SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
12a-6(e) (2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
BLACKHAWK BANCORP, INC.
(Name of Registrant as Specified in Its Charter)
Not Applicable
--------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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pursuant to Exchange Rule 0-11 (Set forth the amount on which the
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ----------------------------------------------
2) Form, Schedule or Registration Statement No.: ------------------------
3) Filing Party: --------------------------------------------------------
4) Date Filed: ----------------------------------------------------------
BLACKHAWK BANCORP, INC.
400 Broad Street
Beloit, Wisconsin 53511
(608) 364-8911
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
on May 21, 2003
To the shareholders of BLACKHAWK BANCORP, INC.:
The 2003 annual meeting of the shareholders of Blackhawk Bancorp, Inc. (the
"Corporation") will be held on Wednesday, May 21, 2003 at 10:00 A.M., local
time, at the Country Club of Beloit, 2327 Riverside Drive, Beloit, Wisconsin
53511 for the following purposes:
(1) Election of four directors to serve for a term of three years;
(2) Ratification of the appointment of the Corporation's independent
accountants for fiscal 2003; and
(3) Transaction of such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Only shareholders of record on the books of the Corporation at the close of
business on April 1, 2003 will be entitled to vote at the Annual Meeting or any
adjournment thereof. If you do not vote by proxy and plan to attend the meeting
and hold your stock in a brokerage account ("street name" holders), please bring
a copy of your brokerage statement to the annual meeting of shareholders
reflecting your stock ownership as of April 1, 2003.
Your attention is called to the Proxy Statement accompanying this notice
for a more complete description of the matters to be acted upon at the Annual
Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Todd J. James
TODD J. JAMES
Executive Vice President and Secretary
Beloit, Wisconsin
April 11, 2003
A PROXY, WHICH IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, IS ENCLOSED.
PLEASE INDICATE YOUR VOTING DIRECTIONS, SIGN AND DATE THE ENCLOSED PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF FOR ANY REASON YOU LATER DESIRE
TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE YOUR PROXY IS VOTED.
BLACKHAWK BANCORP, INC.
400 Broad Street
Beloit, Wisconsin 53511
(608) 364-8911
PROXY STATEMENT
This Proxy Statement and accompanying proxy
were first mailed to Shareholders on or about April 11, 2003
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Blackhawk Bancorp, Inc., a Wisconsin
corporation (the "Corporation"), for the annual meeting of shareholders to be
held on Wednesday, May 21, 2003 beginning at 10:00 A.M.
Shareholders of record at the close of business on April 1, 2003 will be
entitled to one vote on each matter presented for each share so held. At that
date there were 2,517,131 shares of Common Stock outstanding and entitled to
vote at the meeting. Any shareholder entitled to vote may vote either in person
or by duly authorized proxy. Shares of the Corporation's Common Stock
represented by properly executed proxies received by the Corporation will be
voted at the meeting and any adjournment thereof in accordance with the terms of
such proxies, unless revoked. If no choice is specified, the proxy will be voted
in favor of the nominees listed in Item 1, for ratification of the appointment
of McGladrey & Pullen, LLP as auditors for 2003 and in the discretion of the
proxy holder on any other matter which may properly come before the meeting and
all adjournments or postponements of the meeting. Proxies may be revoked at any
time prior to the voting thereof either by written notice filed with the
secretary or the acting secretary of the meeting or by oral notice to the
presiding officer during the meeting. The representation at the meeting in
person or by proxy of shareholders of the Corporation holding a majority of the
Corporation's shares of Common Stock entitled to vote shall constitute a quorum
for the transaction of business. For the purpose of determining the presence of
a quorum, shares represented on any matter will be counted as present and
represented on all matters to be acted upon, including any matter with respect
to which the holder of such shares abstains from voting, and including shares
which are not voted by a holder of record who is a broker because the broker has
not received authority from the beneficial owner, as required under applicable
laws and rules, to vote the shares on such matter ("broker nonvotes").
Directors are elected by a plurality of the votes cast by the holders of
the Corporation's Common Stock at a meeting at which a quorum is present.
"Plurality" means that the individuals who receive the largest number of votes
cast are elected as directors up to the maximum number of directors to be chosen
at the meeting. Consequently, any shares not voted (whether by abstention,
broker nonvote or otherwise) have no impact on the election of directors except
to the extent that the failure to vote for an individual results in another
individual receiving a comparatively larger number of votes. Under Wisconsin
law, votes cast "AGAINST" a director nominee are given no legal effect and are
not counted as votes cast in the election of directors.
Approval of any other matter which properly comes before the meeting,
including ratification of McGladrey & Pullen, LLP, will require the affirmative
vote of a majority of the shares represented at the meeting and entitled to vote
on the particular matter. In tabulating votes cast on any such other matter,
abstentions will be considered votes cast, and accordingly will have the same
effect as a negative vote. Broker nonvotes, on the other hand, will not be
counted as shares entitled to be voted on the particular matter, and therefore
will have no impact on the outcome of the vote.
Expenses in connection with the solicitation of proxies will be paid by the
Corporation. Upon request, the Corporation will reimburse brokers, dealers,
banks and voting trustees, or their nominees, for reasonable expenses incurred
in forwarding copies of the proxy material and annual report to the beneficial
owners of shares which such persons hold of record. Solicitation of proxies
will be principally by mail. Proxies may also be solicited in person, or by
telephone, by officers and regular employees of the Corporation, who will
receive no additional or special compensation for their services. Shares held
for the accounts of participants in the Corporation's Employee Stock Ownership
Plan ("ESOP") will be voted in accordance with the instructions of the
participants or otherwise in accordance with the terms of the ESOP. Under
provisions of the ESOP, if no instructions are received from a participant,
their shares cannot be voted.
BENEFICIAL OWNERSHIP OF SECURITIES
The table below sets forth information regarding the beneficial ownership
of Common Stock of the Corporation, as of March 14, 2003, by each director and
nominee for director, by each of the executive officers named in the Summary
Compensation Table, and by all nominees for director and individuals who served
as directors and executive officers of the Corporation on March 14, 2003 as a
group. Other than Mr. Conerton and Mr. Hendricks, who are directors of the
Corporation, no person is known to the Corporation to be the beneficial owner of
more than 5% of the outstanding shares of the Corporation's Common Stock.
