U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report pursuant to Section 13 or 15(d) of the Securities
and Exchange Act of 1934
For the quarterly period ended March 31, 2000
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________ to ________.
Commission File Number 0-23235
Success Bancshares, Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-3497644
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
100 Tri-State International, Suite 60069
300 (Zip Code)
(Address of Principal Executive
Offices)
(847) 279-9000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange of Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock: 2,602,306 shares $0.001 par value, outstanding as of April 19,
2000.
Table of Contents
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 1
Consolidated Statements of Income 2
Consolidated Statements of Cash Flow 3
Footnotes to Unaudited Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 5 - 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk 13
Part II. OTHER INFORMATION
Item 6. (a) Exhibits 14 - 17
(b) Reports on Form 8-K
None
Form 10-Q Signature Page 18
Success Bancshares, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999
(Unaudited)
March 31, December 31,
2000 1999
(In thousands)
ASSETS
Cash and cash equivalents $12,432 $17,057
Securities available-for-sale 35,914 36,329
Loans, less allowance for loan losses of $4,358
at March 31, 2000
and $4,269 at December 31, 1999 447,491 424,668
Premises and equipment, net 10,310 10,684
Interest receivable 3,391 2,876
Other real estate owned 46 50
Other assets 5,850 5,481
Total Assets $515,434 $497,145
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing deposits $56,648 $60,571
Interest bearing deposits 362,830 333,719
Total deposits 419,478 394,290
Federal funds purchased 7,000 -
Federal Home Loan Bank advances 35,383 45,94
6
Securities sold under repurchase agreements 3,961 5,002
Demand notes payable to U.S. Government 1,316 3,115
Trust preferred securities 15,00 15,000
0
Interest payable and other liabilities 3,218 2,942
Total Liabilities 485,356 466,295
Shareholders' equity
Preferred stock, $0.001 par value, 1,000,000 - -
shares authorized, none issued
Common stock, $0.001 par value, 7,500,000 shares
authorized,
At March 31, 2000: 3,074,326 shares issued and
2,620,806 shares outstanding
At December 31, 1999: 3,074,326 shares issued 3 3
and 2,732,190 shares outstanding
Additional paid-in capital 25,362 25,362
Retained earnings 9,670 9,284
1
Treasury stock (4,621) (3,563)
Loans to Employee Stock Ownership Plan (74) (74)
Unearned compensation (29) (36)
Accumulated other comprehensive income (233) (126)
Total Shareholders' Equity 30,078 30,850
Total Liabilities and Shareholders' Equity $515,434 $497,145
See accompanying notes to Unaudited Consolidated Financial Statements
2
Success Bancshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Three Months
Ended
March 31,
2000 1999
(In thousands,
except share
data)
Interest income
Loans (including fee income) $8,948 $7,621
Investment securities
Taxable 383 391
Exempt from federal income tax 134 156
Other interest income 2 97
9,467 8,265
Interest expense
Deposits 4,099 3,738
Trust preferred securities 336 336
Other borrowings 712 283
5,147 4,357
Net interest income 4,320 3,908
Provision for loan losses 100 150
Net interest income after provision for loan losses 4,220 3,758
Other operating income
Service charges on deposit accounts 595 489
Gain on sale of loans 5 95
Gain on sale of fixed assets, net 53 -
Net credit card processing income 5 (7)
Other non-interest income 88 323
746 900
Other operating expense
Salaries and employee benefits 2,232 2,184
Occupancy and equipment expense 999 815
Data processing 210 190
Other non-interest expense 991 845
4,432 4,034
Income before income taxes 534 624
3
Income tax expense 139 183
Net income $395 $441
Basic earnings per share $ 0.15 $ 0.15
Diluted earnings per share $ 0.15 $ 0.15
See accompanying notes to Unaudited Consolidated Financial Statements
4
Success Bancshares, Inc. and Subsidiaries
Consolidated Statements of Cash Flow
Three Months Ended March 31, 2000 and 1999
(Unaudited)
2000 1999
(In thousands)
Net cash provided by operating activities $295 $678
Cash flows from investing activities:
Proceeds from maturities of available-for-sale 342 2,192
securities
Purchases of available-for-sale securities (96) (1,982)
Proceeds from sale of premises and equipment 482 -
Net (increase) decrease in loans (22,923) 3,681
Premises and equipment expenditures (443) (733)
Net cash (used in) provided by investing (22,638) 3,158
activities
Cash flows from financing activities:
(Decrease) increase in non-interest bearing (3,923) 2,476
deposits
Increase (decrease) in interest bearing deposits 29,111 (21,967)
(Decrease) increase in demand notes payable to (1,799) 123
U.S. Government
(Decrease) increase in securities sold under (1,041) 749
agreements to repurchase
Net decrease in Federal Home Loan Bank advances (10,563) (61)
Increase in federal funds purchased 7,000 2,500
Purchase of common stock for treasury (1,123) -
Proceeds from issuance of treasury stock 56 -
Net cash provided by (used in) financing 17,718 (16,180)
activities
Decrease in cash and cash equivalents (4,625) (12,344)
Cash and cash equivalents at beginning of year 17,057 38,824
Cash and cash equivalents at end of period $12,432 $26,480
See accompanying notes to the Unaudited Consolidated Financial Statement
5
NOTE 1: Basis of Presentation
The financial information of Success Bancshares, Inc. and subsidiaries (the
Company) included herein is unaudited; however, such information reflects all
adjustments (consisting of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair statement of results for the
interim periods. The interim financial statements should be read in
conjunction with the Company's Annual Report and Form 10-K for the period
ending December 31, 1999. The results of the interim period ended March 31,
2000 are not necessarily indicative of the results expected for the year
ended December 31, 2000.
NOTE 2: Recent Accounting Developments
In June 1999, The Financial Accounting Standards Board issued SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133, which delays the effective
date for all fiscal quarters of all fiscal years to periods beginning after
June 15, 2000. Management does not believe that the adoption of SFAS No. 133
will have a material impact on the Company's consolidated financial condition
or results of operation.
NOTE 3: Earnings Per Share
Basic earnings per share are computed by dividing net income, after deducting
any dividends on preferred stock, by the weighted average number of common
shares outstanding. Diluted earnings per share assumes the exercise of any
dilutive instruments, including stock options.
The following table summarizes the computation of earnings per share for the
periods indicated:
For the Three Months Ended March 31,
2000 1999
Income Share Per- Income Share Per-
(Numer (Denom Share (Numer (Denom Share
ator) inator) Amount ator) inator) Amount
(In thousands, except per share amounts)
Net income $395 $441
Less: Preferred stock dividends - -
Basic EPS
Income available to common 395 2,686 $ 0.15 441 2,959 $ 0.15
stockholders
Effect of Dilutive Securities
Options - - - 67
Diluted EPS
Income available to common
stockholders
+ assumed conversions $395 2,686 $ 0.15 $441 3,026 $0.15
NOTE 4: Comprehensive Income
For the three month period ended March 31, 2000 accumulated other
comprehensive income decreased $107,000. For the comparable period in 1999,
accumulated other comprehensive income decreased $40,000.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
General
The Company's principal business is conducted by its wholly owned subsidiary,
Success National Bank (the Bank) and consists of full service community
banking. The Bank is headquartered in Lincolnshire, Illinois located
approximately 35 miles north of downtown Chicago, and, in addition to its
headquarters, has nine branch offices. These banking facilities are located
in Deerfield, Libertyville (2), Lincolnwood (2), Chicago/Lincoln Park,
Lincolnshire, Skokie and Northbrook.
The profitability of the Company's operations depends primarily on its net
interest income, provision for loan losses, other operating income, and other
operating expenses. Net interest income is the difference between the income
the Company receives on its loan and investment portfolios and its cost of
funds, which consists of interest paid on deposits and borrowings. The
provision for loan losses reflects the cost associated with the level of
credit risk in the Company's loan portfolio. Other operating income consists
of service charges on deposit accounts, securities gains, gains on sale of
loans, net credit card processing income and other fees and commissions.
Other operating expenses include salaries and employee benefits, occupancy
and equipment expenses, data processing and other non-interest expenses.
Net interest income is dependent on the amounts and yields of interest
earning assets as compared to the amounts of and rates on interest bearing
liabilities. Net interest income is sensitive to changes in market rates of
interest and the Company's asset/liability management procedures in coping
with such changes. The provision for loan losses is dependent on increases
in the loan portfolio, management's assessment of the collectibility of loans
in the portfolio, as well as economic and market factors. Other operating
expenses are heavily influenced by the growth of operations, with additional
employees necessary to staff and open new branch facilities and marketing
expenses necessary to promote such facilities. Growth in the number of
account relationships directly affects such expenses as data processing
costs, supplies, postage and other miscellaneous expenses.
Results of Operations
For the three months ended March 31, 2000, net income was $395,000 or $0.15
per share on a diluted basis, a decrease of 10.4% from the net income of
$441,000 or $0.15 per diluted share for the same period in 1999.
Net Interest Income
The major source of earnings for the Company is net interest income. The
related net interest margin represents the net interest income expressed as a
percentage of average interest earning assets during the period. The
following table sets forth information relating to the Company's consolidated
average balance sheets and reflects the average yield on assets and cost of
liabilities for the three month periods ended March 31, 2000 and 1999. The
8
yields and costs include adjustments for accretion and amortization of
deferred fees and costs.
Three Months Ended March 31,
2000 1999
Average Average Average Average
Assets Balance Interest Rate BalanceInterest Rate
(Dollars in thousands)
Loans (1) & (2) $438,421 $8,985 8.20% $372,463 $7,621 8.18%
Taxable investment 24,887 383 6.16% 27,351 391 5.72%
securities
Investment securities
exempt from federal
income tax(1) 11,138 203 7.29% 13,403 237 7.10%
Interest bearing
deposits with
financial institutions 106 2 7.55% 2,748 30 4.37%
Other interest earning - - 5,523 67 4.78%
assets
Total interest earning $474,552 $9,573 8.07% $421,488 $8,346 7.92%
assets
Non-interest earning 29,274 40,072
assets
Total assets $503,826 $461,560
9
Results of Operations (continued)
Net Interest Income (continued)
Three Months Ended March 31,
2000 1999
Average Average Average Average
Liabilities & Balance Interest Rate Balance Interest Rate
Shareholders' Equity
(Dollars in thousands)
Deposits:
NOW & money market $182,093 $1,954 4.29% $161,513 $1,775 4.40%
accounts
Savings deposits 22,266 105 1.89% 22,897 131 2.29%
Time deposits 142,735 2,040 5.72% 149,065 1,832 4.92%
Notes payable - - - -
Other borrowings 66,313 1,048 6.32% 37,908 619 6.53%
Total interest 413,407 5,147 4.98% 371,383 4,357 4.69%
bearing liabilities
Demand deposits - - 57,081 54,006
non-interest bearing
Other non-interest 3,016 3,346
bearing liabilities
Shareholders' equity 30,322 32,825
Total liabilities & $503,826 $461,560
shareholders' equity
Net Interest Income $4,426 $3,989
Net Yield on Interest 3.73% 3.79%
Earning Assets
(1) Tax-exempt income as reflected on a fully tax equivalent basis utilizing
a 34% rate for all years presented.
(2) Non-accrual loans are included in average loans.
The Company's annualized net interest margin for the three months ended March
31, 2000 was 3.73% as compared to 3.79% for the same period in 1999. The
decline in the Company's net interest margin for the three months ended March
31, 2000 compared with the same period in 1999, is primarily attributable to
the impact of the Company's negative short-term gap position in a rising rate
environment as experienced during the past two quarters. Management has
entered into a balance sheet restructuring program in order to reduce
interest rate sensitivity.
10
Results of Operations (continued)
The following table represents a reconciliation of fully tax equivalent net
interest income.
