounting
principles or interpretations thereof that affect the banking industry
generally or changes in general economic conditions that uniformly affect the
banking industry on a nationwide basis, including changes in the general
level of interest rate).
(f) Failure To Disclose. Park Ridge shall not have discovered any fact
or circumstance existing as of the date of this Merger Agreement which has
not been disclosed to Park Ridge in this Agreement, any Schedule hereto, or
any document specifically required to be furnished to Park Ridge hereunder
regarding Purchaser, its subsidiaries, or Acquisition Sub which would
individually or in the aggregate with other such facts or circumstances (i)
materially impair consummation of the transactions contemplated by this
Merger Agreement or (ii) have a material adverse effect on the business,
operations or financial condition of Purchaser and its subsidiaries, taken as
a whole.
(g) Legal Opinion. Park Ridge shall have received an opinion letter
dated as of the Effective Date from Howard & Howard Attorneys, P.C., counsel
for Purchaser and Acquisition Sub, in a form satisfactory to counsel for Park
Ridge based upon customary reliance and subject to customary qualifications
to the effect that:
(i) Purchaser is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Michigan. Acquisition Sub is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Illinois. Each of Purchaser and Acquisition Sub is
registered as a bank holding company under the Bank Holding Company
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Act.
(ii) Each of the matters set forth in Sections 4.1, 4.2, 4.3 and 4.4 of
this Merger Agreement is true and accurate.
(iii) No authorization, consent or approval of, or filing with, any public
body, court or authority is necessary for the consummation by
Purchaser or Acquisition Sub of the transactions contemplated hereby which
has not been obtained or made.
8.3 Additional Conditions to Obligations of Purchaser and Acquisition
Sub. The obligation of Purchaser and Acquisition Sub to consummate the
transactions contemplated hereby in accordance with the terms of this Merger
Agreement is also subject to the following conditions:
(a) Representations and Compliance. All terms, covenants and conditions of
this Merger Agreement required to be complied with and satisfied by Park
Ridge on or prior to the Effective Date shall have been duly complied with
and satisfied in all material respects and the representations and warranties
of Park Ridge set forth in Article V of this Merger Agreement shall have been
true and correct as of the date hereof, and such representations and
warranties, as updated as of the Effective Date pursuant to Section 8.2(a)
shall be true and correct as of the Effective Date as if made at and as of
the Effective Date, except where the failure to be true and correct would not
have, or would not reasonably be expected to have, a material adverse effect
on the business, operations or financial condition of Park Ridge or the
Subsidiaries; and Park Ridge shall in all material respects have performed
each obligation and agreement and complied with each covenant to be performed
and complied with by it hereunder at or prior to the Effective Date.
(b) Officer's Certificate of Park Ridge. Park Ridge shall have furnished
to Purchaser a certificate of the President of Park Ridge, dated as of the
Effective Date, in which such officer shall certify that he has no reason to
believe that the conditions set forth in Section 8.3(a) have not been
fulfilled.
(c) Secretary's Certificate. Park Ridge shall have furnished to
Purchaser (i) copies of the text of the resolutions by which the corporate
action on the part of Park Ridge necessary to approve this Merger Agreement
and the transactions contemplated hereby were taken, (ii) a certificate dated
as of the Effective Date executed on behalf of Park Ridge by its corporate
secretary or one of its assistant corporate secretaries certifying to
Purchaser that such copies are true, correct and complete copies of such
resolutions and that such resolutions were duly adopted and have not been
amended or rescinded and (iii) an incumbency certificate dated as of the
Effective Date executed on behalf of Park Ridge by its corporate secretary or
one of its assistant corporate secretaries certifying the signature and
office of each officer of Park Ridge executing this Agreement or any other
agreement, certificate or other instrument executed pursuant thereto.
(d) Shareholder Approvals. This Merger Agreement and the Merger shall
have been approved by the affirmative vote of the shareholders of Park Ridge
required by its Charter and the provisions of the BCA.
(e) Adverse Proceedings. Neither Park Ridge nor the Subsidiaries shall
be made a party to, or, to the knowledge of Park Ridge, threatened by, any
actions, suits, proceedings, litigation or legal proceedings which, in the
reasonable opinion of Purchaser, have or are likely to have a material
adverse effect on the consolidated assets, properties, business, operations
or condition, financial or otherwise, of Park Ridge or the assets,
properties, business, operations or condition, financial or otherwise, of the
Subsidiaries. There shall not be threatened, instituted or pending any
action or proceeding, before any court or governmental authority or agency,
domestic or foreign, (i) challenging or seeking to make illegal, or to delay
or otherwise, directly or indirectly, to restrain or prohibit, the
consummation of the transactions contemplated hereby or seeking to obtain
material damages in connection with the transactions contemplated hereby;
(ii) seeking to prohibit direct or indirect ownership or operation by
Purchaser of all or a material portion of the business or assets of Park
Ridge or any of the Subsidiaries or to compel Purchaser or any of its
subsidiaries to dispose of or to hold separately all or a material portion of
the business or assets of Park Ridge or any of the Subsidiaries, or (iii)
seeking to require direct or indirect divestiture by Purchaser of any of its
business or assets or of Park Ridge's or the Subsidiaries' business or
assets, but only insofar as any action or proceeding threatened, instituted
or pending by a party other than a governmental or quasi-governmental
authority or agency shall have a reasonable likelihood of success on the
merits with respect thereto.