NUMBER OF SHARES BENEFICIALLY
NAME AND ADDRESS OWNED AND NATURE OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP(1)(2) OF CLASS
------------------- ----------------------- --------
R. Richard Bastian, III 36,667 shares 1.44%
130 Eaglewood
Rockton, IL 61072
John B. Clark 86,400 shares(4) 3.42%
1840 Sherwood Drive S.W.
Beloit WI 53511
Charles Hart 21,800 shares .86%
c/o Tricor, Inc.
520 W. Grand Avenue
Beloit WI 53511
Kenneth A. Hendricks 282,434 shares(4) 11.18%
c/o ABC Supply Co.
One ABC Parkway
Beloit WI 53511
Charles J. Howard 20,000 shares .79%
4920 Forest Hills Road
Loves Park IL 61111
George D. Merchant 82,725 shares 3.27%
2413 Liberty Avenue
Beloit WI 53511
Merritt J. Mott 15,667 shares .62%
c/o Rockford Sanitary
Systems, Inc.
5159 28th Avenue
Rockford IL 61109
Stephen P. Carter no shares 0.00%
3131 Talbot Trail
Rockford IL 61114
Prudence A. Harker 8,000 shares .32%
c/o AXA Advisors, LLC
500 S. Park Avenue
South Beloit IL 61080
Roger G. Bryden 74,900 shares 2.98%
c/o Bryden Motors, Inc.
548 Broad Street
Beloit WI 53511
Stephen R. Thomas no shares 0.00%
1003 Beach Bay Rd.
Poplar Grove IL 61065
Todd J James 3,833 shares 0.15%
505 West 7th Street
Pecatonica IL 61063
Sunil Puri
6885 Vistagreen Way 8,813 shares(5) 0.35%
Rockford, IL 61108
Dennis M. Conerton 146,741 shares(3) 5.83%
1352 Middle Road
South Beloit IL 61080
All nominees for director and 797,417 shares(3)(4) 30.67%
individuals who served as
directors and executive
officers of the Corporation
on March 14, 2003 as a group
(19 persons)
(1) Except as noted otherwise, each person holds sole voting and
dispositive powers with respect to all shares shown opposite his name.
(2) Includes options to purchase shares exercisable currently or within 60
days of the date of this Proxy Statement for each of the persons
identified in the table as follows: Messrs. Bastian - 26,667; Clark -
11,250; Conerton - 667; Hart - 11,250; Hendricks - 8,100; Howard -
2,000; Merchant - 11,250; Puri - 2,000; Mott - 667 and James - 3,333,
and for all nominees for director and individuals who served as
directors and executive officers of the Corporation on March 14, 2003
as a group - 83,018.
(3) Includes shares allocated to the individual's account under the
Corporation's ESOP as follows: Mr. Conerton - 1,883 shares; and for
all nominees for director and individuals who served as directors and
executive officers of the Corporation on March 14, 2003 as a group -
1,886 shares.
(4) For Messrs. Clark and Hendricks, includes 86,400 shares, and 274,334
shares, respectively, held jointly with such person's spouse and for
all nominees for director and individuals, who served as directors and
executive officers of the Corporation on March 14, 2003 as a group,
includes 360,734 shares held jointly with such persons' spouses.
(5) For Mr. Puri, includes 8,413 shares held individually and 400 shares
held by his spouse.
The information presented in the table is based on information furnished by
the specified persons and was determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934 (the "1934 Act"), as required for purposes of
this Proxy Statement. Briefly stated, under that Rule shares are deemed to be
beneficially owned by any person or group having the power to vote or direct the
vote of, or the power to dispose or direct the disposition of, such shares, or
who has the right to acquire beneficial ownership thereof within 60 days.
Beneficial ownership for the purposes of this Proxy Statement is not necessarily
to be construed as an admission of beneficial ownership for other purposes.
ELECTION OF DIRECTORS
The Corporation's Bylaws, and actions of the Board taken pursuant thereto,
provide that there shall be 11 directors divided into three classes, as nearly
equal in number as practicable, each to serve 3-year staggered terms. At each
annual meeting the term of office of one of the three classes expires, and a new
class must be elected or re-elected to serve for a term of three years or until
their successors are duly elected and qualified.
The four nominees standing for election as directors of the Corporation at
the 2003 annual meeting are Mr. Kenneth A. Hendricks, Mr. George D. Merchant,
Mr. Stephen P. Carter and Mr. Stephen R. Thomas for terms expiring at the 2006
annual meeting of shareholders. Mr. Hendricks has been a director of the
Corporation since 1996. Mr. Merchant has been a director of the Corporation
since 1989. Messrs. Carter and Thomas have been nominated to fill the
directorates of Messrs. Conerton and Puri, who will not stand for re-election at
the annual meeting. The Board thanks Mr. Conerton who has been a director since
1989, for his many years of dedicated service to the Corporation. The Board
also wishes to thank Mr. Puri, who has been a director since 2000, for his years
of dedicated service to the Corporation.
The Board recommends that the shareholders elect the four nominees to serve
as directors of the Corporation for a term of three years or until their
successors have been duly elected and qualified. Unless otherwise directed,
proxies will be voted for the election of the four nominees. If any of the
nominees should decline or be unable to act as a director, which is not
foreseen, proxies may be voted with discretionary authority for a substitute
nominee designated by the Board of Directors.
NOMINEES FOR ELECTION TO TERM EXPIRING IN 2006:
DIRECTOR
NAME AND AGE PRINCIPAL OCCUPATION(1) SINCE
------------ --------------------------- --------
Kenneth A. Hendricks, Chairman and Chief Executive 1996
61(2)(4) Officer of ABC Supply Co. (roofing
and siding wholesaler).
George D. Merchant, 70(3) Retired; prior thereto, 1989
Owner/Operator of two Dairy Queen
ice cream store franchises.
Stephen P. Carter, 51 Executive Vice President, Chief ----
Financial Officer and Treasurer of
Woodward Governor Company
(manufacturer of energy control
systems for engines).
Stephen R. Thomas, 50 President of Cirrus Trails, Inc., ----
holding company for Poplar Grove
Airmotive, Inc. and President of
Emery Air Charter, Inc.