(In
thousands)
Fully tax equivalent net interest income for the three $3,989
months ended March 31, 1999
Change due to average interest earning asset fluctuations 612
Change due to interest rate fluctuations (175)
Fully tax equivalent net interest income for the three $4,426
months ended March 31, 2000
Other Operating Income
Other operating income was $746 thousand for the quarter ended March 31, 2000
as compared to $900 thousand for the comparable quarter in 1999. Service
charges on deposit accounts were $595 thousand, an increase of $106 thousand
or 21.7% over the comparable quarter in 1999. For the quarter, other
noninterest income was $88 thousand, a decrease of $235 thousand from the
$323 thousand recorded during the comparable period in 1999. During the
quarter ended March 31, 1999 the Company recognized nonrecurring income
including the receipt of a lawsuit settlement of $70 thousand and the
settlement of monthly billing claims and conversion related charges with its
service provider and the reduction of previously accrued expenses by $94
thousand.
Other Operating Expenses
Other operating expenses were $4.4 million for the three months ended March
31, 2000 compared with $4.0 million for the first quarter of 1999. Salaries
and benefits expense increased $48 thousand, or 2.2%, to $2.2 million for the
current quarter as compared to the same period in 1999. Occupancy expenses
increased $184 thousand, or 22.6%, to $1.0 million for the quarter ended
March 31, 2000 versus the comparable period in 1999. The increase in
occupancy expense is due, in part, to the recognition of rental and utility
charges associated with the Company's corporate center in the current
quarter. Management intends to offset the corporate center charges with an
elimination of the occupancy expenses related to the closed Chicago Loop
branch. The Company has not yet entered into an agreement to sublease the
closed Loop branch space.
11
Financial Condition
Loans
The loan portfolio is the largest category of the Company's interest earning
assets. At March 31, 2000 total loans were $451.8 million, an increase of
$22.9 million, or 5.3% from the $428.9 million at December 31, 1999. As the
table below indicates, the growth in the loan portfolio is primarily
attributed to the commercial and real estate mortgage categories which
increased $8.3 million and $7.3 million, respectively. Home equity loans
outstanding increased $4.8 million during the first three months of 2000.
The following table sets forth the composition of the loan portfolio:
March 31, 2000 December 31, 1999
Percent Percent
Amount of Amount of
Portfolio Portfolio
(Dollars in thousands)
Commercial $137,543 30.44% $129,233 30.13%
Real estate - construction 21,366 4.73% 19,422 4.53%
Real estate - mortgage 204,881 45.34% 197,587 46.06%
Home equity 79,733 17.65% 74,936 17.47%
Installment 7,968 1.76% 7,385 1.72%
Credit cards 368 0.08% 373 0.09%
Total gross loans 451,859 100.00% 428,936 100.00%
Net deferred loan fees 180 205
Unaccreted discount resulting from
loss on transfer of loans
from held-for-sale to portfolio (190) (204)
Loans net of unearned discount 451,849 428,937
and net deferred loan fees
Allowance for loan losses (4,358) (4,269)
Net loans $447,491 $424,668
Allowance to gross loans 0.96% 1.00%
12
Financial Condition (continued)
Non-Performing Assets
The following table presents a summary of book value of non-performing assets
which includes (a) non-performing loans and (b) other real estate owned.
Non-performing loans include: (1) loans accounted for on a non-accrual basis;
(2) accruing loans contractually past due 90 days or more as to interest or
principal payment; and (3) loans whose terms have been renegotiated to
provide a reduction or deferral of interest or principal because of a
deterioration in the financial position of the borrower. The Company has a
reporting and control system to monitor non-performing loans.
Loans with principal or interest payments contractually due but not yet paid
are reviewed by senior management on a weekly basis and are placed on non-
accrual status when scheduled payments remain unpaid for 90 days or more,
unless the loan is both well-secured and in the process of collection.
Interest income on non-accrual loans is recorded when actually received in
contrast to the accrual basis, which records income over the period in which
it is earned, regardless of when it is received.
March 31, December
2000 31, 1999
(Dollars in
thousands)
Non-performing loans:
Non-accrual $2,269 $1,486
90 days or more past due, still 1,530 222
accruing
Total non-performing loans 3,799 1,708
Other real estate owned 46 50
Total non-performing assets $3,845 $1,758
Non-performing loans to loans,
net of unearned discount and net 0.84% 0.40%
deferred loan fees
Non-performing loans to allowance for 87.17% 40.01%
loan losses
The increase in non-accrual loans of $783,000 from December 31, 1999 to March
31, 2000 resulted primarily from the classification of four additional loans.
Of the $2.3 million classified as non-accrual at March 31, 2000, the largest
loan has a balance of $1.1 million. Loans past due 90 days or more and still
accruing increased from $222,000 at December 31, 1999 to $1.5 million at
March 31, 2000 as a result of the classification of four additional loans.
13
Financial Condition (continued)
Potential Problem Loans
In addition to those loans disclosed under Non-performing Loans, there are
certain loans in the portfolio which management has identified through its
problem loan identification system which exhibit a higher than normal credit
risk. However, these loans do not represent non-performing loans to the
Company. Management's review of the total loan portfolio to identify loans
where there is concern that the borrower will not be able to continue to
satisfy present loan repayment terms includes factors such as review of
individual loans, recent loss experience and current economic conditions.
Loans in this category include those with characteristics such as those that
have recent adverse operating cash flow or balance sheet trends, or have
general risk characteristics that the loan officer believes might jeopardize
the future timely collection of principal and interest payments. The
principal amount of loans in this category as of March 31, 2000 and December
31, 1999 were approximately $1.2 million and $2.3 million, respectively. At
March 31, 2000, there were no significant loans which were classified by any
bank regulatory agency that are not included above as non-performing or as a
potential problem loan.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level considered adequate to
provide for potential future losses in the Company's loan portfolio. The
level of the allowance is based upon management's periodic and comprehensive
evaluation of the loan portfolio. Reports of Examination furnished by
Federal banking authorities are also considered by management in this regard.
The evaluations by management in assessing the adequacy of the allowance
include consideration of past loan loss experience, changes in the
composition of the loan portfolio, the volume and condition of loans
outstanding and current market and economic conditions.
Loans are charged to the allowance for loan losses when deemed uncollectible
by management, unless sufficient collateral exists to repay the loan.
The following table summarizes transactions in the allowance for loan losses
for the periods indicated:
Three Months
Ended
March 31,
2000 1999
(Dollars in
thousands)
Balance at beginning of period $4,269 $3,824
Provision for loan losses 100 150
Recoveries on loans previously charged-off 1 3
Loans charged-off (12) -
14
Balance at end of period 4,358 3,977
Allowance as a % of total loans, net of unearned 0.96 % 1.07 %
discount and net deferred loan fees/costs
Ratio of net charge-offs to average loans outstanding 0.01 % 0.00 %
(annualized)
Control of the Company's loan quality is continually monitored by management
and is reviewed by the Board of Directors and loan committee of the Bank on a
monthly basis, subject to oversight by the Company's Board of Directors
through its members who serve on the loan committee. Independent external
review of the loan portfolio is provided by the examinations conducted by
regulatory authorities and through the Company's independent public
accountants in conjunction with the Company's annual audit. Internal loan
review is primarily the responsibility of the Loan Review Department. The
Loan Review Department measures risk in the Company's loan portfolio through
(i) an in-depth credit review which emphasizes larger and newer commercial
and commercial real estate credits, (ii) a system of process reviews for all
retail portfolios, (iii) attendance at loan committee meetings and (iv) the
completion of monthly monitoring activities evaluating the classification of
delinquent and non-accrual loans. The amount of additions to the allowance
for possible loan losses, which is charged to earnings through the provision
for loan losses, is determined based on a variety of factors, including
actual charge-offs during the year, historical loss experience and delinquent
loans. Although management believes the allowance for possible loan losses
is adequate to cover any potential losses, there can be no assurance that the
allowance will prove sufficient to cover actual loan losses in the future.
Deposits
The following table sets forth deposits at the periods indicated:
March 31, Percent December 31, Percent
2000 of 1999 of
Deposits Deposits
(Dollars in thousands)
NOW and money market accounts $188,752 45.00 % $ 181,296 45.98 %
Savings 22,382 5.34 % 21,359 5.42 %
Time 151,696 36.16 % 131,064 33.24 %
Demand 56,648 13.50 % 60,571 15.36 %
Total $419,478 100.00 % $ 394,290 100.00 %
15
Liquidity and Capital Resources
Shareholders' Equity and Capital Standards
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could
have a direct material effect on the Company's growth and financial
condition. The regulations require the Company and the Bank to meet specific
capital adequacy guidelines that involve quantitative measures of assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting principles. The capital classifications are also
subject to qualitative judgments by the regulators about risk weightings and
other factors.
Quantitative measures established by Federal regulations to ensure capital
adequacy require the Company and the Bank to maintain minimum ratios (set
forth in the table below) of Tier I capital (as defined in the regulations)
to total average assets (as defined in the regulations). As of March 31,
2000, the Company's actual total capital to risk-weighted assets ratio was
12.49%. As of March 31, 2000, the ratio of the Bank's total capital to risk-
weighted assets was 10.68% indicating that the Bank is considered well
capitalized.
The required ratios and the Company's and Bank's actual ratios at March 31,
2000, are presented below:
To Be Well
Capitalized
For Capital Under Prompt
Corrective
Actual Adequacy Action Provisions
Purposes
Amount Ratio Amount Ratio Amount Ratio
s s s
(Dollars in thousands)
As of March 31, 2000
Total Capital (to Risk
Weighted Assets):
Consolidated $49,741 12.49% $31,852 8.0% Not Applicable
Bank 42,278 10.68% 31,666 8.0% $39,582 10.0%
Tier 1 Capital (to
Risk Weighted Assets):
Consolidated 40,415 10.15% 15,926 4.0% Not Applicable
Bank 37,848 9.56% 15,833 4.0% 23,749 6.0%
Tier 1 Capital (to
Average Assets):
Consolidated 40,415 7.95% 20,327 4.0% Not Applicable
Bank $37,848 7.47% $20,255 4.0% $25,319 5.0%
16
Operating, Investing and Financing Activities
Liquidity management at the Bank involves planning to meet anticipated
funding needs at a reasonable cost. Liquidity management is guided by
policies formulated and monitored by the Company's senior management and the
Bank's asset/liability committee, which take into account the marketability
of assets, the sources and stability of funding and the level of unfunded
commitments. The Bank's principal sources of funds are deposits, short-term
borrowings and capital contributions by the Company. Borrowings by the Bank
from the Federal Reserve Bank of Chicago and Federal Home Loan Bank of
Chicago provide additional available sources of liquidity.
The Bank's core deposits, the most stable source of liquidity for community
banks due to the nature of long-term relationships generally established with
depositors and the security of deposit insurance provided by the FDIC, are
available to provide long-term liquidity. At March 31, 2000 and December 31,
1999, 33.97% and 36.83%, respectively, of the Company's total assets were
funded by NOW accounts and demand deposits.
Liquid assets refer to money market assets such as cash and due from banks,
federal funds sold and interest bearing time deposits with financial
institutions, as well as securities available for sale and securities held-
to-maturity with a remaining maturity less than one year. Net liquid assets
represent the sum of the liquid asset categories less the amount of assets
pledged to secure public funds. As of March 31, 2000 and December 31, 1999,
net liquid assets totaled approximately $19.1 million and $22.7 million,
respectively.
