<PAGE> 1
As filed with the Securities and Exchange Commission on December 24, 1996.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
WINTRUST FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
6712
(Primary Standard Industrial Classification Code Number)
ILLINOIS 36-3873352
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
727 NORTH BANK LANE, LAKE FOREST, ILLINOIS 60045-1951, (847) 615-4096
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
DAVID A. DYKSTRA
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
727 NORTH BANK LANE, LAKE FOREST, ILLINOIS 60045-1951
(847) 615-4096
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies To:
JENNIFER R. EVANS, ESQ. MICHAEL J. GAMSKY, ESQ.
VEDDER, PRICE, KAUFMAN & KAMMHOLZ MUCH SHELIST FREED DENENBERG AMENT
222 NORTH LASALLE STREET BELL & RUBENSTEIN, P.C.
CHICAGO, ILLINOIS 60601 200 NORTH LASALLE STREET
(312) 609-7500 CHICAGO, ILLINOIS 60601
(312) 346-3100
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effectiveness of this Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [x]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
================================================================================================================
Title of each class of Proposed maximum aggregate
securities to be registered offering price(1) Amount of registration fee
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, without par value . . . . . $18,000,000 $5,455
================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 23, 1996
1,200,000 SHARES
WINTRUST FINANCIAL CORPORATION
COMMON STOCK
Wintrust Financial Corporation (the "Company") is offering hereby up to
1,200,000 newly issued shares of common stock, without par value (the "Common
Stock") at a price of $_____ per share. The shares are being offered on a
priority basis to shareholders of record of the Company as of __________, 1996
("Record Date Shareholders"), and to customers of the Company's banking
subsidiaries as of __________, 1996 ("Record Date Customers"), in a
Subscription Offering (the "Subscription Offering"). The highest priority will
be given in the Subscription Offering to those Record Date Shareholders placing
purchase orders for shares of Common Stock offered hereby prior to Noon,
Central Time, on __________, 1997. To the extent shares of Common Stock are
available after satisfying purchase orders in the Subscription Offering, the
Company is offering shares of Common Stock for sale to the general public in a
direct community offering (the "Community Offering") with preference given to
residents of the communities in which the Company's banking subsidiaries have
offices. (The Subscription Offering and Community Offering are collectively
referred to herein as the "Subscription and Community Offering.") Depending on
market conditions, shares of Common Stock may be offered for sale in the
Community Offering to the general public on a best efforts basis by a selling
group of broker-dealers managed by EVEREN Securities, Inc. (the "Selling
Agent"). The Company reserves the right in its sole discretion, regardless of
any priorities or preferences, to accept or reject orders in whole or in part
in the Subscription and Community Offering, which will expire at Noon, Central
Time, on __________, 1997. ONCE MADE, SUBSCRIPTIONS ARE IRREVOCABLE.
COMPLETION OF THE SUBSCRIPTION AND COMMUNITY OFFERING IS NOT CONDITIONED UPON
THE SALE OF ANY MINIMUM NUMBER OF SHARES. In addition, depending on market
conditions, upon completion of the Subscription and Community Offering, any
shares of Common Stock then remaining available for sale may be offered to the
general public in an underwritten public offering (the "Public Offering") to be
managed by the Selling Agent. The Subscription and Community Offering and the
Public Offering are referred to collectively herein as the "Offering."
While the Company's Common Stock has traded occasionally in the
over-the-counter "OTC" market, and bid and ask prices are quoted on the OTC
Bulletin Board, prior to this Offering there has not been an active trading
market for the Company's shares. See "MARKET FOR COMMON STOCK AND DIVIDENDS."
For information relating to the determination of the initial public offering
price of the Common Stock, see "TERMS OF THE OFFERING." The Company has
applied to have its Common Stock approved for quotation on The Nasdaq National
MarketSM under the symbol "WTFC," subject to the completion of the Offering.