In addition to those four persons, the following seven individuals also
presently serve as directors of the Corporation for the indicated terms.
CLASS OF DIRECTORS WHOSE TERM EXPIRES IN 2004:
DIRECTOR
NAME AND AGE PRINCIPAL OCCUPATION(1) SINCE
------------ --------------------------- --------
Charles J. Howard, Chairman of the Board and Chief Executive Officer 2000
56(2) (4) of William Charles, Ltd. (a company engaged in
heavy manufacturing, waste management, truck
sales, and real estate development).
Merritt J. Mott, Mr. Mott is the owner and Chief Executive Officer 2001
57(3) (4) of Rockford Sanitary Systems, Inc. (designer and
manufacturer of fluid filtration/separation
systems for commercial plumbing use). Mr. Mott
serves as a member of the Board of Directors of
Landstar System, Inc., a publicly traded
transportation technology services company, and
Landstar System Holdings, Inc., its wholly-owned
subsidiary.
Prudence A. Harker, Investment Advisor Representative, AXA Advisors, 2002
58(3) LLC.
CLASS OF DIRECTORS WHOSE TERM EXPIRES IN 2005:
DIRECTOR
NAME AND AGE PRINCIPAL OCCUPATION (1) SINCE
------------ ---------------------------- --------
R. Richard Bastian, President and Chief Executive Officer of the 2001
III, 56(2) Corporation since February 2002 and of its
subsidiary, Blackhawk State Bank (the "Bank")
since May 2001. Previously, President of the
Bank of Kenosha from January 1999 to January
2001 and Executive Vice President and Director
of the Clean Air Action Corporation from
August 1994 to January 2001.
John B. Clark, Retired since 1997; prior thereto stockbroker, 1989
60(3) Wachovia Securities, Inc. (securities in-
vestment firm).
Charles Hart, Sales person at Tricor, Inc. (full service 1993
69(2) insurance agency) since 1999; previously sales
person and President and Director of Combined
Insurance Group, Ltd.; Director, Hart, Kruse &
Boutelle, Inc. (real estate).
Roger G. Bryden, 60 Owner/Operator, Bryden Motors, Inc. (Dodge- 2002
Chrysler-Jeep automotive dealership in Beloit,
WI).
(1) Except as otherwise noted, all directors have been employed in the
principal occupations noted above for the past five years or more.
(2) Member of the Executive Committee in 2002.
(3) Member of the Audit and Compliance Committee in 2002.
(4) Member of the Compensation Committee in 2002.
MEETINGS AND COMMITTEES
The Board of Directors held 13 meetings during 2002. Each of the directors
attended at least 75% of the meetings of the Board (including meetings of
committees of which the director is a member) held during the period of 2002 for
which he or she served as a director, except for Mr. Taylor who attended 50% of
his meetings and resigned as a director effective May 15, 2002. There are no
standing nomination or similar committees of the Board.
The Corporation has an Executive Committee, of which Mr. Howard was the
chairman. The other members of the Executive Committee are set forth on the
tables above. The Executive Committee is authorized to exercise the powers of
the Board of Directors in the management of the business and affairs of the
Corporation when the Board is not in session, except for those powers which are
non-delegable by law or have been delegated to other committees. The Executive
Committee did not meet in 2002.
The Corporation has a Compensation Committee of which Mr. Mott was the
chairman. The other members of the Compensation Committee are set forth on the
tables above. The Compensation Committee reviews and makes recommendations
with respect to the Corporation's and its subsidiary's hiring and compensation
policies, and performs administrative functions with respect to the Cor-
poration's 1990 and 1994 Executive Stock Option Plans. The Compensation
Committee met 5 times in 2002.
The Corporation has an Audit and Compliance Committee of which Mr. Merchant
was the chairman. The other members of the Audit and Compliance Committee are
set forth on the tables above. The Board of Directors believes that all of the
current members of the Audit and Compliance Committee are "independent
directors" as defined by the listing standards of the National Association of
Securities Dealers, Inc. The Audit and Compliance Committee's functions include
meeting with the Corporation's independent public accountants and making
recommendations to the Board of Directors regarding the engagement or retention
of such accountants, adoption of accounting methods and procedures, public
disclosures required to comply with securities laws and other matters relating
to the Corporation's financial accounting. The Charter for the Audit and
Compliance Committee is attached as Annex I. The Audit and Compliance Committee
met 11 times in 2002.
AUDIT AND COMPLIANCE COMMITTEE REPORT
The Corporation's Audit and Compliance Committee is comprised of four
directors who are not officers of the Corporation. The members of the Audit and
Compliance Committee are independent as defined by Rule 4200(a) (15) of the
National Association of Securities Dealers' listing standards. A responsibility
of the Committee is to monitor and review the Corporation's financial reporting
process on behalf of the Board of Directors. Management is responsible for the
Corporation's internal controls and the financial reporting process while the
independent accountants are responsible for performing an independent audit of
the Corporation's consolidated financial statements in accordance with generally
accepted auditing standards and to issue a report thereon.
The Committee held eleven meetings during 2002. One meeting was designed
to facilitate and encourage open communication between the Committee and the
Corporation's prior independent public accountants, Wipfli Ullrich Bertleson LLP
("Wipfli"). During the meeting, the Committee reviewed and discussed the
Corporation's annual financial statements with management and Wipfli.
On August 27, 2002 the Audit and Compliance Committee approved the
appointment of McGladrey & Pullen, LLP to serve as the Corporation's independent
public accountants for the year ended December 31, 2002. See "Other Information
- Independent Auditors."
The Audit and Compliance Committee believes that management maintains an
effective system of internal controls that results in fairly presented financial
statements. The Committee discussed with Wipfli matters relating to
communications with audit committees as required by Statement on Auditing
Standards No. 61. Wipfli also provided to the Committee the written disclosures
relative to auditor independence as required by Independence Standards Board
Standard No. 1. The Committee also reviewed a list of non-audit services
performed during fiscal year 2002 and determined, based upon their scope, that
such services did not affect the independence of Wipfli and McGladrey & Pullen,
LLP in performing their audit services. Fees paid to and for the 2002 financial
statement audit performed by McGladrey & Pullen, LLP are as summarized under the
caption "Audit and Non-Audit Fees". The Audit and Compliance Committee
considered these fees in its assessment of the independence of Wipfli and
McGladrey & Pullen, LLP and deemed that the services provided and the fees paid
for those services were compatible with maintaining independence of the
Corporation's independent public accountant.