Liquidity and Capital Resources (continued)
Operating, Investing and Financing Activities (continued)
The Company's cash flows are composed of three classifications: cash flows
from operating activities, cash flows from investing activities, and cash
flows from financing activities. Net cash provided by operating activities
consists primarily of earnings. Net cash used in investing activities,
consisting primarily of loan and investment funding, was $22.6 million at
March 31, 2000 as compared to cash provided of $3.2 million for the same
period in 1999. The increased usage is primarily attributed to an increase
in loan volume in 2000. Net cash provided by financing activities,
consisting primarily of deposit activities, was $17.7 million at March 31,
2000 as compared to cash used of $16.2 million at March 31, 1999. The
increase in cash provided is primarily the result of an increase in deposit
balances during the first quarter of 2000.
Year 2000 Issue
The year 2000 was the first century date change ever for an automated
society. For years, information systems were designed using a two-digit date
field. This practice has created an environment in which older generation
software programs may not be able to discern the difference between the year
2000 and the year 1900. This problem could result in the failure of
computers and/or information systems. Due to its reliance on both computers
and information systems, in early 1998, the Company began the process of
17
identifying and assessing the degree to which its hardware and software would
be impacted by the date change. As a result of the efforts described below,
the Company experienced no year 2000 related problems.
A committee, comprised of representatives from all major operating areas, was
created to assess whether or not the Company's internal and external systems,
particularly those that are mission-critical, are year 2000 compliant. The
committee developed and adopted an action plan that addressed the Company's
year 2000 renovation, testing, contingency planning and management review
process. In addition the Company developed a due diligence process to
monitor and evaluate the efforts of external third party suppliers to achieve
year 2000 readiness. The committee developed and implemented a written
testing plan for both internal and external mission-critical systems and
finalized substantially all testing of internal mission-critical systems by
December 31, 1998. A business resumption contingency plan that defines
scenarios for mission-critical systems failing to achieve year 2000 readiness
and evaluates the Company's options was completed by the committee during
1999.
The Company was committed to year 2000 compliance and, as such, undertook
steps to educate its customers in identifying potential year 2000 problems.
A year 2000 risk assessment of borrowers with loans in excess of $100
thousand was completed. The Company was satisfied that these borrowers
represented a low year 2000 risk.
It is estimated that the Company spent approximately $140 thousand in total
in preparation for year 2000 compliance.
Forward Looking Statements
Statements made about the Company's future economic performance, strategic
plans or objectives, revenues or earnings projections, or other financial
items and similar statements are not guarantees of future performance, but
are forward looking statements. By their nature, these statements are
subject to numerous uncertainties that could cause actual results to differ
materially from those in the statements. Important factors that might cause
the Company's actual results to differ materially include, but are not
limited to, the following:
. Federal and state legislative and regulatory developments;
. The impact of continued loan and deposit promotions on the Company's net
interest margin;
. The impact of opening, staffing and operating new branch facilities;
. The impact of the consolidation or closing of existing branch facilities;
. Changes in management's estimate of the adequacy of the allowance for loan
losses;
. Changes in the level and direction of loan delinquencies and write-offs;
. Interest rate movements and their impact on customer behavior and the
Company's net interest margin;
18
Forward Looking Statements (continued)
. The impact of interest rate sensitivity restructuring activities;
. The impact of repricing and competitors' pricing initiatives on loan and
deposit products;
. The Company's ability to adapt successfully to technological changes to
meet customers' needs and developments in the marketplace;
. The Company's ability to access cost effective funding; and
. Changes in financial markets and general economic conditions.
19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's net income is dependent on its net interest income. Net
interest income is susceptible to interest rate risk to the degree that
interest bearing liabilities mature or reprice on a different basis than
interest earning assets. When interest bearing liabilities mature or reprice
more quickly than interest earning assets in a given period, a significant
increase in market rates of interest could adversely affect net interest
income. Similarly, when interest earning assets mature or reprice more
quickly than interest bearing liabilities, falling interest rates could
result in a decrease in net income.
In order to evaluate its asset/liability sensitivity, management employs a
measurement tool which determines exposure to changes in interest rates by
measuring the percentage change in net interest income due to changes in
rates over a one-year time horizon. Management measures such percentage
change assuming an instantaneous permanent parallel shift in the yield curve
of 100 and 200 basis points, both upward and downward. The model uses an
option-based pricing approach to estimate the sensitivity of mortgage loans.
The most significant embedded option in these types of assets is the
prepayment option of the borrowers. The model uses various prepayment
assumptions depending upon the type of mortgage instrument (residential
mortgages, commercial mortgages, mortgage-backed securities, etc.).
Prepayment rates for mortgage instruments ranged form 5 to 48 CPR (Constant
Prepayment Rate) as of March 31, 2000 and December 31, 1999. For
administered rate core deposits (e.g. NOW and savings accounts), the model
utilizes interest rate floors equal to 100 basis points below their current
levels.
Utilizing this measurement concept, the interest rate risk of the Company,
expressed as a percentage change in net interest income over a one-year time
horizon due to changes in interest rates, at March 31, 2000 and December 31,
1999, was as follows:
Basis Point Change
+200 +100 -100 -200
At March 31, 2000 (7.9%) (3.9%) 4.0% 7.0%
At December 31, 1999 (8.8%) (4.4%) 4.6% 7.8%
The Company does not currently engage in trading activities or use derivative
instruments to control interest rate risk. Although such activities may be
permitted with the approval of the Board of Directors of the Bank, the
Company does not intend to engage in such activities in the immediate future.
Interest rate risk is the most significant market risk affecting the Company.
Other types of market risk, such as foreign currency exchange rate risk and
commodity price risk, do not arise in the normal course of the Company's
business activities.
20
PART II: OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
Exhibits
Exhibits
Number Exhibit Title
3.1 Second Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 of the Company's
Form S-1 Registration Statement (No. 333-32561) filed with
the Securities and Exchange Commission (the Commission)
on July 31, 1997).
3.1.1 Certificate of Designations of Series B Junior Participating
Preferred Stock.
3.2 By-laws of the Company (incorporated by reference to Exhibit
3.2 of the Company's Form S-1 Registration Statement (No.
333-32561) filed with the Commission on July 31, 1997).
3.2.1 Amendment No. 1 to By-laws
4.1 Form of Subordinated Indenture relating to the Junior
Subordinated Debentures (incorporated by reference to
Exhibit 4.1 of the Form S-1 Registration Statement of the
Company and Success Capital Trust I (Success Capital)
(No. 333-51271 and No. 333-51271-01) filed with the
Commission on April 28, 1998).
4.2 Form of Junior Subordinated Debenture Certificate (included
as an exhibit to Exhibit 4.1).
4.3 Certificate of Trust of Success Capital (incorporated by
reference to Exhibit 4.3 of the Form S-1 Registration
Statement of the Company and Success Capital (No. 333-51271
and 333-51271-01) filed with the Commission on April 28,
1998).
4.4 Form of Amended and Restated Trust Agreement of Success
Capital (incorporated by reference to Exhibit 4.4 of the
Form S-1 Registration Statement of the Company and Success
Capital (No. 333-51271 and 333-51271-01) filed with the
Commission on April 28, 1998).
4.5 Form of Trust Preferred Security Certificate of Success
Capital (included as an exhibit to Exhibit 4.4).
4.6 Form of Common Security Certificate of Success Capital
(included as an exhibit to Exhibit 4.4).
4.7 Form of Guarantee Agreement of the Company relating to the
Trust Preferred Securities (incorporated by reference to
Exhibit 4.7 of the Form S-1 Registration Statement of the
Company and Success Capital (No. 333-51271 and 333-51271-01)
filed with the Commission on April 28, 1998).
4.8 Form of Rights Agreement, dated as of August 1, 1998,
between the Company and Harris Trust and Savings Bank, which
includes as Exhibit B thereto the Form of Right Certificate
(incorporated by reference to Exhibit 1 of the Company's
Form 8-A Registration Statement (File No. 001-14381) filed
with the Commission on August 6, 1998).
(1) 10.1 Success Bancshares, Inc. 1995 Employee Stock Option Plan
(incorporated by reference to Exhibit 10.2 of the Company's
21
Form S-1 Registration Statement (No. 333-32561) filed with
the Commission on July 31, 1997).
(2) 10.2 Employment Agreement between the Bank and Laurie K.
Breitenstein dated as of April 15, 1999 (incorporated by
reference to Exhibit 10.3 of the Company's Form 10-Q filed
with the Commission on August 15, 1999).
10.3 Success Bancshares, Inc. 1999 Stock Option Plan
(incorporated by reference to Exhibit 10.4 of the Company's
Annual Report on Form 10-K filed with the Commission on
March 30, 1999).
10.4 Lease with respect to Lincolnwood branch banking facility
(October, 1991) (incorporated by reference to Exhibit 10.5
of the Company's Form S-1 Registration Statement (No. 333-
32561) filed with the Securities and Exchange Commission on
July 31, 1997).
10.5 Lease with respect to Lincoln Park branch banking facility
(April, 1993) (incorporated by reference to Exhibit 10.6 of
the Company's Form S-1 Registration Statement (No. 333-
32561) filed with the Commission on July 31, 1997).
10.6 Lease with respect to Northbrook branch banking facility
(December, 1994) (incorporated by reference to Exhibit 10.7
of the Company's Form S-1 Registration Statement (No. 333-
32561) filed with the Commission on July 31, 1997).
(1) 10.7 Employment Agreement between the Bank and Christa N.
Calabrese dated as of August 1, 1998, as amended
(incorporated by reference to Exhibit 10.9 of the Company's
Form 10-Q filed with the Commission on November 13, 1998).
(1) 10.8 Employment Agreement between the Bank and Kurt C. Felde
dated as of August 1, 1998, as amended (incorporated by
reference to Exhibit 10.10 of the Company's Form 10-Q filed
with the Commission on November 13, 1998).
(1) 10.9 Employment Agreement between the Bank and Ronald W. Tragasz
dated as of August 1, 1998, as amended (incorporated by
reference to Exhibit 10.11 of the Company's Form 10-Q filed
with the Commission on November 13, 1998).
(1)10.10 Employment Agreement between the Bank and Marlene Sachs
dated as of August 1, 1998 (incorporated by reference to
Exhibit 10.12 of the Company's Form 10-Q filed with the
Commission on November 13, 1998).
(1)10.11 Stock Option Agreement dated as of September 23, 1998
between the Company and Christa N. Calabrese (incorporated
by reference to Exhibit 10.13 of the Company's Form 10-Q
filed with the Commission on November 13, 1998).
(1)10.12 Stock Option Agreement dated as of June 25, 1998 between the
Company and Kurt C. Felde (incorporated by reference to
Exhibit 10.14 of the Company's Form 10-Q filed with the
Commission on November 13, 1998).
(1)10.13 Stock Option Agreement dated as of September 23, 1998
between the Company and Ronald W. Tragasz (incorporated by
reference to Exhibit 10.15 of the Company's Form 10-Q filed
with the Commission on November 13, 1998).
(1)10.14 Stock Option Agreement dated as of September 23, 1998
between the Company and Marlene Sachs (incorporated by
22
reference to Exhibit 10.16 of the Company's Form 10-Q filed
with the Commission on November 13, 1998).
(1)10.15 Stock Option Agreement dated as of August 26, 1998 between
the Company and Sherwin Koopmans (incorporated by reference
to Exhibit 10.17 of the Company's Form 10-Q filed with the
Commission on November 13, 1998).
(1)10.16 Stock Option Agreement dated as of August 26, 1998 between
the Company and George M. Ohlhausen (incorporated by
reference to Exhibit 10.18 of the Company's Form 10-Q filed
with the Commission on November 13, 1998).
(1)10.17 Stock Option Agreement dated as of August 26, 1998 between
the Company and Norman D. Rich (incorporated by reference to
Exhibit 10.20 of the Company's Form 10-Q filed with the
Commission on November 13, 1998).