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(f) Governmental Action. There shall not be any action taken, or any
statute, rule, regulation, judgment, order or injunction proposed, enacted,
entered, enforced, promulgated, issued or deemed applicable to the
transaction contemplated hereby by any federal, state or other court,
government or governmental authority or agency, which would reasonably be
expected to result, directly or indirectly, in any of the consequences
referred to in Section 8.3(e).
(g) Failure to Disclose. Purchaser shall not have discovered any fact or
circumstance existing as of the date of this Merger Agreement which has not
been disclosed to Purchaser in this Agreement, any Schedule hereto, or any
document specifically required to be furnished to Purchaser hereunder,
regarding Park Ridge or any of the Subsidiaries which would, individually or
in the aggregate with other such facts and circumstances, (i) materially
impair the consummation of the transactions contemplated by this Merger
Agreement, or (ii) have a material adverse effect on the business, operations
or financial condition of Park Ridge and the Subsidiaries, taken as a whole.
(h) Material Adverse Change. Since the date of this Agreement, there
shall have been no material adverse change in, and no event, occurrence or
development in the business of Park Ridge or the Subsidiaries that, taken
together with other events, occurrences and developments with respect to such
business, would have or would reasonably be expected to have a material
adverse effect on, the business, operations or financial condition of Park
Ridge or the Subsidiaries, (other than changes in banking laws or
regulations, changes in generally accepted accounting principles or
interpretations thereof that affect the banking industry generally or changes
in general economic conditions that uniformly affect the banking industry on
a nationwide basis, including changes in the general level of interest
rates).
(i) Legal Opinion. Purchaser and Acquisition Sub shall have received an
opinion letter dated as of the Effective Date from Laser, Pokorny, Schwartz,
Friedman & Economos, P.C., counsel for Park Ridge, in a form satisfactory to
counsel for Purchaser and Acquisition Sub, based upon customary reliance and
subject to customary qualifications to the effect that each of the matters
set forth in Sections 5.1, 5.2, 5.6 and 5.7 of this Merger Agreement is true
and correct.
(j) Net Worth. As of the close of business on the day immediately
preceding the Effective Date, Park Ridge's net worth as shown by the sum of
its total shareholders' equity plus the reserve for loan losses shall not be
less than such amount as set forth in Park Ridge's Consolidated Statement of
Condition at December 31, 1993. Park Ridge shall deliver to Purchaser a
certificate signed by its chief financial officer, dated the Effective Date,
certifying to such effect.
ARTICLE IX
TERMINATION AND EFFECT OF TERMINATION
9.1 Termination. This Merger Agreement may be terminated prior to the
Effective Date:
(a) by mutual consent of Park Ridge, Purchaser and Acquisition Sub;
(b) by either Park Ridge or Purchaser, if any of the conditions to such
party's obligation to consummate the transactions contemplated in this Merger
Agreement shall not have been fulfilled and shall not have been waived
pursuant to Section 10.2 hereof or shall have become impossible to satisfy;
(c) by either Purchaser or Park Ridge in the event of a material breach
by the opposite party of any representation, warranty, covenant or agreement
contained herein which has not been cured within thirty (30) days after
written notice of such breach has been given to the party causing such
breach;
(d) by either Park Ridge or Purchaser, if this Merger Agreement and the
Merger are not duly approved by the shareholders of Park Ridge in accordance
with the requirements of the BCA;
(e) by Park Ridge or Purchaser if the Effective Date is not on or before
December 31,1994 (the "Termination Date") (unless the failure to consummate
the Merger by such date shall be due to the action or failure to act of the
party seeking to terminate this Merger Agreement in breach of such party's
obligations under this Merger Agreement);
(f) by Park Ridge, if any material condition to the obligations of Park
Ridge is not satisfied in all material respects at the time required pursuant
to this Merger Agreement and such condition is not waived by Park Ridge;
(g) by Purchaser, if any material condition to the obligations of Purchaser
or Acquisition Sub is not satisfied in all material respects at the time
required pursuant to this Merger Agreement and such
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condition is not waived by Purchaser and Acquisition Sub; and
(h) by Park Ridge or Purchaser in the event that the Average Closing Price
is less than $30.25 and the party electing to terminate shall give notice of
such election to the other party not later than the second business day after
the last day of the Valuation Period; provided, however, that no termination
pursuant to this subsection (h) shall occur in the event that Purchaser shall
notify Park Ridge of its election to terminate pursuant to this subsection (h)
and not later than two business days thereafter, Park Ridge shall notify
Purchaser of its election to consummate the Merger with the Exchange Rate being
40.60.
9.2 Effect of Termination. In the event of termination of this Merger
Agreement caused otherwise than by a breach of this Merger Agreement by any of
the parties hereto, this Merger Agreement shall cease and terminate, the
acquisition of Park Ridge as provided herein shall not be consummated, and none
of Purchaser, Acquisition Sub nor Park Ridge shall have any liability to any
other party under this Merger Agreement of any nature whatever, including
without limitation, any liability for damages, except for Purchaser's
obligations related to payment of expenses; provided, however, that the duties
of the Parties with respect to confidential information shall survive any such
termination. If the Merger is not consummated as the result of termination of
this Merger Agreement caused otherwise than by breach of this Merger Agreement,
each party shall pay its own fees and expenses incident to the negotiation,
preparation and execution of this Merger Agreement and all other acts
incidental to, contemplated by or in pursuance of the transactions contemplated
by this Merger Agreement, including fees and expenses of its counsel,
accountants and other experts and advisors. If termination of this Merger
Agreement shall be judicially determined to have been caused by breach of this
Merger Agreement, then, in addition to other remedies at law or equity for
breach of this Merger Agreement, the party so found to have breached this
Merger Agreement shall indemnify the other parties for their respective costs,
fees and expenses of their counsel, accountants and other experts and advisors,
as well as fees and expenses incident to the negotiation, preparation and
execution of this Merger Agreement and related documentation.