Based on these discussions, the Audit and Compliance Committee recommended
to the Board of Directors that the audited financial statements be included in
the Corporation's Annual Report on Form 10-KSB for the year ended December 31,
2002.
Respectfully submitted to the Corporation's shareholders by the Audit and
Compliance Committee of the Board of Directors.
George D. Merchant, Committee Chair Prudence A. Harker
John B. Clark Merritt J. Mott
AUDIT AND NON-AUDIT FEES
The following table presents fees for professional audit services rendered by
McGladrey & Pullen, LLP for the audit of the Corporation's annual financial
statements for fiscal 2002, and fees billed for other services rendered by
McGladrey & Pullen, LLP for fiscal 2002.
Audit fees $44,885
Financial information systems design and implementation consulting $ -0-
All other fees $ 3,000
COMPENSATION OF DIRECTORS
DIRECTORS' FEES
Directors of the Corporation who are not employees of the Corporation or of
the Bank receive a $6,000 annual retainer and $250 for each board meeting
attended and $100 for each committee meeting attended. Directors who are
employees received a quarterly retainer of $1,750 through June 30, 2002. After
that date employee directors no longer receive any additional compensation for
serving as a director. The Corporation has also established stock option plans
in which non-employee directors are eligible to participate.
DIRECTORS' STOCK OPTION PLANS
Prior to its expiration on January 24, 1995, the Corporation maintained the
Blackhawk Bancorp, Inc. 1990 Directors' Stock Option Plan (the "1990 Directors'
Plan"), which was intended to provide an incentive for directors of the
Corporation who are not active full-time employees of the Corporation or of a
subsidiary of the Corporation ("Outside Directors") to improve corporate
performance on a long-term basis. To replace the expired 1990 Directors' Plan,
the Board of Directors adopted, and the shareholders of the Corporation on
May 11, 1994 approved, the Blackhawk Bancorp, Inc. 1994 Directors' Stock Option
Plan (the "1994 Directors' Plan"), which is substantially similar in all
material respects to the 1990 Directors' Plan. The 1994 Directors' Plan has
150,000 shares of the Corporation's Common Stock reserved for issuance and
provides for the granting of non-qualified stock options.
On March 3, 2003, each of the ten Outside Directors automatically was
granted an option under the 1994 Directors' Plan to purchase 2,000 shares of the
Corporation's Common Stock at a per share exercise price of $9.90 (the per share
market price of the Corporation's Common Stock on that date). On March 1, 2002,
each of the ten Outside Directors automatically was granted an option to
purchase 2,000 shares at an exercise price of $9.50, the market price on that
date. Giving effect to those grants, the total number of shares of the
Corporation's Common Stock subject to outstanding grants under the 1990 and 1994
Directors' Plans as of March 14, 2003 was 81,850, and there remained available
59,383 shares for future grants under the 1994 Directors' Plan. The 1990
Directors' Plan expired on January 24, 1995; therefore, no more options will be
granted under that Plan. The 1994 Directors' Plan will expire December 31,
2003.
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table summarizes certain information for each of the last
three years concerning all compensation awarded or paid to or earned by the
Chief Executive Officer and another executive officer of the Corporation that
had total compensation exceeding $100,000 in 2002.
SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------------- --------------------------------------------------------
Name and Other Annual Option Other
Principal Position Year Salary ($) Bonus ($)(1) Compensation(2) SARs(3) Compensation(4)
------------------ ---- ---------- ----------------- -------------------- ------------ --------------------
R. Richard Bastian, III(5) 2002 $142,904 $ 0 $4,375 10,000 $13,398
President and Chief Executive 2001 $ 85,917 $25,000 $2,188 40,000 $10,822
Officer of the Corporation
since February 2002 and the Bank
Since May 2001
Denis M. Conerton - Retired 2002 $ 80,704 $ 0 $ 4,167 0 $ 203
President and Chief Executive 2001 $127,000 $ 0 $ 1,880 0 $17,330
Officer of the Corporation and 2000 $127,000 $ 0 $ 2,018 5,000 $20,454
Bank, serving through
January 31, 2002.(6)
Todd J. James(7) -Executive 2002 $ 85,865 $15,000 $ -0- 16,000 $ 714
Vice President and Chief
Financial Officer
(1) Annual bonus amounts are earned and accrued during the years indicated
and paid at the beginning of the next calendar year. Mr. Bastian's
bonus for 2001 was paid upon the commencement of his employment with
the Bank. $5,000 of Mr. James' bonus for 2002 was paid upon the
commencement of his employment with the Bank.
(2) Represents taxable value of company provided automobile.
(3) Consists entirely of non-qualified executive stock options.
(4) Includes: (a) employer contributions to each named executive's
account under a 401(k) profit sharing plan in the amounts of $6,986,
$3,774 and $203 for Mr. Conerton in the years 2000, 2001 and 2002,
respectively, and in the amount of $4,542 for Mr. Bastian and $714 for
Mr. James in 2002; (b) premiums paid for life insurance in the amount
of $4,843 on behalf of Mr. Conerton in each of the years 2000 and 2001
and $4,510 on behalf of Mr. Bastian in 2001 and 2002; (c) additional
insurance benefits in the amount of $5,157 for Mr. Conerton in each of
the years 2000 and 2001 and $3,810 for Mr. Bastian in 2001; and (d)
country club memberships for Mr. Bastian of $2,502 in 2001 and $4,346
in 2002 and for Mr. Conerton of $3,468 and $3,556 in 2000 and 2001,
respectively.
(5) Mr. Bastian became employed by the Corporation in May 2001.
(6) Includes payments to Mr. Conerton in 2002 after his retirement from
the Corporation pursuant to severance arrangements. See "Conerton
Retirement Agreement" below.
(7) Mr. James became employed by the Corporation in February 2002.
EXECUTIVE STOCK OPTIONS
Prior to its expiration on January 24, 1995, the Corporation maintained the
Blackhawk Bancorp, Inc. 1990 Executive Stock Option Plan (the "1990 Executive
Plan"), which provided an incentive for executive officers of the Corporation or
any of its subsidiaries to improve corporate performance on a long-term basis.