FOR INFORMATION ON HOW TO SUBSCRIBE FOR SHARES OF COMMON STOCK, PLEASE
CALL THE STOCK SALE CENTER AT (847) ___-____ AND ASK FOR AN EVEREN SECURITIES,
INC. REPRESENTATIVE.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH
UNDER "RISK FACTORS" BEGINNING ON PAGE ___ OF THIS PROSPECTUS.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE
BANK INSURANCE FUND OR THE SAVINGS ASSOCIATION INSURANCE FUND
OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY GOVERNMENTAL AGENCY.
<PAGE> 3
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
============================================================================================================
SELLING AGENT
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1)(2) COMPANY(3)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share . . . . . . . . . . $ $ $
- ------------------------------------------------------------------------------------------------------------
Total(4) . . . . . . . . . . $ $ $
============================================================================================================
</TABLE>
(1) The Company has agreed to indemnify the Selling Agent against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "TERMS OF THE OFFERING."
(2) Up to 1,200,000 of the shares may be offered by the Company on a "best
efforts" basis with the assistance of the Selling Agent. Assumes all
1,200,000 shares are sold on such basis without the assistance of the
Selling Agent's commissioned brokers. Based upon negotiations between
the Company and the Selling Agent, the Company has agreed to pay the
Selling Agent a commission equal to 2.5% of the aggregate sales price for
shares sold without the use of the Selling Agent's commissioned
registered representatives; in the event that the Company elects to offer
shares in the Community Offering through a selling group of selected
broker-dealers managed by the Selling Agent using the assistance of
commissioned registered representatives, the Company would pay discounts
and commissions equal to 4.0% of the aggregate sales price of Common
Stock sold in such manner; and, in the event an underwritten Public
Offering is commenced to offer any remaining shares, the Company would
agree to sell such shares at the per share Price to Public shown above,
less discounts and commissions currently estimated to be 6.6% of the per
share price.
(3) Assumes no exercise of the over-subscription or over-allotment option and
the sale of 1,200,000 shares on a best efforts basis in the Offering
directly by the Company (although there is no minimum number of shares
required to be sold), before deducting offering expenses payable by the
Company estimated to be approximately $__________, including the maximum
of $75,000 reimbursable to the Selling Agent for out-of-pocket expenses.
(4) The Company may, in its sole discretion, increase the number of shares of
Common Stock sold by up to 180,000 additional shares to satisfy unfilled
purchase orders in the Subscription and Community Offering. In addition,
in the event the Selling Agent undertakes an underwritten Public Public
Offering, the Company will grant to the Selling Agent an option,
exercisable within 30 days of the completion date of the Public Offering,
to purchase up to an additional 15% of the number of shares sold in the
Public Offering at the same price per share to be paid by the Selling
Agent for the other shares sold in the Public Offering. The Selling Agent
may exercise the option only for the purpose of covering over-allotments,
if any, made in connection with the distribution of the Common Stock.
____________________
EVEREN SECURITIES, INC.
The date of the Prospectus is __________, 1997
2
<PAGE> 4
WINTRUST FINANCIAL CORPORATION
[Map of greater Chicago metropolitan area depicting locations of Company's
banking facilities and main bank offices.]
IN THE EVENT THERE IS AN UNDERWRITTEN PUBLIC OFFERING, THE SELLING
AGENT MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZATION, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.
The Company intends to furnish to its shareholders annual reports of
the Company containing consolidated financial statements, certified by
independent public accountants.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and the Company's Combined and Consolidated Financial
Statements, including the accompanying notes, appearing elsewhere in this
Prospectus. Unless otherwise indicated, all information in this Prospectus
assumes no exercise of the Company's over-subscription option or the Selling
Agent's over-allotment option. This Prospectus contains forward-looking
statements that involve risks and uncertainties. Actual results could differ
materially from those addressed in the forward-looking statements as a result
of certain factors, including those described under "RISK FACTORS" and
elsewhere in this Prospectus.