ARTICLE X
GENERAL PROVISIONS
10.1 Public Statements. Neither Purchaser nor Park Ridge shall make any
public announcement or statement with respect to the Merger, this Merger
Agreement or any related transactions without the approval of the other party;
provided, however, that either Purchaser or Park Ridge may, upon reasonable
notice to the other party, make any public announcement or statement that it
believes is required by federal securities law or other applicable laws. To
the extent practicable, each of Purchaser and Park Ridge will consult with the
other with respect to any such public announcement or statement.
10.2 Waivers; Amendments. Any of the provisions of this Merger Agreement may
be waived at any time by the party which is, or the shareholders of which are,
entitled to the benefit thereof, provided, however, such waiver, if material to
Park Ridge or its shareholders, may be made only following due authorization by
the Board of Directors of Park Ridge. This Merger 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 persons) as this Merger Agreement and
which makes reference to this Merger Agreement, provided, however, such
amendment or modification may be made only following due authorization by the
respective Boards of Directors of Park Ridge, Purchaser and Acquisition Sub;
provided, further, however, that after a favorable vote by the shareholders of
Park Ridge any such action shall be taken by Park Ridge 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 Merger Agreement
for the shareholders of Park Ridge and will not require resolicitation of any
proxies from such shareholders.
10.3 Entire Agreement. Subject to the exceptions noted in the next following
sentence, this Merger Agreement supersedes any other agreement, whether written
or oral, that may have been made or entered into by Park Ridge, Purchaser and
Acquisition Sub or by any officer of officers of such parties relating to the
Merger or the acquisition of the business or the capital stock of Park Ridge
and/or of its Subsidiaries by Purchaser. Except for the Exhibits and Schedules
hereto and any attachments thereto, this Merger Agreement constitutes the
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entire agreement by the parties, and there are no agreements or commitments
except as set forth herein and therein.
10.4 Captions. The captions in this Merger Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Merger Agreement.
10.5 Materiality. Unless the context otherwise requires, any reference in
this Merger Agreement to "material" or "materiality" with respect to any party
shall be deemed to be with respect to such party and its subsidiaries, taken as
a whole.
10.6 Survival Of Representations And Covenants. The respective
representations and warranties of the parties contained in this Merger
Agreement shall terminate upon consummation of the Merger and shall not survive
the Effective Date. Covenants of the parties which relate to periods of
activities subsequent to the Merger shall survive the Merger for the applicable
period.
10.7 Severability. If any term, provision, covenant or restriction of this
Merger Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Merger Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated, and the parties shall
negotiate in good faith to modify this Merger Agreement and to preserve each
party's anticipated benefits under this Merger Agreement.
10.8 Counterparts. This Merger Agreement may be executed in two or more
counterparts which together shall constitute a single binding agreement.
10.9 Governing Law. This Merger Agreement shall be construed and interpreted
according to the applicable laws of the State of Illinois.
10.10 Discussions With Other Banks, Bank Holding Companies and Bank-Related
Businesses. Purchaser now or in the future may be discussing possible
affiliation with other banks or bank holding companies or bank-related
businesses located in Illinois or other states, but such discussions, if any,
are preliminary in nature and there can be no assurance at this time that
agreements for affiliation will be reached, or if reached, will be consummated.
However, it is agreed that additional banks, bank holding companies or
bank-related businesses as now or hereafter approved by the FRB may become
affiliated with Purchaser prior to, concurrently with, or after the date
hereof, on such terms as Purchaser and any such other bank, bank holding
company or bank-related business may in their discretion agree. It is further
agreed that Purchaser and its subsidiaries, its pending subsidiaries, and
future subsidiaries may engage in any activities permitted to be performed by
bank holding companies, banks, or bank-related businesses and that Purchaser
may merge or consolidate any or all of its subsidiaries, banks, or any or all
of its bank-related businesses, as Purchaser may deem desirable or appropriate;
provided, however, that nothing contained herein shall affect the right of Park
Ridge or Purchaser to abandon this Agreement in the manner contemplated by
Article IX.
10.11 Notices. All notices and other communications hereunder shall be in
writing and be deemed to have been given (i) one business day after delivery to
a nationally recognized overnight courier service for overnight delivery, or
(ii) three days after being mailed, certified mail, return receipt requested,
postage prepaid, or (iii) upon being sent by facsimile transmission. Notice to
Purchaser shall be deemed to be notice to Acquisition Sub.
(a) If to Purchaser, to:
FIRST OF AMERICA BANK CORPORATION
211 South Rose Street
Kalamazoo, Michigan 49007
Attention: Richard K. McCord
Fax Number: (616) 376-7016
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With a required copy to:
Joseph B. Hemker, Esq.
HOWARD & HOWARD ATTORNEYS, P.C.
107 West Michigan Avenue
Suite 400
Kalamazoo, Michigan 49007
Fax Number: (616) 382-1568
(b) If to Park Ridge
First Park Ridge Corporation
607 Devon Avenue
Park Ridge, Illinois 60068
Attn: Jules M. Laser, Chairman
Fax Number: (708) 692-9030
With a required copy to:
Bruce M. Friedman
Laser, Pokorny, Schwartz, Friedman & Economos, P.C.