(1)10.18 Amendment No. 1 to Employment Agreement dated as of August
1, 1998 between the Bank and Marlene Sachs (incorporated by
reference to Exhibit 10.21 of the Company's Annual Report on
Form 10-K filed with the Commission on March 30, 1999).
(1)10.19 Stock Option Agreement dated as of August 26, 1998 between
the Company and Avrom H. Goldfeder (incorporated by
reference to Exhibit 10.22 of the Company's Form 10-Q filed
with the Commission on November 13, 1998).
(1)10.20 Stock Option Agreement dated as of August 26, 1998 between
the Company and Glen Wherfel (incorporated by reference to
Exhibit 10.23 of the Company's Form 10-Q filed with the
Commission on November 13, 1998).
(1)10.21 Employment Agreement dated as of December 16, 1998 between
the Bank and Wilbur G. Meinen (incorporated by reference to
Exhibit 10.24 of the Company's Annual Report on Form 10-K
filed with the Commission on March 30, 1999).
(1)10.22 Stock Option Agreement dated as of December 16, 1998 between
the Company and Kurt C. Felde (incorporated by reference to
Exhibit 10.25 of the Company's Annual Report on Form 10-K
filed with the Commission on March 30, 1999).
(1)10.23 Stock Option Agreement dated as of December 16, 1998 between
the Company and Wilbur G. Meinen (incorporated by reference
to Exhibit 10.26 of the Company's Annual Report on Form 10-K
filed with the Commission on March 30, 1999).
(1)10.24 Stock Option Agreement dated as of January 27, 1999 between
the Company and Wilbur G. Meinen (incorporated by reference
to Exhibit 10.27 of the Company's Annual Report on Form 10-K
filed with the Commission on March 30, 1999).
(1)10.25 Success Bancshares, Inc. 1998 Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.28 of the Company's
Annual Report on Form 10-K filed with the Commission on
March 30, 1999).
(1)10.26 Amendment No. 1 to 1995 Stock Option Plan (incorporated by
reference to Exhibit 10.29 of the Company's Annual Report on
Form 10-K filed with the Commission on March 30, 1999).
(1)10.27 Restricted Stock Agreement dated as of December 16, 1998
between the Company and Wilbur G. Meinen (incorporated by
reference to Exhibit 10.30 of the Company's Annual Report on
23
Form 10-K filed with the Commission on March 30, 1999).
10.28 Lease with respect to Chicago downtown branch banking
facility (May, 1998) (incorporated by reference to Exhibit
10.31 of the Company's Annual Report on Form 10-K filed with
the Commission on March 30, 1999).
(1)10.29 Amendment No. 2 to Employment Agreement dated as of December
16, 1998 between the Bank and Christa N. Calabrese
(incorporated by reference to Exhibit 10.32 of the Company's
Form 10-Q filed with the Commission on May 13, 1999).
(1)10.30 Agreement dated April 28, 1999 between the Company and
Ronald W. Tragasz (incorporated by reference to Exhibit
10.33 of the Company's Form 10-Q filed with the Commission
on August 15, 1999).
(1)10.31 Stock Option Agreement dated April 28, 1999 between the
Company and Ronald W. Tragasz (incorporated by reference to
Exhibit 10.34 of the Company's Form 10-Q filed with the
Commission on August 15, 1999).
10.32 Sublease with respect to Corporate Center (April, 1999)
(incorporated by reference to Exhibit 10.35 of the Company's
Form 10-Q filed with the Commission on August 15, 1999).
(1)10.33 Stock Option Agreement dated August 25, 1999 between the
Company and Sherwin Koopmans (incorporated by reference to
Exhibit 10.36 of the Company's Form 10-Q filed with the
Commission on November 10, 1999).
(1)10.34 Stock Option Agreement dated August 25, 1999 between the
Company and Glen Wherfel (incorporated by reference to
Exhibit 10.37 of the Company's Form 10-Q filed with the
Commission on November 10, 1999).
(1)10.35 Stock Option Agreement dated August 25, 1999 between the
Company and George M. Ohlhausen (incorporated by reference
to Exhibit 10.38 of the Company's Form 10-Q filed with the
Commission on November 10, 1999).
(1)10.36 Stock Option Agreement dated August 25, 1999 between the
Company and Avrom Goldfeder (incorporated by reference to
Exhibit 10.39 of the Company's Form 10-Q filed with the
Commission on November 10, 1999).
(1)10.37 Stock Option Agreement dated August 25, 1999 between the
Company and Norman Rich (incorporated by reference to
Exhibit 10.41 of the Company's Form 10-Q filed with the
Commission on November 10, 1999).
(1)(2) Employment Agreement between the Bank and Craig J. Love
10.38 dated May 5, 1999.
(1)(2) Stock Option Agreement dated April 28, 1999 between the
10.39 Company and Craig J. Love.
(1)(2) Stock Option Agreement dated November 17, 1999 between the
10.40 Company and Craig J. Love.
(1)(2) Stock Option Agreement dated December 15, 1999 between the
10.41 Company and Joseph A. Cari, Jr..
(1)(2) Assignment dated December 15, 1999 of Stock Option Agreement
10.42 dated December 15, 1999 between the Company and Joseph A.
Cari, Jr. to the University of Notre Dame Law School.
(2) 27.1 Financial Date Schedule
24
(1) Management contract or compensatory plan or arrangement
(2) Filed herewith
(b) Reports on Form 8-K
None
25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Success Bancshares, Inc.
(Registrant)
May 8, 2000 /s/ Wilbur G. Meinen, Jr.
Date Wilbur G. Meinen, Jr.
Chairman, President & Chief
Executive Officer
May 8, 2000 /s/ Kurt C. Felde
Date Kurt C. Felde
Executive Vice President
Chief Financial Officer
26
EXHIBIT INDEX
3.1 Second Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 of the Company's
Form S-1 Registration Statement (No. 333-32561) filed with the
Securities and Exchange Commission (the Commission) on July
31, 1997).
3.1.1 Certificate of Designations of Series B Junior Participating
Preferred Stock.
3.2 By-laws of the Company (incorporated by reference to Exhibit
3.2 of the Company's Form S-1 Registration Statement (No. 333-
32561) filed with the Commission on July 31, 1997).
3.2.1 Amendment No. 1 to By-laws
4.1 Form of Subordinated Indenture relating to the Junior
Subordinated Debentures (incorporated by reference to Exhibit
4.1 of the Form S-1 Registration Statement of the Company and
Success Capital Trust I (Success Capital) (No. 333-51271
and No. 333-51271-01) filed with the Commission on April 28,
1998).
4.2 Form of Junior Subordinated Debenture Certificate (included as
an exhibit to Exhibit 4.1).
4.3 Certificate of Trust of Success Capital (incorporated by
reference to Exhibit 4.3 of the Form S-1 Registration
Statement of the Company and Success Capital (No. 333-51271
and 333-51271-01) filed with the Commission on April 28,
1998).
4.4 Form of Amended and Restated Trust Agreement of Success
Capital (incorporated by reference to Exhibit 4.4 of the Form
S-1 Registration Statement of the Company and Success Capital
(No. 333-51271 and 333-51271-01) filed with the Commission on
April 28, 1998).
4.5 Form of Trust Preferred Security Certificate of Success
Capital (included as an exhibit to Exhibit 4.4).
4.6 Form of Common Security Certificate of Success Capital
(included as an exhibit to Exhibit 4.4).
4.7 Form of Guarantee Agreement of the Company relating to the
Trust Preferred Securities (incorporated by reference to
Exhibit 4.7 of the Form S-1 Registration Statement of the
Company and Success Capital (No. 333-51271 and 333-51271-01)
filed with the Commission on April 28, 1998).
4.8 Form of Rights Agreement, dated as of August 1, 1998, between
the Company and Harris Trust and Savings Bank, which includes
as Exhibit B thereto the Form of Right Certificate
(incorporated by reference to Exhibit 1 of the Company's Form
8-A Registration Statement (File No. 001-14381) filed with
the Commission on August 6, 1998).
(1) Success Bancshares, Inc. 1995 Employee Stock Option Plan
10.1 (incorporated by reference to Exhibit 10.2 of the Company's
Form S-1 Registration Statement (No. 333-32561) filed with the
Commission on July 31, 1997).
(1) Employment Agreement between the Bank and Laurie K.
10.2 Breitenstein dated as of April 15, 1999 (incorporated by
reference to Exhibit 10.3 of the Company's Form 10-Q filed
with the Commission on August 15, 1999).
10.3 Success Bancshares, Inc. 1999 Stock Option Plan (incorporated
by reference to Exhibit 10.4 of the Company's Annual Report on
Form 10-K filed with the Commission on March 30, 1999).
10.4 Lease with respect to Lincolnwood branch banking facility
(October, 1991) (incorporated by reference to Exhibit 10.5 of
the Company's Form S-1 Registration Statement (No. 333-32561)
filed with the Securities and Exchange Commission on July 31,
1997).
10.5 Lease with respect to Lincoln Park branch banking facility
(April, 1993) (incorporated by reference to Exhibit 10.6 of
the Company's Form S-1 Registration Statement (No. 333-32561)
filed with the Commission on July 31, 1997).
10.6 Lease with respect to Northbrook branch banking facility
(December, 1994) (incorporated by reference to Exhibit 10.7 of
the Company's Form S-1 Registration Statement (No. 333-32561)
filed with the Commission on July 31, 1997).
(1) Employment Agreement between the Bank and Christa N. Calabrese
10.7 dated as of August 1, 1998, as amended (incorporated by
reference to Exhibit 10.9 of the Company's Form 10-Q filed
with the Commission on November 13, 1998).
(1) Employment Agreement between the Bank and Kurt C. Felde dated
10.8 as of August 1, 1998, as amended (incorporated by reference to
Exhibit 10.10 of the Company's Form 10-Q filed with the
Commission on November 13, 1998).
(1) Employment Agreement between the Bank and Ronald W. Tragasz
10.9 dated as of August 1, 1998, as amended (incorporated by
reference to Exhibit 10.11 of the Company's Form 10-Q filed
with the Commission on November 13, 1998).
(1) Employment Agreement between the Bank and Marlene Sachs dated
10.10 as of August 1, 1998 (incorporated by reference to Exhibit
10.12 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
(1) Stock Option Agreement dated as of September 23, 1998 between
10.11 the Company and Christa N. Calabrese (incorporated by
reference to Exhibit 10.13 of the Company's Form 10-Q filed
with the Commission on November 13, 1998).
(1) Stock Option Agreement dated as of June 25, 1998 between the
10.12 Company and Kurt C. Felde (incorporated by reference to
Exhibit 10.14 of the Company's Form 10-Q filed with the
Commission on November 13, 1998).
(1) Stock Option Agreement dated as of September 23, 1998 between
10.13 the Company and Ronald W. Tragasz (incorporated by reference
to Exhibit 10.15 of the Company's Form 10-Q filed with the
Commission on November 13, 1998).
(1) Stock Option Agreement dated as of September 23, 1998 between
10.14 the Company and Marlene Sachs (incorporated by reference to
Exhibit 10.16 of the Company's Form 10-Q filed with the
Commission on November 13, 1998).
(1) Stock Option Agreement dated as of August 26, 1998 between the
10.15 Company and Sherwin Koopmans (incorporated by reference to
Exhibit 10.17 of the Company's Form 10-Q filed with the
Commission on November 13, 1998).
(1) Stock Option Agreement dated as of August 26, 1998 between the
10.16 Company and George M. Ohlhausen (incorporated by reference to
Exhibit 10.18 of the Company's Form 10-Q filed with the
Commission on November 13, 1998).
(1) Stock Option Agreement dated as of August 26, 1998 between the
10.17 Company and Norman D. Rich (incorporated by reference to
Exhibit 10.20 of the Company's Form 10-Q filed with the
Commission on November 13, 1998).