THE COMPANY
Wintrust Financial Corporation, an Illinois corporation (the
"Company"), is a financial services holding company headquartered in Lake
Forest, Illinois. The Company engages in community banking and specialty
finance through its direct and indirect wholly-owned operating subsidiaries:
North Shore Community Bank and Trust Company ("North Shore Bank"); Lake Forest
Bank and Trust Company ("Lake Forest Bank"); Hinsdale Bank and Trust Company
("Hinsdale Bank"); Libertyville Bank and Trust Company ("Libertyville Bank");
Barrington Bank and Trust Company, N.A. ("Barrington Bank"); and First Premium
Services, Inc. ("First Premium").
Through its banking subsidiaries, Lake Forest Bank, Hinsdale Bank,
North Shore Bank, Libertyville Bank and Barrington Bank (collectively, the
"Banks"), the Company provides community-oriented, personal and commercial
banking services in different affluent suburbs of Chicago, Illinois. Through
First Premium, the Company is in the business of originating commercial
insurance premium finance receivables, a portion of which are purchased by the
Banks using the relatively lower-cost funds obtained from the Banks' deposit
activities.
Each of the Banks was organized as a de novo banking organization
within the last five years and provides a variety of financial services to
individuals, small businesses, local governmental units and institutional
clients. These services include demand, NOW, money market, savings and time
deposit accounts; real estate, commercial and consumer loans; safe deposit
facilities; trust services and other innovative and traditional services
tailored for the customer base. The Company employs a community banking
philosophy, focusing on providing a highly personal, professional level of
service to commercial and retail customers residing in its local service areas
to generate deposit growth, loan demand and other banking business.
The Company has successfully pursued unique earning asset niches which
management believes offer, relative to their respective risk profiles,
attractive yields on earning assets, such as the Company's indirect auto loan
program, insurance premium finance activities, and mortgage warehouse lending.
The Company plans to expand its operations through continued internal
growth, expansion of existing businesses, potential acquisitions and the
formation of additional de novo banks in selected new markets believed to offer
good opportunities for successful community banking.
Key elements of the Company's business and growth strategies include:
- Maintaining decision-making authority locally within each of the Banks
and First Premium;
- Focusing on a highly personal, professional level of service;
- Employing fewer, highly qualified individuals at relatively higher
compensation rates;
- Continued emphasis on trust services provided to small businesses and
affluent individuals residing in the Banks' market areas;.
- Identifying and developing additional niche lending businesses to
deploy the Banks' expanding deposit base at attractive yields and
risk profiles;
- Expanding through internal growth of existing operations;
- Establishment of branch offices in nearby communities;
- Formation of additional de novo banks; and
- Potential specialty finance company acquisitions.
4
<PAGE> 6
The Company's executive offices are located at 727 North Bank Lane,
Lake Forest, Illinois, 60045-1951, and its telephone number is (847) 615-4096.
THE OFFERING
COMMON STOCK OFFERED BY THE COMPANY . . 1,200,000 shares
COMMON STOCK TO BE OUTSTANDING AFTER
THE OFFERING . . . . . . . . . . . . 7,803,420 shares(1)
PRICE TO PUBLIC . . . . . . . . . . . . $_____ per share
USE OF PROCEEDS . . . . . . . . . . . . The Company will use the net
proceeds from the sale of
shares of Common Stock offered
hereby to repay approximately
$___ million of the debt
currently outstanding under the
Company's $25 million revolving
line of credit. Following such
repayment, the unused portion
of the line will remain
available for future
borrowings from time to time
for general corporate
purposes, including continued
growth of the Company's
banking and finance
subsidiaries, for future branch
office openings and additional
de novo bank formations, and
for potential future
acquisitions of specialty
finance companies or
investments in businesses
engaged in niche consumer
lending or selected commercial
finance activities.
SUBSCRIPTION OFFERING . . . . . . . . . The Common Stock is being offered
by the Company on a priority
basis to shareholders of
record of the Company as of
__________, 1997 and to
customers of the Company's
banking subsidiaries as of
__________, 1997. The
highest priority will be
given to those Record Date
Shareholders placing purchase
orders prior to Noon, Central
Time, on __________, 1997.