205 N. Michigan Avenue
Suite 3800
Chicago, Illinois 60601
Fax Number: (312) 540-0610
Any party may change its address for notices pursuant to notice given in
accordance herewith.
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan of
Merger as of the date first stated above.
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FIRST PARK RIDGE CORPORATION
Attest: /s/ Henry S. Frank By: /s/ Jules M. Laser
Henry S. Frank Jules M. Laser
Its: Secretary Its: President
FIRST OF AMERICA BANK
CORPORATION
Attest: /s/ Samuel G. Stone By: /s/ Thomas W. Lambert
Samuel G. Stone Thomas W. Lambert
Its: Senior Vice President Its: Executive Vice President and
and Treasurer Chief Financial Officer
FIRST OF AMERICA
ACQUISITION COMPANY
Attest: /s/ Thomas W. Lambert By: /s/ Samuel G. Stone
Thomas W. Lambert Samuel G. Stone
Its: Vice President
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APPROVAL AND AGREEMENT OF CERTAIN DIRECTORS, OFFICERS
AND SHAREHOLDERS
The undersigned, each being a shareholder of First Park Ridge Corporation,
Park Ridge, Illinois, ("Park Ridge") and either a director or officer of Park
Ridge or one of its banking subsidiaries, as the case may be, acknowledge that
each of them have been furnished with such information about Park Ridge, First
of America Bank Corporation (the "Purchaser") and the transactions contemplated
by the foregoing Agreement as has been necessary for them to evaluate the
merits and risks associated with entry into the Agreement, and each of the
undersigned represents to each of the corporate parties to the Agreement that
he or she has evaluated and understands such merits and risks. Based on the
foregoing, the undersigned do hereby approve the Agreement and the basis of
exchange set forth therein, and in consideration of the benefits to be derived
by Park Ridge and its shareholders from the transactions contemplated by the
foregoing Agreement, each of the undersigned agrees with each of the corporate
parties to the foregoing Agreement: (i) subject to satisfaction of all
conditions contained in the Agreement, to exchange all shares of stock in Park
Ridge, now or hereafter beneficially owned by each, in accordance with the
terms of the Agreement; (ii) to vote said shares, in person or by proxy, at any
meeting of shareholders of Park Ridge and all adjournments thereof, in favor of
approval of the Agreement; and (iii) that none of the undersigned will directly
or indirectly sell or transfer any beneficial interest in, assign, pledge,
hypothecate or otherwise dispose of or encumber any shares of stock of Park
Ridge prior to the Effective Date, except with the prior express written
consent of Purchaser which shall not be unreasonably withheld.
Dated: April 15, 1994
/s/ Jules M. Laser /s/ Patrick Arbor
Jules M. Laser Patrick Arbor
Chairman & President and Director Director
First Park Ridge Corporation First State Bank & Trust Company
of Park Ridge
/s/ Henry S. Frank /s/ Robert W. Troch, Jr.
Henry S. Frank Robert W. Troch, Jr.
Vice President/Secretary and Director Director
First Park Ridge Corporation First State Bank & Trust Company
of Park Ridge
/s/ Eugene T. Carter
Eugene T. Carter
Treasurer
First Park Ridge Corporation
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EXHIBIT A
FIRST OF AMERICA BANK CORPORATION
211 South Rose Street
Kalamazoo, Michigan 49007
Gentlemen:
I have been advised that I may be deemed an "affiliate" within the meaning of
paragraph (c) of Rule 145 of the Rules and Regulations of the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933 (the "Act") of
FIRST PARK RIDGE CORPORATION, an Illinois corporation (the "COMPANY"), and may
be deemed such at the time of the merger ("Merger") of FIRST OF AMERICA
ACQUISITION COMPANY, an Illinois corporation ("FOA-ACQUISITION") with the
COMPANY. Pursuant to the Merger, I will acquire shares of the Common Stock
("FIRST OF AMERICA Common Stock") of FIRST OF AMERICA BANK CORPORATION ("FIRST
OF AMERICA") in exchange for each share of the COMPANY stock held by me. I
agree that I will not make any sale, transfer or other disposition of the FIRST
OF AMERICA Common Stock in violation of the Act or the rules and regulations
promulgated thereunder by the SEC.
I have been advised that the issuance of the FIRST OF AMERICA Common Stock to
me pursuant to the Merger has been registered under the Act by FIRST OF AMERICA
by the filing of a Registration Statement with the SEC. I have also been
advised that such registration does not apply to any distribution by me of the
FIRST OF AMERICA Common Stock received by me in the Merger. I have also been
advised that, since at the effective time of the Merger, I may be deemed to
have been an "affiliate" of the COMPANY, any offering or sale by me of any of
the FIRST OF AMERICA Common Stock will, under current law, require either (i)
the further registration under the Act of the FIRST OF AMERICA Common Stock to
be sold; (ii) compliance with Rule 145 promulgated under the Act; or (iii) the
availability of another exemption from such registration. In addition, I have
been advised that any transferee in a private offering or other similar
disposition will be subject to the same limitations as those imposed on me.
I represent and warrant to FIRST OF AMERICA that:
1. I have carefully read this letter and discussed its requirements and other
applicable limitations upon the sale, transfer or other disposition of the
FIRST OF AMERICA Common Stock to the extent I felt necessary, with my counsel
or counsel for the COMPANY.