(1) Amendment No. 1 to Employment Agreement dated as of August 1,
10.18 1998 between the Bank and Marlene Sachs (incorporated by
reference to Exhibit 10.21 of the Company's Annual Report on
Form 10-K filed with the Commission on March 30, 1999).
(1) Stock Option Agreement dated as of August 26, 1998 between the
10.19 Company and Avrom H. Goldfeder (incorporated by reference to
Exhibit 10.22 of the Company's Form 10-Q filed with the
Commission on November 13, 1998).
(1) Stock Option Agreement dated as of August 26, 1998 between the
10.20 Company and Glen Wherfel (incorporated by reference to Exhibit
10.23 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
(1) Employment Agreement dated as of December 16, 1998 between the
10.21 Bank and Wilbur G. Meinen (incorporated by reference to
Exhibit 10.24 of the Company's Annual Report on Form 10-K
filed with the Commission on March 30, 1999).
(1) Stock Option Agreement dated as of December 16, 1998 between
10.22 the Company and Kurt C. Felde (incorporated by reference to
Exhibit 10.25 of the Company's Annual Report on Form 10-K
filed with the Commission on March 30, 1999).
(1) Stock Option Agreement dated as of December 16, 1998 between
10.23 the Company and Wilbur G. Meinen (incorporated by reference to
Exhibit 10.26 of the Company's Annual Report on Form 10-K
filed with the Commission on March 30, 1999).
(1) Stock Option Agreement dated as of January 27, 1999 between
10.24 the Company and Wilbur G. Meinen (incorporated by reference to
Exhibit 10.27 of the Company's Annual Report on Form 10-K
filed with the Commission on March 30, 1999).
(1) Success Bancshares, Inc. 1998 Employee Stock Purchase Plan
10.25 (incorporated by reference to Exhibit 10.28 of the Company's
Annual Report on Form 10-K filed with the Commission on March
30, 1999).
(1) Amendment No. 1 to 1995 Stock Option Plan (incorporated by
10.26 reference to Exhibit 10.29 of the Company's Annual Report on
Form 10-K filed with the Commission on March 30, 1999).
(1) Restricted Stock Agreement dated as of December 16, 1998
10.27 between the Company and Wilbur G. Meinen (incorporated by
reference to Exhibit 10.30 of the Company's Annual Report on
Form 10-K filed with the Commission on March 30, 1999).
10.28 Lease with respect to Chicago downtown branch banking facility
(May, 1998) (incorporated by reference to Exhibit 10.31 of the
Company's Annual Report on Form 10-K filed with the Commission
on March 30, 1999).
(1) Amendment No. 2 to Employment Agreement dated as of December
10.29 16, 1998 between the Bank and Christa N. Calabrese
(incorporated by reference to Exhibit 10.32 of the Company's
Form 10-Q filed with the Commission on May 13, 1999).
(1) Agreement dated April 28, 1999 between the Company and Ronald
10.30 W. Tragasz (incorporated by reference to Exhibit 10.33 of the
Company's Form 10-Q filed with the Commission on August 15,
1999).
(1) Stock Option Agreement dated April 28, 1999 between the
10.31 Company and Ronald W. Tragasz (incorporated by reference to
Exhibit 10.34 of the Company's Form 10-Q filed with the
Commission on August 15, 1999).
10.32 Sublease with respect to Corporate Center (April, 1999)
(incorporated by reference to Exhibit 10.35 of the Company's
Form 10-Q filed with the Commission on August 15, 1999).
(1) Stock Option Agreement dated August 25, 1999 between the
10.33 Company and Sherwin Koopmans (incorporated by reference to
Exhibit 10.36 of the Company's Form 10-Q filed with the
Commission on November 10, 1999).
(1) Stock Option Agreement dated August 25, 1999 between the
10.34 Company and Glen Wherfel (incorporated by reference to Exhibit
10.37 of the Company's Form 10-Q filed with the Commission on
November 10, 1999).
(1) Stock Option Agreement dated August 25, 1999 between the
10.35 Company and George M. Ohlhausen (incorporated by reference to
Exhibit 10.38 of the Company's Form 10-Q filed with the
Commission on November 10, 1999).
(1) Stock Option Agreement dated August 25, 1999 between the
10.36 Company and Avrom Goldfeder (incorporated by reference to
Exhibit 10.39 of the Company's Form 10-Q filed with the
Commission on November 10, 1999).
(1) Stock Option Agreement dated August 25, 1999 between the
10.37 Company and Norman Rich (incorporated by reference to Exhibit
10.41 of the Company's Form 10-Q filed with the Commission on
November 10, 1999).
(1)(2) Employment Agreement between the Bank and Craig J. Love dated
10.38 May 5, 1999.
(1)(2) Stock Option Agreement dated April 28, 1999 between the
10.39 Company and Craig J. Love.
(1)(2) Stock Option Agreement dated November 17, 1999 between the
10.40 Company and Craig J. Love.
(1)(2) Stock Option Agreement dated December 15, 1999 between the
10.41 Company and Joseph A. Cari, Jr..
(1)(2) Assignment dated December 15, 1999 of Stock Option Agreement
10.42 dated December 15, 1999 between the Company and Joseph A.
Cari, Jr. to the University of Notre Dame Law School.
(2) Financial Date Schedule
27.1
(1) Management contract or compensatory plan or arrangement
(2) Filed herewith
Exhibit 27 - Financial Data Schedule
Legend This schedule contains summary financial information
extracted from the quarterly unaudited financial
statements of Success Bancshares, Inc. for the three
months ended March 31, 2000, and is qualified in its
entirety by reference to such financial statements.
Name Success Bancshares, Inc.
Multiplier 1,000
Period Type 3 months
Fiscal Year End Dec-31-
2000
Period Start Jan-01-
2000
Period End Mar-31-
2000
Cash 12,432
Int. Bearing -
Deposits
Fed Funds Sold -
Trading Assets -
Investments 35,914
Held-for-Sale
Investments -
Carrying
Investments -
Market
Loans 451,849
Allowance 4,358
Total Assets 515,434
Deposits 419,478
Short Term 23,477
Liabilities - 3,218
Other
Long Term 24,183
Preferred 15,000
Mandatory
Preferred -
Common 25,365
Other - SE 4,713
Total 515,434
Liabilities and
Equity
Interest - Loan 8,948
Interest - 517
Invest
Interest - 2
Other
Interest - 9,467
Total
Interest - 4,099
Deposit
Interest - 5,147
Expense
Interest - 4,320
Income - Net
Loan - Losses 100
Securities - -
Gains
Expense - Other 4,432
Income - Pretax 534
Income - Pre- 534
Extraordinary
Extraordinary -
Changes -
Net - Income 395
EPS - Basic 0.15
EPS - Diluted 0.15
Yield - Actual 3.73%
Loans - Non 2,269
Loans - Past 1,530
Loans - -
Troubled
Loans - Problem 1,200
Allowance - 4,269
Open
Charge-Offs 12
Recoveries 1
Allowance - 4,358
Close
Allowance - 4,358
Domestic
Allowance - -
Foreign
Allowance - 780
Unallocated
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into as
of May __, 1999, by and between Success National Bank, a national banking
organization ("Employer"), and Craig Love ("Employee").
WHEREAS, Employer and Employee desire to enter into an employment
agreement governed by the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the provisions and undertakings set
forth herein, the parties, intending to be legally bound, hereby agree as
follows:
1. EMPLOYMENT.
1.1 Employment. Employer hereby retains and employs, and Employee
accepts such retention and employment, to provide services hereunder as Senior
Vice President-Chief Credit Officer. Employee shall be accountable to
Employer through its Chief Executive Officer and Board of Directors.
1.2 Duties and Obligations. As Senior Vice President-Chief Credit
Officer, Employee shall perform all executive and managerial duties incumbent
upon such position. Employee will devote his full time and attention and give
his best efforts to the performance of such executive and managerial duties.
It is intended that Employee may have other business investments or
directorships and engage in civic, charitable and other such activities so
long as such activities do not interfere with his duties hereunder. Employer
shall not relocate Employee to a location more than 40 miles from the
Employer's Lincolnshire location.
1.3 Proprietary Property. Employee acknowledges that in the course of
his employment with Employer, Employer will provide Employee with, or access
to, customer lists, memoranda, files, records, trade secrets and such other
proprietary information and property (collectively, the "Proprietary
Property") as is necessary or desirable to assist Employee in his duties.
Employee acknowledges that the Proprietary Property is the sole and exclusive
property of Employer and is not available to the public at large. Employee
agrees that he shall not, while in the employ of Employer or thereafter,
communicate or divulge to, or use for the benefit of himself or any other
person, firm or corporation, without the prior written consent of Employer,
any information relating to the Proprietary Property. Upon termination of
Employee's employment with Employer, Employee shall thereupon return all
Proprietary Property in his possession or control to Employer.
2. FINANCIAL ARRANGEMENTS.
2.1 Compensation. As Employee's compensation for services provided
hereunder, Employer shall do the following:
(a) Salary. Employer shall pay Employee, pursuant to Employer's payroll
schedule, an annual salary in the amount of $120,000 during the term of this
Agreement, subject to annual review and increase, but not decrease, by the
Board of Directors of Employer.
(b) Bonus. Employer, based upon the sole determination of Employer's
Board of Directors, may grant a bonus to Employee in any year in which it
determines that Employer's performance justifies such a bonus. Employee shall
participate in an executive officer bonus plan adopted by Employer.
(c) Expenses. Employee shall be reimbursed on a monthly basis for all
reasonable business expenses incurred by him in the performance of his duties
hereunder, to the extent such expenses are substantiated and are consistent
with the general policies of Employer relative to expense reimbursement.
(d) Benefits. In addition to any compensation provided under this
Agreement, Employee shall be entitled to participate in and receive benefits
under any and all pension, profit sharing and other employee benefit plans,
insurance programs and other benefit programs which are, from time to time,
maintained by Employer for its senior executive officers, in accordance with
the provisions of such plans or programs as from time to time in effect.
(e) Incentive Stock Option. Employer shall grant to Employee an
incentive stock option to purchase five thousand (5,000) shares of Employee's
Common Stock on the usual terms and conditions provided with respect to grants
pursuant to Employees Stock Option Plan. The price per share for such option
shall be at the closing price on the date of Employee's next meeting of its
Board of Directors.
(f) Vacations. Employee shall be entitled to four (4) weeks paid
vacation.
3. TERM AND TERMINATION.
3.1 Term. This Agreement shall be effective for a period of three (3)
years from the date hereof.
3.2 Termination. This Agreement may also be terminated on the first to
occur of any of the following events:
(a) Agreement. Written agreement by both parties to terminate this
Agreement.
(b) Negligence; Misconduct. (i) substantial neglect of his duties
hereunder by Employee, (ii) gross misconduct or (iii) any intentional act by
Employee constituting fraud, misappropriation, embezzlement, dishonesty or
similar act which is injurious to Employer. Prior to termination of this
Agreement under Section 3.2(b)(i) and 3.2(b)(ii) only, Employer shall be
required to provide written notice to Employee of the act or omission
complained of, giving reasonably specific details in describing necessary
corrective action, and Employee shall be given a period of twenty (20) days in
which to cure or correct such act or omission. If such act or omission is
cured or corrected, the right of Employer to terminate this Agreement under
Sections 3.2(b)(i) and 3.2(b)(ii) shall be extinguished.
(c) Breach. Excluding actions or events which may cause termination of
this Agreement as provided in Section 3.2(b), in the event of the breach of
any of the terms and conditions of this Agreement by either party and the
failure of the breaching party to correct such breach within ten (10) business
days after receipt of written notice of such breach by the breaching party,
such other party may terminate this Agreement immediately upon written notice
of such termination to the breaching party.