COMMUNITY OFFERING . . . . . . . . . . To the extent shares of Common
Stock are available after
satisfying purchase orders in
the Subscription Offering, the
Common Stock is being offered
by the Company for sale to the
general public with a
preference given to residents
of the communities in which
the Company's banking
subsidiaries have offices.
Depending on market conditions,
shares of Common Stock may be
offered for sale in the
Community Offering to the
general public on a best efforts
basis by a selling group of
broker-dealers managed by the
Selling Agent.
SUBSCRIPTION AND COMMUNITY OFFERING
PERIOD . . . . . . . . . . . . . . . The Subscription and Community
Offering will terminate at
Noon, Central Time, on
__________, 1997 (the
"Expiration Date"), unless
extended by the Company.
- ------------------
(1) Excludes an aggregate of 1,410,203 shares reserved for issuance upon the
exercise of outstanding warrants, rights and options to purchase Common
Stock of the Company, of which an aggregate of 904,783 shares are subject
to currently exercisable warrants, rights and options.
5
<PAGE> 7
PUBLIC OFFERING . . . . . . . . . . . . Depending on market conditions,
any shares of Common Stock
then remaining available for
sale upon completion of the
Subscription and Community
Offering may be offered for sale
to the general public in an
underwritten Public Offering to
be managed by the Selling Agent.
OVER-SUBSCRIPTION AND OVER-ALLOTMENT
OPTIONS . . . . . . . . . . . . . . The Company may, in its sole
discretion, increase the number
of shares of Common Stock sold
by up to 180,000 additional
shares to satisfy unfilled
purchase orders in the
Subscription and Community
Offering. In addition, in the
event a Public Offering is
commenced, the Company will
grant to the Selling Agent an
option, exercisable within 30
days of the completion date of
the Public Offering, to
purchase up to 15% of the
number of shares sold in the
Public Offering.
PROCEDURES FOR ORDERING SHARES OF
COMMON STOCK IN THE SUBSCRIPTION AND
COMMUNITY OFFERING . . . . . . . . . Record Date Shareholders, Record
Date Customers and other
interested investors in the
Subscription and Community
Offering must return to the
Company the accompanying
original Stock Order Form
(facsimile copies and
photocopies will not be
accepted) and a fully executed
Certification Form, along
with full payment (or
appropriate instructions for
authorizing a withdrawal from
a deposit account at one of the
Banks) at $___ per share for
all shares subscribed for or
ordered prior to Noon, Central
Time, on __________, 1997. To
receive the highest priority
in the Subscription Offering,
Record Date Shareholders must
place purchase orders prior to
Noon, Central Time, on
__________, 1997. The Company
reserves the right in its
sole discretion, regardless of
priorities or preferences, to
accept or reject orders in
whole or in part in the
Subscription and Community
Offering. Subscription
proceeds will be held in a
non-interest bearing escrow
account at one of the Banks
pending closing of the
Offering. ONCE MADE,
SUBSCRIPTIONS ARE IRREVOCABLE.
COMPLETION OF THE SUBSCRIPTION
AND COMMUNITY OFFERING IS NOT
CONDITIONED UPON THE SALE OF
ANY MINIMUM NUMBER OF SHARES.
Delivery of certificates
evidencing the shares will be
made directly to purchasers of
the shares as soon as
practicable following completion
of the Offering. See "TERMS
OF THE OFFERING" for complete
instructions for ordering
shares and terms and
conditions of the Subscription
and Community Offering.
DIVIDEND POLICY . . . . . . . . . . . . Although the Company
anticipates that it may
commence payment of quarterly
dividends in the future, the
Company's current policy is to
retain earnings to facilitate
the continued growth of the
Company.