To replace the expired 1990 Executive Plan, the Board of Directors of the
Corporation adopted, and on May 11, 1994 the shareholders approved, the
Blackhawk Bancorp, Inc. 1994 Executive Stock Option Plan (the "1994 Executive
Plan"), which is substantially similar in all material respects to the 1990
Executive Plan. The 1994 Executive Plan provides for the granting of incentive
stock options ("ISOs") intended to qualify as such within the meaning of Section
422 of the Internal Revenue Code of 1986, nonqualified stock options ("NSOs")
and stock appreciation rights ("SARs"). The 1994 Executive Plan has 405,000
shares of the Corporation's Common Stock reserved for issuance.
Options for 61,250 shares were granted in 2002 and at December 31, 2002
there were outstanding under this Plan options for the purchase of a total of
162,745 shares. There are 118,595 shares available for future grants under the
1994 Executive Plan. The 1994 Executive Plan will expire December 31, 2003.
OPTIONS OF NAMED EXECUTIVES
Options to purchase shares of the Corporation's Common Stock were granted
to the named executive officers as reflected in the table below. Pursuant to the
terms of the 1994 Executive Plan, such options will become exercisable in equal
thirds on each of the first three anniversaries of the date of grant. Mr.
Conerton was granted options, as an outside director, after the effectiveness of
his resignation as an officer; that grant is not included in this table. See
"Compensation of Directors".
OPTION/SAR GRANTS IN LAST FISCAL YEAR
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED FISCAL YEAR ($/SHARE) DATE(2)
---- ------------ ------------ --------- ------------
R. Richard Bastian, III 10,000 16.3% $9.52(1) June 2012
Todd J. James 10,000 16.3% $9.55(1) February 2012
Todd J. James 6,000 9.8% $8.29(1) December 2012
(1) Represented fair market value (determined under provisions of 1994
Executive Plan) of the Corporation's Common Stock as of the date of
grant.
(2) Options generally expire three months following named executive
officer's death, disability, retirement or termination of his
employment with the Corporation and/or the Bank.
The following table sets forth certain information concerning individual
exercises of stock options by the named executive officers during 2002 including
the number and value of options outstanding at the end of 2002 for each of the
named executive officers. Value is calculated using the difference between the
exercise price and the market price on the day of exercise, for those options
exercised in fiscal year 2002, or year-end market price, for all other options,
multiplied by the number of shares underlying the option.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
---------------------- -------------------------
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
R. Richard Bastian, III 0 $ 0 13,333 36,667 $6,667 $13,333
Todd J James 0 0 0 16,000 $ 0 $ 7,260
Dennis M. Conerton 92,716 $52,062 0 2,000 $ 0 $ 0
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes share information, as of December 31, 2002, for
Blackhawk's equity compensation plans. The option plans have been approved by
Blackhawk's shareholders.
NUMBER OF COMMON NUMBER OF
SHARES TO BE WEIGHTED- SECURITIES
ISSUED UPON AVERAGE REMAINING
EXERCISE OF EXERCISE PRICE AVAILABLE FOR
OUTSTANDING OF OUTSTANDING FUTURE ISSUANCE
OPTIONS, OPTIONS, UNDER EQUITY
WARRANTS AND WARRANTS AND COMPENSATION
PLAN CATEGORY RIGHTS RIGHTS PLANS
------------- ------------ ------------ ---------------
Equity compensation plans
approved by shareholders 226,695 $8.10 197,978
Equity compensation plans not
approved by shareholders 0 N/A 0
------- ----- -------
Total 226,695 $8.10 197,978
------- ----- -------
------- ----- -------
SEVERANCE PAYMENT AGREEMENTS
The Bank has agreements with potential severance amounts payable in excess
of $100,000 per individual currently in effect with two officers, R. Richard
Bastian, III and Richard J. Rusch. Mr. Bastian's provisions are in his
employment agreement; Mr. Rusch's in a severance agreement. The agreement
remains in effect until the earliest to occur of the officer's: (i) death; (ii)
disability; (iii) retirement; (iv) termination of employment (whether voluntary
or involuntary); or (v) termination in connection with a change in control of
the Bank or the Corporation.
The agreements provide that, in the event of termination of his employment
in connection with a change in control of the Bank or the Corporation, the
officer would receive a severance payment in an amount equal to his average
annual compensation (defined to include his then current base annual salary plus
the average bonus, if any, received by him in the three years preceding
termination) multiplied by three, plus an amount equal to the dollar equivalent
of all contributions by the Bank on behalf of and for the benefit of the officer
to any pension, profit sharing or employee stock benefit plan, including the
Corporation's ESOP, during the three years prior to the termination. Mr.
Bastian's agreement provides for payment within 15 days of termination. Mr.
Rusch's agreement requires payment of one-third of the severance payment in a
lump sum within 30 days of termination with the remaining two-thirds to be paid
in monthly installments commencing in the thirteenth month following
termination. In addition to this severance payment, the officer would also be
entitled to continue receiving, for three years following termination, medical,
life and disability insurance benefits and vested benefits otherwise payable to
him under any Bank plan or agreement relating to retirement or deferred
compensation benefits, if any. In the event Mr. Rusch finds other full-time
employment, his severance payment in the second and third year following
termination would be reduced by an amount equal to salary and other benefits
received from his new employer during the period for which he is entitled to
receive payments under his Severance Payment Agreement; Mr. Bastian's agreement
is not subject to that adjustment. Mr. Rusch's Severance Payment Agreement
provides that, in the event the officer is under the age of 55 and physically
and medically able to perform duties with another employer comparable to those
performed by him with the Bank at the time of his termination, he must take
reasonable steps to obtain such employment within 50 miles of the Bank's main
office.