2. I have been informed by FIRST OF AMERICA that the FIRST OF AMERICA Common
Stock must be held by me indefinitely unless (i) any of the FIRST OF AMERICA
Common Stock received by me in the Merger and to be distributed by me is first
registered under the Act other than by the registration by FIRST OF AMERICA
referred to above; (ii) a sale of the FIRST OF AMERICA Common Stock is made in
conformity with the volume and other applicable limitations of paragraph (d) of
Rule 145 (which incorporates by reference paragraphs (c), (e), (f) and (g) of
Rule 144); or (iii) some other exemption from registration is available with
respect to any such proposed sale, transfer or other disposition of the FIRST
OF AMERICA Common Stock. I will be required to deliver to FIRST OF AMERICA
evidence of compliance with such requirements in connection with any proposed
sale, transfer or other disposition by me which may include, in the case of
a distribution under some other exemption from registration, an opinion of
counsel satisfactory to counsel for FIRST OF AMERICA that such exemption is
available.
3. I understand that FIRST OF AMERICA is under no obligation to register the
FIRST OF AMERICA Common Stock that I may wish to sell, transfer, or otherwise
dispose of or to take any other action necessary in order to make compliance
with an exemption from registration available.
4. If I rely on the exemption from the registration provisions contained in
Section 4 of the Act (other than that contained in Rule 144 or 145), I will
obtain and deliver to FIRST OF AMERICA a copy of a letter from any prospective
transferee which will contain (a) representations reasonably satisfactory to
FIRST OF AMERICA as to the
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nondistributive intent, sophistication, ability to bear risk, and access to
information of such transferee; (b) an acknowledgment concerning restrictions
on transfer of the FIRST OF AMERICA Common Stock; and (c) an assumption of the
obligations of the undersigned under this paragraph 4.
5. I also understand that to enforce the foregoing commitments, stop transfer
instructions will be given to FIRST OF AMERICA'S transfer agent with respect to
the FIRST OF AMERICA Common Stock and that there will be placed on the
certificates for the FIRST OF AMERICA Common Stock, or any substitutions
therefor, a legend stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
EFFECTED ON _________, 1994, TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") APPLIES, HAVE BEEN DELIVERED IN RELIANCE
UPON THE REPRESENTATION OF THE REGISTERED HOLDER HEREOF THAT THEY HAVE BEEN
ACQUIRED FOR SUCH HOLDER'S ACCOUNT, AND MAY BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF, WHETHER IN WHOLE OR IN PART, ONLY IN COMPLIANCE WITH THE
APPLICABLE REQUIREMENTS OF RULE 145 OR PURSUANT TO A REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM SUCH REGISTRATION.
Very truly yours,
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EXHIBIT C
11.70. PROCEDURE TO DISSENT
Sec. 11.70. Procedure to Dissent. (a) If the corporate action giving rise to
the right to dissent is to be approved at a meeting of shareholders, the notice
of meeting shall inform the shareholders of their right to dissent and the
procedure to dissent. If, prior to the meeting, the corporation furnishes to
the shareholders material information with respect to the transaction that will
objectively enable a shareholder to vote on the transaction and to determine
whether or not to exercise dissenters' rights, a shareholder may assert
dissenters' rights only if the shareholder delivers to the corporation before
the vote is taken a written demand for payment for his or her shares if the
proposed action is consummated, and the shareholder does not vote in favor of
the proposed action.
(b) If the corporate action giving rise to the right to dissent is not to be
approved at a meeting of shareholders, the notice to shareholders describing
the action taken under Section 11.30 or Section 7.10 [805 ILCS 5/11.30 or 805
ILCS 5/7.10] shall inform the shareholders of their right to dissent and the
procedure to dissent. If, prior to or concurrently with the notice, the
corporation furnishes to the shareholder material information with respect to
the transaction that will objectively enable a shareholder to determine whether
or not to exercise dissenters' rights, a shareholder may assert dissenter's
rights only if he or she delivers to the corporation within 30 days from the
date of mailing the notice a written demand for payment for his or her shares.
(c) Within 10 days after the date on which the corporate action giving rise
to the right to dissent is effective or 30 days after the shareholder delivers
to the corporation the written demand for payment, whichever is later, the
corporation shall send each shareholder who has delivered a written demand for
payment a statement setting forth the opinion of the corporation as to the
estimated fair value of the shares, the corporation's latest balance sheet as
of the end of a fiscal year ending not earlier than 16 months before the
deliver of the statement, together with the statement of income for that year
and the latest available interim financial statements, and either a commitment
to pay for the shares of the dissenting shareholder at the estimated fair value
thereof upon transmittal to the corporation of the certificate or certificates,
or other evidence of ownership, with respect to the shares, or instructions to
the dissenting shareholder to sell his or her shares within 10 days after
delivery of the corporation's statement to the shareholder. The corporation
may instruct the shareholder to sell only if there is a public market for the
shares at which the shares may be readily sold. If the shareholder does not
sell within that 10 day period after being so instructed by the corporation,
for purposes of this Section the shareholder shall be deemed to have sold his
or her shares at the average closing price of the shares, if listed on a
national exchange, or the average of the bid and asked price with respect to
the shares quoted by a principal market maker, if not listed on a national
exchange, during that 10 day period.
(d) A shareholder who makes written demand for payment under this Section
retains all other rights of a shareholder until those rights are cancelled or
modified by the consummation of the proposed corporate action. Upon
consummation of that action, the corporation shall pay to each dissenter who
transmits to the corporation the certificate or other evidence of ownership of
the shares the amount the corporation estimates to be the fair value of the
shares, plus accrued interest, accompanied by a written explanation of how the
interest was calculated.