PROPOSED NASDAQ NATIONAL MARKET(SM)
SYMBOL . . . . . . . . . . . . . . . WTFC
6
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The summary consolidated financial and operating data should be read
in conjunction with the Consolidated Financial Statements and the notes thereto
appearing elsewhere in this Prospectus and with "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION." Results for interim
periods are not necessarily indicative of results to be expected during the
remainder of the year or for any future period. Results shown for periods
prior to September 1, 1996, the date of the Company's recent reorganization
transaction which was accounted for using the pooling-of-interests method of
accounting, reflect the consolidated historical results of the Company and its
predecessors. See "THE COMPANY -- Background."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------------------------------
1996 1995 1995 1994 1993 1992(1) 1991(2)
------ ------ ------ ------ ------ ------ -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total interest income . . . . . . . . . . $27,398 $18,022 $25,472 $17,744 $8,239 $5,843 $11,388
Total interest expense . . . . . . . . . . 17,011 11,124 15,772 9,871 3,884 3,515 7,090
------- ------- ------- ------- ------ ------ -------
Net interest income . . . . . . . . . . . 10,387 6,898 9,700 7,873 4,355 2,328 4,298
Provision for possible loan losses . . . . 1,344 770 1,430 607 1,127 1,116 1,445
------- ------- ------- ------- ------ ------ -------
Net interest income after provision
for possible loan losses . . . . . . . 9,043 6,128 8,270 7,266 3,228 1,212 2,853
------- ------- ------- ------- ------ ------ -------
Gain on sale of premium finance loans . . 2,659 3,551 4,421 -- -- -- --
Loan servicing fees . . . . . . . . . . . 1,035 782 1,083 -- -- -- --
Fees on mortgage loans sold . . . . . . . 1,023 503 850 399 551 -- --
Trust fees . . . . . . . . . . . . . . . . 412 281 399 202 92 -- --
Service charges on deposit accounts . . . 309 187 196 112 92 42 --
Securities gains, net . . . . . . . . . . 18 -- -- 21 23 -- --
Other . . . . . . . . . . . . . . . . . . 400 300 1,595 752 386 717 7,589
------- ------- ------- ------- ------ ------ -------
Total non-interest income . . . . . . . 5,856 5,604 8,544 1,486 1,144 759 7,589
------- ------- ------- ------- ------ ------ -------
Salaries and employee benefits . . . . . . 8,133 5,395 8,011 5,319 3,536 3,475 5,095
Occupancy expense, net . . . . . . . . . . 1,245 723 1,520 1,165 790 617 918
Data processing . . . . . . . . . . . . . 732 440 624 335 177 114 63
Advertising and marketing . . . . . . . . 710 367 682 288 150 232 288
Nonrecurring merger related expenses . . . 849 -- -- -- -- -- --
Amortization of deferred financing fee . . 337 451 768 641 511 126 --
Other non-interest expenses . . . . . . . 4,448 3,325 4,207 3,004 2,354 3,244 4,164
------- ------- ------- ------- ------ ------ -------
Total non-interest expense . . . . . . 16,454 10,701 15,812 10,752 7,518 7,808 10,528
------- ------- ------- ------- ------ ------ -------
Income (loss) from continuing operations
before income taxes . . . . . . . . . . (1,555) 1,031 1,002 (2,000) (3,146) (5,837) (86)
Income tax benefit . . . . . . . . . . . . (34) (198) (512) -- -- -- --
------- ------- ------- ------- ------ ------ -------
Income (loss) from continuing operations . (1,521) 1,229 1,514 (2,000) (3,146) (5,837) (86)
Income (loss) from operations and sale of
discontinued operations . . . . . . . -- (96) (17) (236) (193) 102 1,261
------- ------- ------- ------- ------ ------ -------
Net income (loss) . . . . . . . . . . . $ (1,521) $1,133 $ 1,497 $(2,236) $(3,339) $(5,735) $1,175
======= ======= ======= ======= ======= ======= ======
Net income (loss) per common share . . . $ (0.25) $ 0.19 $ 0.24 $ (0.56) $ (1.14) $ (2.59) $ 0.93
======= ======= ======= ======= ======= ======= ======