The agreements define a change in control to include: (i) acquisition of
beneficial ownership of securities of the Bank or of the Corporation in a
transaction subject to the notice provisions of the Change in Bank Control Act
of 1978 or approval under the Bank Holding Company Act of 1956; (ii) someone
other than the Corporation becoming owner of more than 25% of the voting
securities of the Bank; (iii) the persons constituting the Board of Directors of
the Bank or the Corporation at any particular time ceasing, during any two-year
period thereafter, to constitute at least a majority thereof; (iv) a person or
group of persons or entity succeeding to all or substantially all of the
business and/or assets of the Bank or the Corporation as a result of a purchase,
merger, consolidation or similar transaction; or (v) the filing by the
Corporation of a report or proxy statement with the Securities and Exchange
Commission disclosing that a change in control of the Corporation has or may
have occurred pursuant to any contract or transaction. A termination of an
officer is deemed to have occurred in connection with a change in control if,
following an event defined as a change in control, either the officer's
employment is terminated by the Bank or a successor other than for death,
disability, retirement or certain wrongful conduct by the officer, or the
officer terminates his employment on 90 days prior written notice following such
change in control and the occurrence of specified events, including: (i)
demotion in his position or reduction in his duties or responsibilities; (ii)
reduction in compensation; (iii) transfer to a remote location; (iv) a good
faith determination by the officer that he is unable, and it would not be in the
best interests of the Bank for him, to carry out the authorities, powers,
functions, responsibilities or duties attached to his position; or (v) failure
on the part of the Bank to obtain a commitment from a successor to assume the
Bank's duties and obligations under the agreements. If an officer is terminated
within six months prior to a change in control for reasons other than death,
disability or cause, such termination will be treated as being in anticipation
of the change in control and the officer will be entitled to receive the
benefits he would have received had the termination occurred after and in
connection with a change in control.
Mr. Bastian's employment agreement provides that he shall receive the
severance amounts described above, regardless of whether or not a change in
control has occurred, if he is terminated by the Corporation or the Bank without
cause or if he terminates his employment for cause. The employment agreement
further provides a base salary of $160,000 (subject to annual change by the
board), specified benefits and a term of three years, commencing on August 1,
2002, subject to annual extensions.
CONERTON RETIREMENT AGREEMENT
Dennis Conerton retired, and resigned from employment, effective
January 31, 2002. In connection therewith, the Corporation entered into an
agreement with Mr. Conerton relating to the continuance of certain benefits.
Although the resignation was effective January 31, 2002, Mr. Conerton continued
to draw salary, and receive health insurance benefits, through July 31, 2002.
His use of a company car extended through January 31, 2003. In accordance with
the relevant stock option plan, any unexercised employee stock options held by
Mr. Conerton expired on April 30, 2002.
Mr. Conerton remains a director through the annual meeting. After the
effectiveness of his resignation, he received compensation as an outside
director. That compensation included grants of options under the directors'
stock option plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Corporation's directors, executive officers and any person holding more than 10%
of the Corporation's Common Stock are required to report their initial ownership
of the Corporation's Common Stock and any subsequent changes in that ownership
to the Securities and Exchange Commission. Specific due dates for these reports
have been established and the Corporation is required to disclose in this Proxy
Statement any failure to file such reports by these dates during 2002. Based
solely on a review of copies of such reports furnished to the Corporation, or
written representations that no reports were required, the Corporation believes
that during 2002 all filing requirements applicable to its directors and
executive officers were satisfied.
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Bank occasionally extends home mortgage loans, home improvement loans,
home equity loans, consumer loans and commercial loans to its directors,
officers and employees, and affiliates of the foregoing. Such loans are made in
the ordinary course of business and do not, in the opinion of management of the
Bank, involve more than the normal risk of collectability or present other
unfavorable features, and are made on substantially the same terms, including
interest rate and collateral, as those prevailing at the time for comparable
transactions with other persons. Where the borrower is also a director of the
Bank, it is the policy of the Bank that he must leave the meeting of the Bank's
Board of Directors while his loan is being considered and he neither
participates in that consideration nor votes on approval of the loan. Messrs.
Hendricks, Puri and Bryden or their affiliates, each had one or more loans with
the Bank with an aggregate outstanding balance at December 31, 2002 in excess of
$60,000. As of that date, those loans aggregated $9,691,067 which represented
approximately 31.35% of the capital of the Bank at December 31, 2002. Those
loans were all made in accordance with the policy described above.
OTHER INFORMATION
INDEPENDENT AUDITORS
On August 27, 2002, the Audit and Compliance Committee of the Board of
Directors of the Corporation approved a change in auditors. The Board of
Directors ratified the Audit Committee's engagement of McGladrey & Pullen, LLP
to serve as the Corporation's independent public accountants and replacement of
Wipfli Ullrich Bertelson LLP (Wipfli") as the Corporation's independent public
accountants, effective August 28, 2002.
Wipfli performed audits of the consolidated financial statements for the
two years ended December 31, 2001 and 2000. Their reports did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope, or accounting principles.
During the two years ended December 31, 2001, and from December 31, 2001
through the effective date of the Wipfli termination, there were no
disagreements between the Corporation and Wipfli on any matter of accounting
principles or practice, financial statement disclosure, or auditing scope or
procedure, which disagreements would have caused Wipfli to make reference to the
subject matter of such disagreements in connection with this report.
During the two years ended December 31, 2001, and from December 31, 2001
until the effective date of the dismissal of Wipfli, Wipfli did not advise the
Corporation of any of the following matters:
1. That the internal controls necessary for the Corporation to develop
reliable financial statements did not exist;
2. That information had come to Wipfli's attention that had lead it to no
longer be able to rely on management's representations, or that had made it
unwilling to be associated with the financial statements prepared by management;
3. That there was a need to expand significantly the scope of the audit of the
Corporation, or that information had come to Wipfli's attention that if further
investigated: (i) may materially impact the fairness or reliability of either a
previously-issued audit report or underlying financial statements, or the
financial statements issued or to be issued covering the fiscal periods
subsequent to the date of the most recent financial statements covered by an
audit report (including information that may prevent it from rendering an
unqualified audit report on those financial statements) or (ii) may cause it to
be unwilling to rely on management's representation or be associated with the
Corporation's financial statements and that, due to its dismissal, Wipfli did
not so expand the scope of its audit or conduct such further investigation;
4. That information had come to Wipfli's attention that it had concluded
materially impacted the fairness or reliability of either: (i) a previously-
issued audit report or the underlying financial statements or (ii) the financial
statements issued or to be issued covering the fiscal period subsequent to the
date of the most recent financial statements covered by an audit report
(including information that, unless resolved to the accountant's satisfaction,
would prevent it from rendering an unqualified audit report on those financial
statements), or that, due to its dismissal, there were no such unresolved issues
as of the date of its dismissal.