(d) Death or Disability. In the event Employee dies or becomes
disabled, to the extent that he is physically or materially incapacitated for
more than six (6) months in the aggregate over a period of twenty-four (24)
months so that Employee is unable to perform his essential duties and
functions hereunder, this Agreement may be terminated by Employer upon written
notice to Employee.
3.3 Effects of Termination. In the event of termination of this
Agreement pursuant to Sections 3.1, 3.2(a), 3.2(b) or 3.2(d) hereof or
termination by Employer pursuant to Section 3.2(c) hereof, Employer shall have
no continuing obligation to Employee hereunder. In the event of termination
by Employee pursuant to Section 3.2(c) hereof or termination by Employer for
any reason not set forth in Section 3.1 or 3.2 hereof, Employer shall continue
to pay Employee salary, bonus, if any is due, and benefits for the duration of
the term.
4. CHANGE OF CONTROL, SALE.
4.1 Payment Upon Termination. Upon a Change of Control or an
Announcement (as each is defined herein) of Employer or Bancshares, Employer
shall pay Employee the sum of one times Employee's base salary in one lump sum
payment or, if such payment is not permissible as a matter of law, then such
other maximum payment, not to exceed one times Employee's base salary, as is
lawful; provided, however, that such payment shall only be made if Employee is
an employee of the Employer immediately prior to the public announcement of a
definitive event which will cause such Change of Control ("Announcement") and
either: (a) within three hundred sixty (360) days following such Announcement,
Employee is terminated by Employer as an employee of the Employer for any
reason; or (b) within one hundred eighty (180) days following such Change of
Control, Employee terminates his employment with the Employer as a result of
his reasonable determination that he is not comfortable continuing to work for
Employer.
4.2 Change of Control Defined. For purposes of this Agreement, a
"Change of Control" shall be deemed to have occurred upon any of the following
events:
(a) The consummation of any of the following transactions: (i) a
merger, recapitalization or other business combination of Employer or
Bancshares with or into another corporation pursuant to which Employer or
Bancshares, respectively, is not the continuing or surviving corporation or
pursuant to which shares of the Common Stock of Employer or Bancshares, as the
case may be, are converted into cash, securities of another corporation or
other entity or other property, other than a transaction in which the holders
of the Common Stock immediately prior to such transaction (including any
preliminary or other transaction relating to such transaction) will continue
to own at least fifty (50%) percent of the total voting power of the then-
outstanding securities of the surviving or continuing corporation immediately
after such transaction or (ii) any sale, lease, exchange or other transfer (in
one transaction or a series of related transactions) of all, or substantially
all, of the assets of Employer or Bancshares.
(b) A transaction in which any person (including any "person" as defined
in Section 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), corporation or other entity (other than
Employer or Bancshares, an affiliate thereof or any profit-sharing, employee
ownership or other employee benefit or similar plan sponsored by Employer or
Bancshares or any subsidiaries thereof, or any trustee of or fiduciary with
respect to any such plan when acting in such capacity, or any group comprised
solely of such entities): shall become, through purchase or otherwise, the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange
Act), directly or indirectly (in one transaction or a series of related
transactions), of securities of Employer or Bancshares, as the case may be,
representing fifty (50%) percent or more of the total voting power of the
then-outstanding securities of Employer or Bancshares, respectively,
ordinarily (and apart from the rights accruing under special circumstances)
having the right to vote in the election of the directors of Employer or
Bancshares, respectively.
(c) If, during any period of two (2) consecutive years, individuals who
at the beginning of such period constituted the entire Board and any new
director whose election by the Board or nomination for election by the
stockholders of Employer or Bancshares, as the case may be, was approved by a
vote of eighty (80%) percent of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election by the stockholders was previously so approved, cease for any
reason to constitute a majority thereof.
4.3 Survival. The provisions of this Section 4 shall survive the
expiration of this Agreement until such time as Employee shall no longer be an
employee of the Employer.
5. PAYMENT BY HOLDING COMPANY
In view of Employee's contribution to Bancshares, any compensation or
benefit provided for herein to Employee may, upon the approval of both the
Boards of Directors of Employer and Bancshares, be paid by Bancshares.
6. NON-SOLICITATION/NON-COMPETITION
6.1 Non-Solicitation. Employee shall not, during the term of Employee's
employment with Employer and for a period of six (6) months after the
termination or expiration thereof, directly or indirectly, hire, offer to hire,
divert, entice away, solicit or in any other manner persuade or attempt to
persuade ("Solicitation") any person who is, or was, at any time within the
twelve (12) months prior to such Solicitation, an officer, director, employee,
agent, lessor, lessee, licensor, licensee, customer, prospective customer,
supplier or shareholder or prospective shareholder of Employer or Bancshares to
discontinue, cease or alter his, her or its relationship with Employer or
Bancshares.
6.2 Non-Competition. Employee shall not, during the term of Employee's
employment with Employer and for a period of six (6) months after the
termination or expiration thereof, except in the event that (a) such
termination occurs upon a Change of Control and otherwise as set forth in
Section 4.1 of this Agreement or (b) Employee is terminated by Employer as an
employee of the Employer for any reason other than one described in Sections
3.2(a), 3.2(b)(i), (ii) or (iii) or 3.2(c), directly or indirectly, within
five (5) miles of the three (3) largest then-existing offices of Employer: (i)
engage in any business or activity that competes with the business of Employer
or Bancshares; (ii) enter the employ of any person engaged in any business or
activity that competes with the business of Employer or Bancshares or render
any services to any person for use in competing with the business of Employer
or Bancshares; or (iii) have an interest in any person engaged in any business
or activity that competes with the business of Employer or Bancshares, directly
or indirectly, in any capacity, including, without limitation, as an
individual, partner, shareholder, officer, director, principal, agent,
employee, trustee, creditor or consultant or any other relationship or
capacity.
6.3 Remedies Upon Breach. Employee acknowledges and agrees that (a)
Employer shall be irreparably injured in the event of a breach by Employee of
any of Employee's obligations under this Section 6.3; (b) monetary damages
shall not be an adequate remedy for any such breach; (c) Employer shall be
entitled to injunctive relief, in addition to any other remedy which it may
have, in the event of any such breach; and (d) the existence of any claims
which Employee may have against Employer, whether under this Agreement or
otherwise, shall not be a defense to the enforcement by Employer of any of its
rights under this Section 6.3.
6.4 Enforcement. The covenants and obligations of Employee contained in
this Section 6 shall be in addition to, and not in lieu of, any covenants and
obligations which Employee may have with respect to the subject matter hereof,
whether by contract, as a matter of law or otherwise, and such covenants and
obligations, and their enforceability, shall survive the termination of this
Agreement.
6.5 Survival. The provisions of this Section 6 shall survive until the
later of (a) six (6) months following the expiration of this Agreement and (b)
six (6) months following the termination of Employee's employment with
Employer.
7. MISCELLANEOUS
7.1 Assignment. This Agreement and all rights and benefits hereunder
are personal to Employee and to Employer. Accordingly, no rights, interests
or benefits hereunder shall be sold, transferred or assigned without the prior
written consent of the other party.
7.2 Employment Status of Employee. It is expressly acknowledged that
Employee, in the performance of his services hereunder, is an employee of
Employer. Accordingly, Employer shall deduct from the compensation paid to
Employee any sums for income tax, social security or any other withholding
taxes as are required by law.
7.3 Changes or Modifications. No change or modification of this
Agreement shall be valid unless the same shall be in writing signed by
Employer and Employee. No waiver of any provision hereof shall be valid
unless in writing and signed by the party against whom charged.
7.4 Entire Agreement. This Agreement constitutes the entire Agreement
between the parties with respect to the matters set forth herein. This
Agreement supersedes any and all other agreements between the parties with
respect to the subject matter.
7.5 Notices. Notice required herein shall be effective when delivered
in person or sent by United States Certified Mail, postage prepaid and
addressed to:
Employer: Board of Directors
Success National Bank
One Marriott Drive
Lincolnshire, Illinois 60069-3703
Employee: Craig Love
1934 Charter Point Drive
Arlington Heights, Illinois 60004-7252
7.6 Governing Law. This Agreement shall be interpreted, construed and
enforced in accordance with the internal laws of Illinois.
7.7 Separability. The inability or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
7.8 Waiver of Breach. The waiver by either party of a breach or
violation of any provision hereof shall not operate as a waiver of any
subsequent breach of the same or any other provision hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the last date written below.
EMPLOYER
SUCCESS NATIONAL BANK
By: /s/ Wilbur G. Meinen
---------------------------
Name: Wilbur G. Meinen
Title: President and CEO
EMPLOYEE:
/s/ Craig Love
------------------------------
Name: Craig Love
SUCCESS BANCSHARES, INC.
STOCK OPTION AGREEMENT
(NON-TRANSFERABLE)
Success Bancshares, Inc., a Delaware corporation (the "Company"), hereby
grants to Craig Love (the "Optionee") an option to purchase a total of 5,000
shares of Common Stock (the "Shares") of the Company, at the price set forth
herein, and in all respects subject to the terms and provisions of the
Company's 1995 Stock Option Plan (the "Plan") applicable to stock options
which terms and provisions are hereby incorporated by reference herein. Unless
otherwise defined or the context herein otherwise requires, the capitalized
terms used herein shall have the same meanings ascribed to them in the Plan.
1 NATURE OF THE OPTION. This Option is intended to be an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
2. DATE OF GRANT; TERM OF OPTION. This Option is granted as of April 28,
1999, and it may not be exercised later than April 28, 2009.
3. OPTION EXERCISE PRICE. The Option exercise price is $10.125 per Share,
which price is not less than the fair market value thereof on the date this
Option was granted.
4. EXERCISE OF OPTION. This Option shall be exercisable during its term only
in accordance with the terms and provisions of the Plan and this Option as
follows:
(a) RIGHT TO EXERCISE. The total number of Shares subject to this Option
is 5,000. Subject to the foregoing and the limitations contained herein and
in the Plan, this Option shall vest and be exercisable, cumulatively, as
follows:
Number of Shares Exercisable First Date Option is Exercisable
---------------------------- --------------------------------
1,250 April 28, 2000
1,250 April 28, 2001
1,250 April 28, 2002
1,250 April 28, 2003
provided, however, that, upon any Change of Control (as defined in the Plan),
this Option shall become immediately exercisable as to all Shares remaining
subject to this Option and all restrictions on vesting shall terminate.
(b) METHOD OF EXERCISE. This Option shall be exercisable by written
notice which shall state the election to exercise this Option, the number of
Shares in respect to which this Option is being exercised, and such other
representations and agreements as to the Optionee's investment intent with
respect to such Shares as may be required by the Company hereunder or pursuant
to the provisions of the Plan. Such written notice shall be signed by the
Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company or such other person as may be designated by the
Company. The written notice shall be accompanied by payment of the exercise
price. The exercise price may be paid: (i) in cash; (ii) by check; (iii) by
delivering certificates of other shares of Common Stock of the Company; (iv)
by transferring shares of Common Stock of the Company to the Company's
transfer agent for delivery to the Company provided that the written notice of
exercise is accompanied by a written acknowledgment by the Optionee that the
Optionee has instructed his broker dealer to transfer such shares and such
transfer is confirmed by a letter from such broker dealer acknowledging that
the Optionee has directed such broker dealer to transfer such shares; (v) by
Optionee simultaneously exercising this Option and selling the Shares thereby
acquired pursuant to a brokerage or similar arrangement approved in advance by
the Board (which approval shall not be unreasonably withheld) and to use the
proceeds from such sale to pay the exercise price and any federal, state and
local taxes required to be withheld as a result of such exercise; or (vi) by
any other method of payment approved by the Company's Board of Directors. For
purposes of clauses (iii) and (iv), the value of the shares of Common Stock of
the Company delivered, or to be delivered, as payment of the exercise price
shall be the closing price per share of the Company's Common Stock on the last
business day prior to the date the written notice is actually received and
acknowledged as received by the Company. Upon receipt of payment, the Company
shall deliver to Optionee or the person exercising this Option for Optionee,
an appropriate certificate or certificates for fully paid nonassessable
Shares. For purposes of clause (iv), should any Optionee fail to have the
number of shares required to pay the exercise price delivered to the Company's
transfer agent within 90 days, this Option, with respect to the number of
shares stated in the written notice, will terminate and be deemed to be
forfeited by the Optionee. The certificate or certificates for the Shares as
to which the Option shall be exercised shall be registered in the name of the
Optionee and shall be legended as set forth in the Plan and/or as required
under applicable law. This Option may not be exercised for a fraction of a
share.