Cash dividends per common share . . . . . $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
======= ======= ======= ======= ======= ======= ======
</TABLE>
7
<PAGE> 9
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- -------------------------------------------------------
1996 1995 1995(1) 1994(1) 1993(1) 1992(1) 1991(2)
---- ---- ---- ---- ---- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets at end of period .......... $621,264 $376,143 $470,890 $354,158 $188,590 $82,864 $52,422
Total deposits at end of period......... 549,303 322,516 405,658 221,985 98,264 42,996 2,361
Total loans at end of period............ 414,405 218,730 258,231 193,982 109,276 48,527 33,482
Notes payable and subordinated debt
at end of period....................... 16,554 13,028 10,758 6,905 4,837 16,050 32,413
SELECTED FINANCIAL RATIOS AND
OTHER DATA(3):
Performance Ratios:
Net interest margin(4)................ 2.86% 2.98% 2.96% 3.35% 3.83% 3.85% N/M
Net interest spread(5)................ 2.32% 2.47% 2.41% 3.07% 3.30% 2.87% N/M
Non-interest income to average
assets............................... 1.47% 2.19% 2.36% 0.57% 0.89% 1.05% N/M
Non-interest expense to average
assets(7)............................ 4.13% 4.18% 4.37% 4.14% 5.84% 10.77% N/M
Return on average assets(6)(7)........ (0.38)% 0.43% 0.40% (0.88)% (2.60)% (7.91)% 1.51%
Return on average equity(7)(8)........ (4.95)% 5.37% 4.66% (12.02)% (25.40)% (46.01)% 14.46%
Loans-to-deposits ratio............... 75.4% 67.8% 63.7% 87.4% 111.2% 112.9% N/M
Average interest-earning assets to
average interest-bearing liabilities. 111.47% 110.56% 111.37% 106.61% 115.42% 116.93% N/M
Asset Quality Ratios:
Non-performing loans to total loans... 0.53% 0.71% 0.80% 0.01% 0.00% 0.27% 0.02%
Allowance for possible loan
losses to:
Total loans.......................... 0.90% 1.02% 1.07% 0.88% 1.24% 1.98% 2.44%
Non-performing loans................. 171.89% 143.58% 143.91% N/M N/M N/M N/M
Net charge-offs to average loans...... 0.15% 0.20% 0.20% 0.18% 0.92% 2.38% 1.38%
Non-performing assets to total
assets............................... 0.35% 0.41% 0.41% 0.01% 0.00% 0.16% 0.01%
Other Data at end of period:
Number of:
Bank subsidiaries(9)................... 4 3 4 3 2 1 1
Banking offices(9) .................... 13 7 12 6 3 1 1
</TABLE>
- -------------------
(1) For 1995, 1994 and 1993, reflects results of those Banks then in operation
or in organization, results of finance and leasing subsidiary operations
(some of which have since been curtailed) and results of discontinued
operations. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OEPRATIONS." For 1992, reflects first full-year
of Lake Forest Bank operations and results of finance and lease subsidiary
operations (some of which have since been curtailed, sold or discontinued).
(2) Reflects results of finance and leasing subsidiary operations, some of
which have since been sold, curtailed or discontinued, and start-up of
Lake Forest Bank which opened in December 1991.
(3) Certain financial ratios for interim periods have been annualized.
(4) Net interest income divided by average interest-earning assets.
(5) Yield on average interest-earning assets less rate on average interest-
bearing liabilities.
(6) Net income less preferred dividends divided by average total assets.
(7) For the nine-month period ended September 30, 1996, includes nonrecurring
merger-related expenses of $849,000. Absent such expenses, non-interest
expense to average assets, the return on average assets and return on
average equity for such period would have been 3.92%, (0.17)% and (2.18)%,
respectively.
(8) Net income less preferred dividends divided by average common equity.
(9) Excludes Barrington Bank which commenced operations on December 19, 1996.
8
<PAGE> 10
RISK FACTORS
Prospective investors should consider carefully the following factors
associated with the ownership of Common Stock together with the other
information contained in this Prospectus.