Wipfli furnished a letter to the SEC stating that it agrees with the above
statements.
During the two years ended December 31, 2001, and from December 31, 2001
through engagement of McGladrey & Pullen, LLP as the Corporation's independent
accountant, neither the Corporation nor anyone on its behalf had consulted
McGladrey & Pullen, LLP with respect to any accounting or auditing issues
involving the Corporation. In particular, there was no discussion with the
Corporation regarding the application of accounting principles to a specified
transaction, the type of audit opinion that might be rendered on the financial
statements, or any related item
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Audit and Compliance
Committee, appointed the firm of McGladrey & Pullen, LLP as independent public
accountants to audit the books and accounts of the Corporation for fiscal 2003.
They have audited the Corporation since 2002. Services provided to the
Corporation and its subsidiaries by McGladrey & Pullen, LLP in fiscal 2002 are
described under "Audit and Non-Audit Fees" above.
Representatives of McGladrey & Pullen, LLP are expected to be present at
the annual meeting to respond to appropriate questions and to make a statement
if they so desire.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF MCGLADREY & PULLEN, LLP AS THE CORPORATION'S INDEPENDENT
ACCOUNTANTS FOR FISCAL 2003.
In the event shareholders do not ratify the appointment, the appointment
will be reconsidered by the Audit and Compliance Committee and Board of
Directors.
SHAREHOLDER PROPOSALS
Shareholder proposals must be received by the Corporation no later than
December 13, 2003 in order to be considered for inclusion in next year's annual
meeting proxy materials. Shareholders who intend to present a proposal at next
year's annual meeting of shareholders without inclusion of such proposal in the
Corporation's proxy materials, or who propose to nominate a person for election
as a director at the annual meeting, are required to provide notice of such
proposal containing the information described in the Corporation's Bylaws to the
Secretary of the Corporation not later than 90 days in advance of next year's
annual meeting.
OTHER AGENDA ITEMS
The Board of Directors has not been informed and is not aware that any
other matters will be brought before the meeting. However, proxies may be voted
with discretionary authority with respect to any other matters that may properly
be presented at the meeting or any adjournment thereof.
A COPY (WITHOUT EXHIBITS) OF THE CORPORATION'S ANNUAL REPORT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON FORM 10-KSB FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2002 IS AVAILABLE WITHOUT CHARGE TO EACH RECORD OR BENEFICIAL OWNER
OF SHARES OF THE CORPORATION'S COMMON STOCK AS OF APRIL 1, 2003 ON THE WRITTEN
REQUEST OF SUCH PERSON DIRECTED TO: TODD J. JAMES, EXECUTIVE VICE PRESIDENT-
SECRETARY AND TREASURER, BLACKHAWK BANCORP, INC., 400 BROAD STREET, BELOIT,
WISCONSIN 53511.
ANNEX I
BLACKHAWK BANCORP, INC.
AUDIT AND COMPLIANCE COMMITTEE CHARTER
PURPOSE
-------
The Audit Committee ("Committee") is appointed by the Blackhawk Bancorp, Inc
("Bank") Board of Directors ("Board"), and is formed for the purpose of
assisting the Board in performing its oversight responsibilities. While the
Audit Committee has the authority and responsibilities outlined below, it is not
responsible for performing audits to ensure the accuracy of the financial
statements, in accordance of Generally Accepted Accounting Principles. Nor is
it the duty of the Committee to conduct investigations, resolve disagreements
between management and the auditors, or provide assurance of compliance with
laws and regulations.
COMPOSITION
-----------
The Committee shall be composed of at least 3 members of the Board, who meet the
independence and financial literacy guidelines as outlined by the New York Stock
--------------
Exchange, the National Association of Securities Dealers and the Securities and
-------------------------------------------------------------------------------
Exchange Commission.
-------------------
AUTHORITY
---------
The Committee has the authority to initiate any investigations or consultations
it deems necessary to fulfill its oversight function on behalf of the Board;
including retaining legal counsel, consulting with accounting and other
applicable professionals, and requesting assistance from any officer or employee
of the Bank.
RESPONSIBILITIES
----------------
In performing the oversight function, the Committee shall:
o FINANCIAL REPORTING Review with management and the independent auditor(s)
matters relating to the Bank's interim and annual financial statements, as
indicated by auditing/accounting standards or securities laws. This could
include review of footnotes and any significant reserves, accruals and
estimates used in preparing the financial statements
o INDEPENDENT/EXTERNAL AUDITOR Recommend the independent auditors to the Board,
based on review of the independent auditors' independence; performance with
the Bank in prior years, if possible; fees charged in the past and proposed
for the current year; and, the independent auditors' reputation within the
community.
o INTERNAL AUDIT Oversee the Bank's Internal Audit function, including review
the appointment of the Auditor, review and approve the Bank's Risk Assessment
and Annual Internal Audit Plan; review the reports on internal audits
performed, including management's responses; and monitor any material or
sensitive projects assigned to the Auditor by Management, the Board, or the
Committee.
o REGULATORY COMPLIANCE Oversee the Bank's Regulatory Compliance function,
including review the appointment of the Compliance Officer, review and
approve the Compliance Program; review the reports on compliance testing
performed, including management's responses; and review any material reports
received from the Examiners.
MEETINGS
--------
The Committee shall meet regularly, at least 4 times annually, or more often as
needed. Additionally, the Committee shall meet with the independent auditor(s),
the internal auditor, or the Compliance Officer, without the presence of
management, when/if privacy is deemed necessary.
OTHER
-----
The Audit Committee shall review and update this Charter, as needed, and submit
it to the Board for approval, annually.
Adopted June 18, 2002
George Merchant, Committee Chairman Dennis M. Conerton
John B. Clark Merritt Mott
Dear Fellow Shareholder:
I cordially invite you attend the Blackhawk Bancorp Annual Meeting at 10:00 A.M.
on May 21, 2003 at the Beloit Country Club.
Accompanying this letter is the formal Notice of Annual Meeting of Shareholders,
Proxy Statement and 2002 Annual Report. The Proxy Statement sets forth the
business to be acted upon including the election of directors.