(c) RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of the Shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other laws or regulations. As a
condition to the exercise of this Option, the Company may require the Optionee
to make such representations and warranties to the Company as may be required
by any applicable law or regulation.
(d) NO SHAREHOLDER RIGHTS BEFORE EXERCISE AND ISSUANCE. No rights as a
shareholder shall exist with respect to the Shares subject to the Option as a
result of the grant of the Option. Such rights shall exist only after issuance
of a stock certificate in accordance with Article V, Section J of the Plan
following the exercise of the Option as provided in this Agreement and the
Plan.
(e) TERMINATION OF EMPLOYMENT. In the event that the Optionee ceases to
be an employee of the Company or an Affiliate, the exercisability of the
Option is subject to the provisions of Article V, Section G of the Plan.
5. INVESTMENT REPRESENTATIONS. In connection with the acquisition of this
Option, the Optionee represents and warrants as follows:
(a) The Optionee is acquiring this Option, and upon exercise of this
Option, he will be acquiring the Shares, for investment for his own account,
not as a nominee or agent, and not with a view to, or for resale in connection
with, any distribution thereof.
(b) The Optionee has a preexisting business or personal relationship
with the Company or one of its directors, officers or controlling persons and
by reason of his business or financial experience, has, and could be
reasonably assumed to have, the capacity to evaluate the merits and risks of
purchasing Common Stock of the Company and to make an informed investment
decision with respect thereto and to protect Optionee's interests in
connection with the acquisition of this Option and the Shares.
6. WITHHOLDING. The Company reserves the right to withhold, in accordance
with any applicable laws, from any compensation or other consideration payable
to the Optionee, any taxes required to be withheld by federal, state or local
law as a result of the grant or exercise of this Option or the sale or other
disposition of the Shares issued upon exercise of this Option; and, if such
compensation or consideration is insufficient, the Company may require
Optionee to pay to the Company an amount sufficient to cover such withholding
tax liability.
7. NONTRANSFERABILITY OF OPTION. This Option may not be transferred,
assigned, pledged or hypothecated or otherwise disposed of in any way (whether
by operation of law or otherwise) and is not subject to execution, attachment
or similar process. Any attempted transfer, assignment, pledge, hypothecation
or other disposition of this Option or of any rights granted hereunder, or the
levy of any attachment or similar process upon this Option or such rights,
will be null and void. This Option may be exercised during the lifetime of
the Optionee only by such Optionee or his legal guardian. Subject to the
foregoing and the terms of the Plan, the terms of this Option shall be binding
upon the executors, administrators, heirs, successors and permitted assigns of
the Optionee.
8. CONTINUATION OF EMPLOYMENT. Neither the Plan nor this Option shall (a)
confer upon the Optionee any right whatsoever to continue in the employment of
the Company or any Affiliate or (b) limit or restrict in any respect the
rights of the Company, which rights are hereby expressly reserved, to
terminate the Optionee's employment and compensation at any time for any
reason whatsoever, with or without cause, in the Company's sole discretion and
with or without notice.
9. THE PLAN. This Option is subject to, and the Company and the Optionee
agree to be bound by, all the terms and conditions of the Company's Plan as
such Plan may be amended from time to time in accordance with the terms
thereof, provided that no such amendment shall deprive the Optionee, without
his consent, of this Option or any rights hereunder. Pursuant to the Plan, the
Board is authorized to adopt rules and regulations not inconsistent with the
Plan as it shall deem appropriate and proper. A copy of the Plan in its
present form is available for inspection at the Company's principal office
during business hours by the Optionee or the persons entitled to exercise this
Option.
10. ENTIRE AGREEMENT. The terms of this Agreement and the Plan constitute
the entire agreement between the Company and the Optionee with respect to the
subject matter hereof and supersede any and all previous agreements between
the Company and the Optionee.
SUCCESS BANCSHARES, INC., a Delaware
corporation
Dated as of: April 28, 1999 By: /s/ Wilber G. Meinen, Jr.
-----------------------------
Name: Wilbur G. Meinen, Jr.
Title: President and Chief Executive Officer
The Optionee hereby acknowledges receipt of a copy of the Plan, a copy of
which is attached hereto, and represents that he has read and is familiar with
the terms and provisions thereof and of this Agreement, and hereby accepts
this Option subject to all of the terms and provisions thereof and of this
Agreement. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Board upon any questions arising under
the Plan.
Dated as of: April 28, 1999 /s/ Craig Love
----------------------------
Signature of Optionee
C/o Success Bancshares, Inc
100th - State International
Suite 300
P.O. Box 1499
-----------------------------
Address
Lincolnshire, IL 60069-1499
------------------------------
City State Zip Code
THIS OPTION AND THE SECURITIES WHICH MAY BE PURCHASED UPON EXECUTION OF
THIS OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE, TRANSFER
OR DISTRIBUTION THEREOF. NO SUCH SALE, TRANSFER OR DISTRIBUTION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
4
SUCCESS BANCSHARE, INC.
STOCK OPTION AGREEMENT No. 2
(NON-TRANSFERABLE)
Success Bancshares, Inc. a Delaware corporation (the Company), hereby
grants to Craig Love (the Optionee) an option to purchase a total of 5,000
shares of Common Stock (the "Shares") of the Company, at the price set forth
herein, and in all respects subject to the terms and provisions of the
Company's 1995 Stock Option Plan (the "Plan") applicable to stock options
which terms and provisions are hereby incorporated by reference herein. Unless
otherwise defiend or the context herein otherwise requires, the capitalized
terms used herein shall have the same meanings ascribed to them in the Plan.
1.NATURE OF THE OPTION. This Option is intended to be an incentive
stock option within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").
2.DATE OF GRANT; TERM OF OPTION. This Option is granted as of November 17,
1999, and it may not be exercised later than November 17, 2009.
3.OPTION EXERCISE PRICE. The Option exercise price is $11.94 per Share,
which price is not less than the fair market value thereof on the date this
Option was granted.
4.EXERCISE OF OPTION. This Option shall be exercisable during its term
only in accordance with the terms and provisions of the Plan and this Option as
follows:
(a)RIGHT TO EXERCISE. The total number of Shares subject to this Option
is 5,000. Subject to the foregoing and the limitations contained herein and
in the Plan, this Option shall vest and be exercisable, cumulatively, as
follows:
Number of Shares Excercisable First Date Option is Exercisable
1,250 November 17, 2000
1,250 November 17, 2001
1,250 November 17, 2002
1,250 November 17, 2003
provided, however, that, upon any Change of Control (as defined in the Plan),
this Option shall become immediately exercisable as to all Shares remaining
subject to this Option and all restrictions on vesting shall terminate.
(b)METHOD OF EXERCISE. This Option shall be exercisable by written notice
which shall state the election to exercise this Option, the number of Shares in
respect to which this Option is being exercised, and such other representations
and agreements as to the Optionee's investment intent with respect to such
Shares as may be required by the Company hereunder or pursuant to the provisions
of the Plan. Such written notice shall be signed by the Optionee and shall be
delivered in person oor by certified mail to the Secretary of the Company or
such other person as may be designated by the Company. The written notice shall
be accompanied by payment of the exercise price. The exercise price may be
paid: (i) in cash; (ii) by check; (iii) by delivering certificates of other
shares of Common Stock of the Company; (iv) by transferring shares of Common
Stock of the Company to the Company's transfer agent for delivery to the Company
provided that the written notice of exercise is accompanied by a written
acknowledgment by the Optionee that the Optionee has instructed his broker
dealer to transfer such shares and such transfer is confirmed by a letter
from such broker dealer acknowledging that the Optionee has directed such
broker dealer to transfer such shares; (v) by Optionee simultaneously exercising
this Option and selling the Shares thereby acquired pursuant to a brokerage
or similar arrangement approved in advance by the Board (which approval shall
not be unreasonably withheld) and to use the proceeds from such sale to pay the
exercise price and any federal, state and local taxes required to be withheld
as a result of such exercise; or (vi) by any other method of payment approved
by the Company's Board of Directors. For purposes of Clauses (iii) and (iv),
the value of the exercise price shall be the closing price per share of the
Company's Common Stock on the last business day prior to the date the written
notice is actually received and acknowledged as received by the Company.
Upon receipt of payment, the Company shall deliver to Optionee or the person
exercising this Option for Optionee, an appropriate certificate or certificates
for fully paid nonassessable Shares. For purposes of clause (iv), should any
Optionee fail to have the number of share required to pay the exercise price
delivered to the Company's transfer agent within 90 days, this Option, with
respect to the number of shares stated I t he written notice, will terminate and
be deemed to be forfeited by the Optionee. The certificate or certificates for
the Shares as to which the Option shall be exercised shall be registered in the
name of the Optionee and shall be legended as set forth in the Plan and/or as
required under applicable law. This Option may not be exercised for a fraction
of a share.
(c)RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of the Shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other laws or regulations. As a
condition to the exercise of this Option, the Company may require the Optionee
to make such representations and warranties to the Company as may be required by
any applicable law or regulation.
(d)NO SHAREHOLDER RIGHTS BEFORE EXERCISE AND ISSUANCE. No rights as a
shareholder shall exist with respect to the Shares subject to the Option as a
result of the grant of the Option. Such rights shall exist only after issuance
of a stock certificate in accordance with Article V, Section J of the Plan
following the exercise of the Option as provided in this Agreement and the Plan.
(e)TERMINATION OF EMPLOYMENT. In the event that the Optionee ceases to be
an employee of the Company or an Affiliate, the exercisability of the Option is
subject to the provision of Article V, Section G of the Plan.
5. INVESTMENT REPRESENTATIONS. In connection with the acquisition of this
Option, the Optionee represents and warrants as follows:
(a)The Optionee is acquiring this Option, and upon exercise of this Option,
he will be acquiring the Shares, for investment for his own account, not as a
nominee or agent, and not with a view to, or for resale in connection with, any
distribution thereof.
(b) The Optionee has a preexisting business or personal relationship with
the Company or one of its directors, officers or controlling persons and by
reason of his business or financial experience, has, and could be reasonably
assumed to have, the capacity to evaluate the merits and risks of purchasing
Common Stock of the Company and to make an informed investment decision with
respect thereto And to protect Optionee's interests in connection with the
acquisition of this Option and the Shares.
6.WITHHOLDING. The Company reserves the right to withhold, in accordance
with any applicable laws, from any compensation or other consideration payable
to the Optionee, any taxes required to be withheld by federal, state or local
law as a result of the grant or exercise of this Option or the sale or other
disposition of the Shares issued upon exercise of this Option; and, if such
compensation or consideration is insufficient, theCompany may require Optionee
to pay to the Company an amount sufficient to cover such withholding tax
liability.
7.NONTRANSFERABILITY OF OPTION. This Option may not be transferred,
assigned, pledged or hypothecated or otherwise disposed of in any way (whether
by operation of law or otherwise) and is not subject to execution, attachment or
similar process. Any attempted transfer, assignment , pledge, hypothecation or
other disposition of this Option or of any rights granted hereunder, or the levy
of any attachment or similar process upon this Option or such rights, will be
null and void. This Option may be exercised during the lifetime of the Optionee
only by such Optionee or his legal guardian. Subject to the foregoing and the
terms of the Plan, the terms of this Option shall be binding upon the executors,
administrators, heirs, successors and permitted assigns of the Optionee.