IMPACT OF DE NOVO OPERATIONS AND BRANCH OPENINGS ON PROFITABILITY
The Company's recent historical results have been impacted by its
strategy of de novo bank formations and branch openings. Each of the Banks was
organized as a de novo banking organization within the past six years and each
of the various branch facilities was also newly opened by the respective Banks.
Management believes that de novo banks may typically require 18 months to three
years of operations before becoming profitable, due to the impact of
organizational and overhead expenses, the start-up phase of generating deposits
and the time lag typically involved in redeploying deposits into attractively
priced loans and other higher yielding earning assets. While the Company
achieved first months of profitable operations at Lake Forest Bank and Hinsdale
Bank within 12 to 18 months, openings of additional full-service branches in
Glencoe in 1995 and in Winnetka in 1996 have extended the time for North Shore
Bank to achieve profitability. North Shore Bank, which commenced operations in
September 1994, recorded net losses for 1994 and 1995 and is still not yet
profitable. Barrington Bank, which was opened in December 1996, is still in
its initial phase of operations and is not yet profitable. Libertyville Bank,
which commenced operations in October 1995, is also in its start-up phase and
is not expected to be profitable until 1997.
While management believes that each of the Banks has demonstrated
significant success to date in deposit generation and will likely continue to
increase its loan-to-deposit ratio as loan origination activities increase, the
level of reported net income and return on average assets for the Company will
in the near term continue to be impacted by start-up costs associated with
these de novo and branching operations. While the Company expects to be
profitable in 1997, to the extent the Company undertakes additional branching
and de novo bank formations, the Company is likely to continue to experience
the effects of higher operating expenses relative to operating income from the
new banks, which may limit increases in profitability.
RELIANCE ON KEY PERSONNEL
The Company's success to date has been influenced strongly by its
ability to attract and to retain senior management experienced in banking and
financial services. The Company's ability to retain the management teams of
each of the Banks and First Premium, and, as the Company grows, to attract and
retain qualified additional senior and middle management will continue to be
important to successful implementation of the Company's business plan. The
Company does not currently maintain key-man life insurance policies. The
unexpected loss of services of any key management personnel, or the inability
to recruit and retain qualified personnel in the future, could have an adverse
effect on the Company's business and financial results. The Company has
entered into employment agreements with each of Howard D. Adams and Edward J.
Wehmer, the Company's Chairman and President, respectively, and it is expected
that the Company and its subsidiaries will enter into similar employment
contracts with the other selected senior management and senior Bank officers
providing for certain non-compete agreements and reasonable and customary
benefits and severance arrangements. See "MANAGEMENT."
ALLOWANCE FOR LOAN LOSSES
The Company's allowance for loan losses is established in consultation
with management of its operating subsidiaries and is maintained at a level
considered adequate by management to absorb anticipated loan losses. The
Company has not experienced any significant charge-offs since 1991 except for
certain losses on the sale of lease portfolios in 1991 and 1992. The Company
ceased its leasing operations in 1992. The amount of future losses is
susceptible to changes in economic, operating and other conditions, including
changes in interest rates, that may be beyond the Company's control, and such
losses may exceed current estimates. Though management uses the best
information available to it and draws upon many years of banking experience in
estimating the allowance for loan losses, de novo bank loan portfolios are by
their nature unseasoned. As a result, estimating loan loss
9
<PAGE> 11
allowances for the Banks is more difficult, and therefore may be more
susceptible to changes in estimate, than for banks with more seasoned loan
portfolios. Although management believes that the allowances for loan losses
are adequate to absorb any losses on existing loans that may become
uncollectible, there can be no assurance that the allowance will prove
sufficient to cover actual loan losses in the future. In particular, First
Premium is currently seeking to recover the approximately $1.2 million
remaining amount related to an approximately $5.0 million premium finance loan
that was fraudulently obtained by the obligor, through pending litigation in
which First Premium has filed claims against several defendants, including the
obligor corporation, certain agents of the obligor and the insurance company.
While First Premium management believes it will ultimately recover the
remaining amount and associated costs of recovery and therefore has not fully
reserved against possible loss of these sums, there can be no assurances when
or if such funds will be received.