Because of business and personal commitments Dennis Conerton and Sunil Puri have
asked that their names not be resubmitted as nominees to the Board of Directors
for three year terms beginning with this year's annual meeting. They have both
been loyal, engaged and involved directors. While retaining their friendship,
we will miss their counsel.
Your board is pleased to nominate in their place Mr. Stephen Carter and Mr.
Stephen Thomas. Subject to your approval, they will join Mr. Hendricks and Mr.
Merchant as directors elected to three year terms.
Mr. Carter is Executive Vice President and Chief Financial Officer of Woodward
Governor. He will add to our board valuable financial expertise and experience
in the governance of publicly held companies. Mr. Thomas is a native of Boone
County with deep roots in the community and a number of successful businesses
including the Poplar Grove Airport. He will be very helpful in supporting our
growing presence in Boone County, the second fastest growing county in Illinois.
That Boone County presence will be significantly strengthened with our
acquisition of DunC Corp. and its subsidiary, First Bank, bc. We expect the
merger to take place sometime in late summer after receipt of approvals from
regulators and DunC shareholders. We will spend some time at the annual meeting
sharing this exciting development with you. In case you missed the
announcement, a copy of the press release is attached.
I look forward to seeing you at the annual meeting.
Sincerely,
/s/R. Richard Bastian, III
R. Richard Bastian, III
President and Chief Executive Officer
NEWS RELEASE
------------
Contact: Rick Bastian, President & CEO, Blackhawk State Bank
608-364-8911
FOR IMMEDIATE RELEASE
---------------------
March 18, 2003
BLACKHAWK STATE BANK AND FIRST BANK, BC TO MERGE
------------------------------------------------
ACTION UNDERSCORES BLACKHAWK'S COMMITMENT TO
THE GREATER ROCKFORD AREA
BELOIT, WISCONSIN, MARCH 18, 2003--- Blackhawk Bancorp, Inc. (OTC: BKHB) and
DunC Corp. jointly announced today they have signed a definitive agreement
for Blackhawk Bancorp to acquire DunC Corp. and its subsidiary, First Bank,
bc, for $7.2 million, or $1,518 per share. The agreement provides for
certain adjustments in price based on the performance of DunC.
The acquisition is expected to be completed in the third quarter of 2003 and
is subject to DunC shareholder and regulatory approval and other closing
conditions.
Blackhawk Bancorp, Inc., which on February 21, 2003 reported 2002 diluted
earnings per share of $0.50, a 39% increase over 2001, is the parent company
of Blackhawk State Bank, which operates nine offices in Beloit, Rockford,
Roscoe, Belvidere, Rochelle and Oregon. It employs 150 people and has assets
of $350 million.
First Bank, bc, with assets of approximately $75 million and over 40
employees, is headquartered in Capron, Illinois. It has four full service
locations in Illinois including Capron, Belvidere, Rockford and Machesney
Park. First Bank, bc offers a full range of retail, commercial and real
estate banking services.
"This affiliation is a natural fit to our existing branch network and our
strategies for growth," said R. Richard Bastian III, President and Chief
Executive Officer of Blackhawk Bancorp, Inc. "It underscores our commitment
to be the premier community bank in the Greater Rockford Area."
"After completion of this merger, Blackhawk will rank second in deposit
balances in fast growing Boone County. It also picks up a full-service
facility in the rapidly developing Rte 173 and Forest Hills Rd. area of
Machesney Park, IL," he said.
"We believe that strong capital, sound asset quality and exceptional customer
service provided by outstanding employees are the keys to our success now and
into the future. We expect that this merger will help Blackhawk State Bank
create an even stronger financial services company with a broader array of
services and locations," continued Bastian.
"The merger will provide greater convenience for clients of both
organizations offering them 12 banking locations in the stateline area,
including three in the Rockford area."
Donald H. Pratt, Chairman and Chief Executive Officer of DunC, Corp. and
First Bank, bc is also pleased with what the merger will bring to his
customers.
"Blackhawk is an ideal partner for First Bank. Our customers can be assured
they will continue to receive the personal attention that only a community
bank can provide. In addition, they will have the added benefit of access to
a broader line of products and services, including internet banking, cash
management and trust services.
"We chose Blackhawk because of their focus on community banking and their
commitment to maintaining close customer relationships," said Pratt. "We're
very comfortable with their leadership as several members of our management
team, including myself, have worked with Rick Bastian in the past."
Bastian and Pratt were both executives of First Community Bancorp prior to
its acquisition by Bank One in 1993. At the time of its acquisition by Bank
One, First Community was the second largest financial institution in the
Rockford area.
Transition teams with employees from both banks will be working in the
upcoming months to make the merger as seamless as possible for business and
consumer clients of both banks, according to Bastian.
In connection with this transaction, Alex Sheshunoff & Co., Investment
Banking acted as financial advisor to DunC Corp. Hinshaw & Culbertson
represented DunC Corp. as legal counsel. Howe Barnes Investments, Inc. acted
as Blackhawk Bancorp, Inc.' s financial advisor and Quarles & Brady LLP
served as its legal counsel.
FORWARD LOOKING STATEMENTS
--------------------------
When used in this communication, the words "believes," "expects," and similar
expressions are intended to identify forward looking statements. Blackhawk's
actual results may differ materially from those described in the forward
looking statements. Factors which could cause such a variance to occur
include, but are not limited to: heightened competition; adverse state and
federal regulation; failure to obtain new or retain existing clients; ability
to attract and retain key executives and personnel; changes in interest
rates; unanticipated changes in industry trends; unanticipated changes in
credit quality and risk factors, including general economic conditions;
success in gaining regulatory approvals when required; changes in the Federal
Reserve Board monetary policies; unexpected outcomes of new and existing
litigation in which Blackhawk or its subsidiaries, officers, directors or
employees is named defendants; technological changes; changes in accounting
principles generally accepted in the United States; changes in assumptions or
conditions affecting the application of "critical accounting policies;" and
the inability of third party vendors to perform critical services for the
company or its clients. Blackhawk and DunC Corp. do not undertake any
obligation to update any forward looking statement to reflect circumstances
or events that occur after the date the forward looking statement is made.