(e) If the shareholder does not agree with the opinion of the corporation as
to the estimated fair value of the shares or the amount of interest due, the
shareholder, within 30 days from the delivery of the corporation's statement of
value, shall notify the corporation in writing of the shareholder's estimated
fair value and amount of interest due and demand payment for the difference
between the shareholder's estimate of fair value and interest due and the
amount of the payment by the corporation or the proceeds of sale by the
shareholder, whichever is applicable because of the procedure for which the
corporation opted pursuant to subsection (c).
(f) If, within 60 days from delivery to the corporation of the shareholder
notification of estimate of fair value of the shares and interest due, the
corporation and the dissenting shareholder have not agreed in writing upon the
fair value of the shares and interest due, the corporation shall either pay the
difference in value demanded by the shareholder, with interest, or file a
petition in the circuit court of the county in which either the registered
office
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or the principal office of the corporation is located, requesting the court to
determine the fair value of the shares and interest due. The corporation shall
make all dissenters, whether or not residents of this State, whose demands
remain unsettled parties to the proceeding as an action against their shares
and all parties shall be served with a copy of the petition. Nonresidents may
be served by registered or certified mail or by publication as provided by law.
Failure of the corporation to commence an action pursuant to this Section shall
not limit or affect the right of the dissenting shareholders to otherwise
commence an action as permitted by law.
(g) The jurisdiction of the court in which the proceeding is commenced under
subsection (f) by a corporation is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the power
described in the order appointing them, or in any amendment to it.
(h) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds that the fair value of his or
her shares, plus interest, exceeds the amount paid by the corporation or the
proceeds of sale by the shareholder, whichever amount is applicable.
(i) The court, in a proceeding commenced under subsection (f), shall
determine all costs of the proceeding, including the reasonable compensation
and expenses of the appraisers, if any, appointed by the court under subsection
(g), but shall exclude the fees and expenses of counsel and experts for the
respective parties. If the fair value of the shares as determined by the court
materially exceeds the amount which the corporation estimated to be the fair
value of the shares or if no estimate was made in accordance with subsection
(c), then all or any part of the costs may be assessed against the corporation.
If the amount which any dissenter estimated to be the fair value of the shares
materially exceeds the fair value of the shares as determined by the court,
then all or any part of the costs may be assessed against that dissenter. The
court may also assess the fees and expenses of counsel and experts for the
respective parties, in amounts the court finds equitable, as follows:
(1) Against the corporation and in favor of any or all dissenters if the
court finds that the corporation did not substantially comply with the
requirements of subsections (a), (b), (c), (d), or (f).
(2) Against either the corporation or a dissenter and in favor of any other
party if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by this Section.
If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated and that the fees
for those services should not be assessed against the corporation, the court
may award to that counsel reasonable fees to be paid out of the amounts awarded
to the dissenters who are benefited. Except as otherwise provided in this
Section, the practice, procedure, judgment and costs shall be governed by the
Code of Civil Procedure [735 ILCS 5/1-101 et seq.].
(j) As used in this Section:
(1) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the consummation of the corporate action to which
the dissenter objects excluding any appreciation or depreciation in
anticipation of the corporate action, unless exclusion would be inequitable.
(2) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans, or, if none, at a rate that is fair
and equitable under all the circumstances.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 551 through 569 of the Michigan Business Corporation Act (the "Act"),
and Article X of First of America's Bylaws relate to indemnification of First
of America's directors and officers, among others, in a variety of
circumstances against liabilities arising in connection with the performance of
their duties. First of America's Articles of Incorporation and Bylaws permit
indemnification to the maximum extent provided by Michigan law.
The Act provides for indemnification of directors and officers acting in good
faith and in a manner they reasonably believe to be in or not opposed to the
best interest of First of America (and, if a criminal proceeding, who have no
reasonable cause to believe their conduct to be unlawful) against (1) expenses
(including attorney's fees) and amounts paid in settlement actually and
reasonably incurred in connection with any threatened, pending, or completed
action, suit, or proceeding (other than an action by, or in the right of First
of America) arising out of a position with First of America (or with some other
entity at First of America's request) and (2) expenses (including attorney's
fees) and amounts paid in settlement actually and reasonably incurred in
connection with threatened, pending, or completed action or suit by or in the
right of First of America, unless the director or officer is found liable to
First of America and an appropriate court does not determine that he or she
nevertheless is fairly and reasonably entitled to indemnity. The Act requires
indemnification for expenses to the extent that a director or officer is
successful in defending against any such action, suit or proceeding, and
otherwise requires in general that the indemnification provided for in (1) and
(2) above be made only on a determination by a majority vote of a quorum of the
Board of Directors who were not parties to or threatened to be made parties to
the action, suit, or proceeding, by a majority vote of a committee of not less
than two disinterested directors, by independent legal counsel, by all
independent directors not parties to or threatened to be made parties to the
action, suit or proceeding, or by the shareholders, that the applicable
standards of conduct were met. In certain circumstances, the Act further
permits advances to cover such expenses before a final determination that
indemnification is permissible, upon receipt of an undertaking, which need not
be secured, by or on behalf of the directors or officers to repay such amounts
unless it shall ultimately be determined that they are entitled to
indemnification.
Indemnification under the Act is not exclusive of other rights to
indemnification to which a person may be entitled under the Articles of
Incorporation, Bylaws, or a contractual agreement.