8.CONTINUATIOJ OF EMPLOYMENT. Neither the Plan nor this Option shall
(a) confer upon the Optionee any right whatsoever to continue in the employment
of the Company or any Affiliate or (b) limit or restrict in any respect the
rights of the Company, which rights are hereby expressly reserved, to terminate
the Optionee's employment and compensation at any time for any reason
whatsoever, with or without cause, in the Company's sold discretion and with or
without notice.
9.THE PLAN. This Option is subject to, and the Company and the Optionee
agree to be bound by, all the terms and conditions of the Company's Plan as such
Plan may be amended from time to time in accordance with the terms thereof,
provided that no such amendment shall deprive the Optionee, without his
consent, of this Option or any rights hereunder. Pursuant to the Plan, the
Board is authorized to adopt rules and regulations not inconsistent with the
Plan as it shall deem appropriate and proper. A copy of the Plan in its present
form is available for inspection at the Company's principal office during
business hours by the Optionee or the persons entitled to exercise this Option.
10.ENTIRE AGREEMENT. The terms of this Agreement and the Plan constitute the
entire agreement between the Company and the Optionee with respect to the
subject matter hereof and supersede any and all previous agreements between the
Company and the Optionee.
SUCCESS BANCSHARES, INC., a Delaware
corporation
Dated as of: November 17, 1999 By: ____________________________
Name: Wilbur G. Meinen
Title: President and Chief Executive
Officer
3
The Optionee hereby acknowledges receipt of a copy of the Plan,, a copy of
which is attached hereto, and represents that he has read and is familiar
with the terms and provisions thereof and of this Agreement, and hereby accepts
this Option subject to all of the terms and provisions thereof and of this
Agreement. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Board upon any questions arising under
the Plan.
Dated as of: November 17, 1999
___________________________________________
Signature of Optionee
Address
City StateZip Code
THIS OPTION AND THE SECURITIES WHICH MAY BE PURCHASED UPON EXECUTION OF
THIS OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE, TRANSFER OR
DISTRIBUTION THEREOF. NO SUCH SALE, TRANSFER OR DISTRIBUTION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR AN OPTION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
4
SUCCESS BANCSHARES, INC.
STOCK OPTION AGREEMENT
(NON-TRANSFERABLE)
Success Bancshares, Inc., a Delaware corporation (the "Company"), hereby
grants to Joseph A. Cari, Jr. (the "Optionee") an option to purchase a total
of 5,000 shares of Common Stock (the "Shares") of the Company, at the price
set forth herein, and in all respects subject to the terms and provisions of
the Company's 1999 Stock Option Plan (the "Plan") applicable to stock options
which terms and provisions are hereby incorporated by reference herein. Unless
otherwise defined or the context herein otherwise requires, the capitalized
terms used herein shall have the same meanings ascribed to them in the Plan.
1 DATE OF GRANT; TERM OF OPTION. This Option is granted as of
December 15, 1999, and it may not be exercised later than December 15, 2009.
2. OPTION EXERCISE PRICE. The Option exercise price is $10.66 per Share,
which price is not less than the Fair Market Value (as defined in the Plan)
thereof on the date this Option was granted.
3. EXERCISE OF OPTION. This Option shall be exercisable during its term
only in accordance with the terms and provisions of the Plan and this Option
as follows:
(a) RIGHT TO EXERCISE. The total number of Shares subject to this Option
is 5,000. Subject to the foregoing and the limitations contained herein and in
the Plan, this Option shall vest and be exercisable in full on December 15,
2000; provided, however, that, upon any Corporate Transaction (as defined in
the Plan), this Option shall become immediately exercisable as to all shares
remaining subject to this Option and all restrictions on vesting shall
terminate.
(b) METHOD OF EXERCISE. This Option shall be exercisable by written
notice which shall state the election to exercise this Option, the number of
Shares in respect to which this Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such Shares as may be required by the Company hereunder or pursuant
to the provisions of the Plan. Such written notice shall be signed by the
Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company or such other person as may be designated by the
Company. The written notice shall be accompanied by payment of the exercise
price. The exercise price may be paid: (i) in cash; (ii) by check; (iii)
tendering (either actually or, if and so long as the Common Stock is
registered under Section 12(b) or 12(g) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), by attestation) Common Stock already
owned by the Optionee for at least six months (or any shorter period necessary
to avoid a charge to the Company's earnings for financial reporting purposes)
having a Fair Market Value on the day prior to the exercise date equal to the
aggregate Option exercise price or by transferring shares of Common Stock
having a Fair Market Value on the day prior to the exercise date equal to the
aggregate Option exercise price to the Company's transfer agent for delivery
to the Company provided that the written notice of exercise is accompanied by
a written acknowledgment by the Optionee that the Optionee has instructed his
broker dealer to transfer such shares and such transfer is confirmed by a
letter from a broker dealer acknowledging that the Optionee has directed such
broker dealer to transfer such shares; or (iv) if and so long as the Common
Stock is registered under Section 12(b) or 12(g) of the Exchange Act, delivery
of a properly executed exercise notice, together with irrevocable
instructions, to (A) a brokerage firm designated by the Company to deliver
promptly to the Company the aggregate amount of sale or loan proceeds to pay
the Option exercise price and any withholding tax obligations that may arise
in connection with the exercise and (B) the Company to deliver the
certificates for such purchased shares directly to such brokerage firm, all in
accordance with the regulations of the Federal Reserve Board. In addition,
the exercise price for shares purchased under this Option may be paid, either
singly or in combination with one or more of the alternative forms of payment
authorized by this Section 3(b), by such other consideration as the Board may
permit. Upon receipt of payment, the Company shall deliver to Optionee or the
person exercising this Option for Optionee, an appropriate certificate or
certificates for fully paid nonassessable Shares. For purposes of clause
(iii), should any Optionee fail to have the number of shares required to pay
the exercise price delivered to the Company's transfer agent within 90 days,
this Option, with respect to the number of shares stated in the written
notice, will terminate and be deemed to be forfeited by the Optionee. The
certificate or certificates for the Shares as to which the Option shall be
exercised shall be registered in the name of the Optionee and shall be
legended as set forth in the Plan and/or as required under applicable law.
This Option may not be exercised for a fraction of a share.
(c) RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of the Shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other laws or regulations. As a
condition to the exercise of this Option, the Company may require the Optionee
to make such representations and warranties to the Company as may be required
by any applicable law or regulation.
(d) NO SHAREHOLDER RIGHTS BEFORE EXERCISE AND ISSUANCE. No rights as a
shareholder shall exist with respect to the Shares subject to the Option as a
result of the grant of the Option. Such rights shall exist only after issuance
of a stock certificate following the exercise of the Option as provided in
this Agreement and the Plan.
(e) TERMINATION OF EMPLOYMENT. In the event that the Optionee ceases to
be a non-employee Director of the Company or its Subsidiary (as defined in the
Plan), the exercisability of the Option is subject to the provisions of
Section 7.6 of the Plan.
4. INVESTMENT REPRESENTATIONS. In connection with the acquisition of
this Option, the Optionee represents and warrants as follows:
(a) The Optionee is acquiring this Option, and upon exercise of this
Option, he will be acquiring the Shares, for investment for his own account,
not as a nominee or agent, and not with a view to, or for resale in connection
with, any distribution thereof.
(b) The Optionee has a preexisting business or personal relationship
with the Company or one of its directors, officers or controlling persons and
by reason of his business or financial experience, has, and could be
reasonably assumed to have, the capacity to evaluate the merits and risks of
purchasing Common Stock of the Company and to make an informed investment
decision with respect thereto and to protect Optionee's interests in
connection with the acquisition of this Option and the Shares.
5. WITHHOLDING. The Company reserves the right to withhold, in
accordance with any applicable laws, from any compensation or other
consideration payable to the Optionee, any taxes required to be withheld by
federal, state or local law as a result of the grant or exercise of this
Option or the sale or other disposition of the Shares issued upon exercise of
this Option; and, if such compensation or consideration is insufficient, the
Company may require Optionee to pay to the Company an amount sufficient to
cover such withholding tax liability.
6. TRANSFERABILITY OF OPTION. This Option may not be assigned, pledged
or transferred by the Optionee other than by will or by the applicable laws of
descent and distribution, and, during the Optionee's lifetime, this Option may
be exercised only by the Optionee or a permitted assignee or transferee of the
Optionee (as provided below); provided, however, that this Option may be
transferred to, and exercised by (in accordance with the terms and conditions
of this Stock Option Agreement), the University of Notre Dame Law School.
7. CONTINUATION OF EMPLOYMENT. Neither the Plan nor this Option shall
(a) confer upon the Optionee any right whatsoever to continue to serve as a
non-employee Director of the Company or any Subsidiary or (b) limit or
restrict in any respect the rights of the Company, which rights are hereby
expressly reserved, to terminate the Optionee's service as a non-employee
Director and any compensation being paid to Optionee at any time for any
reason whatsoever, with or without cause, in the Company's sole discretion and
with or without notice.
8. THE PLAN. This Option is subject to, and the Company and the
Optionee agree to be bound by, all the terms and conditions of the Company's
Plan as such Plan may be amended from time to time in accordance with the
terms thereof, provided that no such amendment shall deprive the Optionee,
without his consent, of this Option or any rights hereunder. Pursuant to the
Plan, the Board is authorized to adopt rules and regulations not inconsistent
with the Plan as it shall deem appropriate and proper. A copy of the Plan in
its present form is available for inspection at the Company's principal office
during business hours by the Optionee or the persons entitled to exercise this
Option.
9. ENTIRE AGREEMENT. The terms of this Agreement and the Plan
constitute the entire agreement between the Company and the Optionee with
respect to the subject matter hereof and supersede any and all previous
agreements between the Company and the Optionee.
SUCCESS BANCSHARES, INC., a Delaware
corporation
Dated as of: December 15, 1999 By: /s/ Wilbur G. Meinen, Jr.
----------------------------
Name: Wilbur G. Meinen, Jr.
Title: President and Chief Executive
Officer
The Optionee hereby acknowledges receipt of a copy of the Plan, a copy of
which is attached hereto, and represents that he has read and is familiar with
the terms and provisions thereof and of this Agreement, and hereby accepts
this Option subject to all of the terms and provisions thereof and of this
Agreement. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Board upon any questions arising under
the Plan.
Dated as of: December 15, 1999
/s/ Joseph A. Cari, Jr.
---------------------------------
Signature of Optionee
C/o Success National Bancshares, Inc.
100th - State International
Suite 300
P.O. Box 1499
---------------------------------
Address
Lincolnshire, IL 60069-1499
---------------------------------
City State Zip Code
THIS OPTION AND THE SECURITIES WHICH MAY BE PURCHASED UPON EXECUTION OF
THIS OPTION ARE SUBJECT TO THE RESTRICTIONS ON TRANSFERABILITY SET FORTH IN
RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, TO THE
EXTENT THAT THEY ARE HELD BY AFFILIATES OF THE COMPANY.
4
ASSIGNMENT
The undersigned hereby assigns to the University of Notre Dame Law School
his entire right, title and interest in and to the Option ("the Option") to
purchase a total of 5,000 shares of common stock of Success Bancshares, Inc.
("the Company") at an exercise price of $10.66 per share, which the Option was
granted to the undersigned pursuant to the attached Stock Option Agreement
dated as of December 15, 1999 between the Company and the undersigned.
/s/ Joseph A. Cari, Jr.
------------------------
Joseph A. Cari, Jr.