The Act permits First of America to purchase insurance on behalf of its
directors and officers against liabilities arising out of their positions with
First of America, whether or not such liabilities would be within the foregoing
indemnification provisions. Pursuant to this authority, First of America
maintains such insurance on behalf of its directors and officers.
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ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS
The exhibits filed pursuant to this Item 21 immediately follow the Exhibit
Index. The following is a description of the applicable exhibits required for
Form S-4 as provided by Item 601 of Regulation S-K.
Exhibit
Number Description
- ------ -----------
(1) Not Applicable
(2) The Agreement and Plan of Merger, dated as of April 15, 1994, between First of America, Acquisition Sub and Park
Ridge. This document is filed as Exhibit B to the Prospectus/Proxy Statement forming a part of this Registration
Statement.
(3) Articles of Incorporation and Bylaws.
A. A copy of the restated Articles of Incorporation of First of America was filed with the Commission as an
exhibit to First of America's Quarterly Report on Form 10-Q for the quarter ended September 30, 1992, and
is incorporated herein by reference.
B. Bylaws of First of America, as amended on May 18, 1994.
(4) Instruments defining the rights of security holders, including indentures.
A. Instruments defining the rights of security holders are included in the Articles of Incorporation and
Bylaws (see Exhibit (3)A. and B., above).
B. Rights Agreement between First of America and First of America Bank - Michigan, N.A., as Rights Agent,
dated as of July 18, 1990, was filed as an exhibit to First of America's Current Report on Form 8-K,
dated July 18, 1990, and is incorporated herein by reference.
C. The Subordinated Indenture between First of America, as Issuer, and Continental Bank, National
Association, as Trustee, dated as of November 1, 1991, was filed as an exhibit to First of America's
Annual Report on Form 10-K for the year ended December 31, 1991 and is incorporated herein by reference.
D. First of America is a party to various instruments (other than the Subordinated Indenture referred to in
(4)C., above) defining the rights of holders of long-term debt of First of America. The total amount of
debt authorized by such instruments does not exceed 10 percent of First of America's and its
subsidiaries' total assets on a consolidated basis. Copies of such instruments (except such as may be
filed as material contracts, see Exhibit (10), below) are not filed with this Registration Statement.
First of America hereby undertakes to furnish any such instruments to the Commission upon request.
(5) Opinion of Howard & Howard Attorneys, P.C. regarding First of America Common Stock, and Consent.
(6) Not applicable.
(7) Not applicable.
(8) Opinion of Howard & Howard Attorneys, P.C. regarding certain tax matters, and Consent.
(9) Not applicable.
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(10) Material Contracts.
A. A copy of the First of America Bank Corporation Annual Incentive Compensation Plan for Key
Corporate and Affiliate Executives was filed with the Commission as Exhibit (10)A to First of America's
Annual Report on Form 10-K for the year ended December 31, 1988 and is incorporated herein by reference,
and a copy of the Amendment to such plan was filed as an exhibit to First of America's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1990 and is incorporated herein by reference.
B. A copy of First of America's Supplemental Retirement Plan to Compensate for Nonqualified Savings
Deferrals was filed with the Commission as Exhibit (10)E to First of America's Annual Report on
Form 10-K for the year ended December 31, 1993 and is incorporated herein by reference.
C. A copy of First of America's Unfunded Deferred Excess Benefit Plan was filed as an exhibit to First of
America's Quarterly Report on Form 10-Q for the quarter ended September 30, 1990 and is incorporated
herein by reference.
D. A copy of the First of America Bank Corporation Long Term Incentive Plan as amended and restated for
performance periods commencing July 1, 1988 and thereafter was filed with the Commission as an
Exhibit (10)F to First of America's Registration Statement on Form S-4 filed July 28, 1988 (Reg. No.
33-23365) and is incorporated herein by reference, and a copy of the Amendment to such plan was filed as an
Exhibit (10) to First of America's Quarterly Report on Form 10-Q for the quarter ended September 30, 1990
and is incorporated herein by reference.
E. A copy of The Restated First of America Bank Corporation 1987 Stock Option Plan as amended was filed with
the Commission as Exhibit (10)G to First of America's Annual Report on Form 10-K for the year ended
December 31, 1993, and is incorporated herein by reference.
F. A copy of the composite form of Management Continuity Agreement entered into by First of America and
certain senior officers of First of America was filed as Exhibit (10) to First of America's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1990 and is incorporated herein by reference.
G. A copy of First of America's Executive Management Trust Agreement was filed as Exhibit (10)H to First of
America's Annual Report on Form 10-K for the year ended December 31, 1989 and is incorporated herein by
reference.
H. A copy of the $150,000,000 364-Day Competitive Advance and Revolving Credit Facility Agreement among
First of America and the lenders listed in schedule 2.01 thereto, dated March 25, 1994, was filed as an
exhibit to First of America's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994, and is
incorporated herein by refernce.
I. A copy of the $150,000,000 Three-Year Competitive Advance and Revolving Credit Facility Agreement among
First of America and the lenders listed in schedule 2.01 thereto, dated March 25, 1994, was filed as an
exhibit to First of America's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994 and is
incorporated herein by reference.
(11) Not applicable.
(12) Not applicable.
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(13) Not applicable.
(14) Not applicable.
(15) Not applicable.
(16) Not applicable.
(21) List of the subsidiaries of First of America and their jurisdictions of incorporation or organization as of
May 31, 1994.
(23) Consents of Experts and Counsel.
A. Consent of KPMG Peat Marwick with respect to the financial statements of First of America Bank Corporation.
B. Consent of Grant Thornton with respect to the financial statements of Park Ridge.
C. Consent of Howard & Howard Attorneys, P.C. (the consent is contained in that firm's opinions filed as
Exhibits (5) and (8).
D. Consent of Laser, Pokorny, Schwartz, Friedman & Economos, P.C.
E. Consent of Goldman Sachs with respect to its opinion set forth as Exhibit A to the Prospectus/Proxy
Statement.
(24) Not applicable.
(25) Not applicable.
(26) Not applicable.
(27) Not applicable.
(28) Not applicable.
(99) Additional Exhibits.
A. Form of Letter to Shareholders of Park Ridge.
B. Form of Notice of Special Meeting of Shareholders of Park Ridge.
C. Form of Proxy to be delivered to shareholders of Park Ridge.
ITEM 22. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes as follows.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
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(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set
forth in the registration statement.
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the registration
statement or any material change to the
information set forth in the registration
statement;
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of First of America's annual report
pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to officers,
directors, and controlling persons of First of America
pursuant to the foregoing provisions, or otherwise, First of
America has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by First of America of
expenses incurred or paid by a director, officer, or
controlling person of First of America in the successful
defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection
with the securities being registered, First of America will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
B. The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the
Prospectus/Proxy Statement pursuant to Items 4, 10(b), 11, or 13 of
this form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in the documents
filed subsequent to the effective date of this Registration Statement
through the date of responding to the request.
C. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject
of and included in this Registration Statement when it became
effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Kalamazoo,
State of Michigan, on the 2nd day of June, 1994.
FIRST OF AMERICA BANK CORPORATION
(Registrant)
By: /s/ Daniel R. Smith
------------------------
Daniel R. Smith
Chairman and
Chief Executive Officer
POWER OF ATTORNEY
The undersigned officers and directors of First of America Bank Corporation, a
Michigan corporation, do hereby constitute and appoint Daniel R. Smith, Richard
F. Chormann, Thomas W. Lambert, and any of them, the lawful attorneys and
agents or attorney and agent, with power and authority to do any and all acts
and things and to execute any and all instruments which said attorneys and
agents, and any one of them, determine may be necessary or advisable or
required to enable said corporation to comply with the Securities Act of 1933,
as amended, and any rules or regulations or requirements of the Securities and
Exchange Commission in connection with this Registration Statement. Without
limiting the generality of the foregoing power and authority, the powers
granted include the power and authority to sign the names of the undersigned
officers and directors in the capacities indicated below to this Registration
Statement, to any and all amendments, both pre-effective and post-effective,
and supplements to this Registration Statement and to any and all instruments
or documents filed as part of or in conjunction with this Registration
Statement or amendments or supplements thereto, and each of the undersigned
hereby ratifies and confirms all that said attorneys and agents or any of them
shall do or cause to be done by virtue hereof. This Power of Attorney may be
signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated opposite his name.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on the 2nd day of June, 1994.
/s/ Daniel R. Smith
- -------------------- Director, Chairman and
Daniel R. Smith Chief Executive Officer
(Principal Executive Officer)
/s/ Thomas W. Lambert
- ---------------------- Executive Vice President
Thomas W. Lambert and Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
141
/s/ Richard F. Chormann Director
- ------------------------
Richard F. Chormann
/s/ Jon E. Barfield Director
- --------------------
Jon E. Barfield
/s/ John W. Brown Director
- ------------------
John W. Brown
/s/ Joseph J. Fitzsimmons Director
- --------------------------
Joseph J. Fitzsimmons
/s/ Joel N. Goldberg Director
- ---------------------
Joel N. Goldberg
/s/ Clifford L. Greenwalt Director
- --------------------------
Clifford L. Greenwalt
/s/ Robert L. Hetzler Director
- ----------------------
Robert L. Hetzler
/s/ Dorothy A. Johnson Director
- -----------------------
Dorothy A. Johnson
/s/ J. Michael Kemp, Esq. Director
- --------------------------
J. Michael Kemp, Esq.
/s/ Richard Krafft, Jr. Director
- ------------------------
Richard Krafft, Jr.
xxxxxx xx xxxxxx Director
- -----------------
Martha M. Mertz
/s/ F. Karl Neumann Director
- --------------------
F. Karl Neumann
142
/s/ James S. Ware Director
- ------------------
James S. Ware
/s/ James W. Wogsland Director
- ---------------------
James W. Wogsland
/s/ Walter J. Wolpin Director
- ---------------------
Walter J. Wolpin
/s/ John L. Zabriskie Director
- ----------------------
John L. Zabriskie
143
EXHIBIT INDEX
SEQUENTIAL
NUMBER PAGE NUMBER
----------- -------------
(3)B. A copy of the Bylaws of First of America as amended.
(5) Opinion of Howard & Howard Attorneys, P.C. regarding First of
America Common Stock and including Consent.
(8) Opinion of Howard & Howard Attorneys, P.C. regarding certain
tax matters, and Consent.
(21) List of Subsidiaries of First of America as of May 31, 1994.
(23)A. Consent of KPMG Peat Marwick.
(23)B. Consent of Grant Thornton.
(23)D. Consent of Laser, Pokorny, Schwartz, Friedman & Economos, P.C.
(23)E. Consent of Goldman Sachs.
(99)A. Form of Letter to Shareholders of Park Ridge.
(99)B. Form of Notice of Special Meeting of Shareholders of Park
Ridge.
(99)C. Form of Proxy to be delivered to Shareholders of Park Ridge.