EFFECT OF INTEREST RATES
Like most banks, the Banks realize income primarily from the spread
between interest earned on loans and investments and the interest paid on
deposits and borrowings. It is expected that the Banks, from time to time,
will experience "gaps" in the interest rate sensitivities of their assets and
liabilities, meaning that either their interest-bearing liabilities will be
more sensitive to changes in market interest rates than their interest-earning
assets, or vice versa. In either event, if market interest rates should move
contrary to the Banks' position, the "gap" will work against the Banks and
their earnings may be negatively affected. Management actively monitors the
interest rate sensitivities of the assets and liabilities of the Banks and
works to prevent any gaps from approaching imprudent levels.
LIMITED MARKET FOR SHARES
While the shares of the Company's Common Stock are freely tradeable by
persons other than those who are currently affiliates of the Company, prior to
this Offering there has been a very limited public market for the shares of the
Company in the OTC market through the OTC Bulletin Board system. The Company
has made application for inclusion of the Common Stock in The Nasdaq National
MarketSM, subject to issuance of the shares in this Offering; however, there can
be no assurance that an active public market will necessarily develop for the
Common Stock. The per share offering price does not necessarily reflect the
price at which the Common Stock might trade in an active or limited market
following the Offering, and there can be no assurance that following the
Offering the Common Stock will trade at or above the subscription price.
DETERMINATION OF OFFERING PRICE
The Company will determine the aggregate offering price of shares
issuable in the Subscription and Community Offering based upon a number of
valuation factors such as prevailing economic and market conditions, revenues
and earnings of the Company, estimates of the business potential and prospects
of the Company, the present state of the Company's business and operations, an
assessment of the Company's management, and the consideration of the foregoing
factors in relation to market valuations of companies in related businesses,
and, to a lesser extent, the prior trading history for shares of Common Stock.
BEST EFFORTS SUBSCRIPTION AND COMMUNITY OFFERING
The Company, and the Selling Agent as agent for the Company, are
offering the Common Stock on a best efforts basis in the Subscription and
Community Offering. Completion of the Offering is not contingent upon the sale
of any minimum number of shares, and the number of shares actually issued may
be substantially less than the maximum 1,200,000 shares offered hereby. This
may occur even though the Company may receive orders at or above such maximum,
as the Company reserves the right to accept or reject, in whole or in part, any
purchase orders in the Subscription and Community Offering. Additionally,
depending on market conditions, the Company may elect to offer shares in the
Community Offering through a selling group of broker-dealers and/or commence an
underwritten Public Offering. In such event(s), the Company may reduce from
the maximum the number of shares actually issued and would incur additional
selling costs. See "TERMS OF THE OFFERING -- Plan of
10
<PAGE> 12
Distribution for the Subscription, Community, and Public Offerings." If the
Offering is completed with a materially fewer number of shares of Common Stock
issued and/or the payment of additional selling costs, the resultant net
proceeds would be reduced from the amounts set forth herein. A lower level of
capitalization may limit the Company's ability to implement future growth
strategies.
RISK OF DELAYED OFFERING
Once made, subscriptions are irrevocable, even if the market price for
the Common Stock falls below the $___ per share subscription price during the
Subscription and Community Offering. Though the Company anticipates completing
the Offering as soon as practicable following the Expiration Date, the Company
has reserved the right to extend the Offering until __________, 1997.
Accordingly, investors placing purchase orders in the Subscription and
Community Offering, including any extensions thereof, are placed at the risk of
(i) foregoing potential investment income and having subscription
funds unavailable as a result of subscription funds being placed in
non-interest-bearing escrow accounts, and/or (ii) having holds placed on
deposit accounts at the Banks as a result of account withdrawal authorizations
used as payment for shares subscribed.
SHARES ELIGIBLE FOR FUTURE SALE
Following completion of the Offering, the Company will have 7,803,420
shares of Common Stock issued and outstanding (assuming no exercise of the
over-subscription and over-allotment options), and also assuming no exercise of
outstanding options to purchase shares of Common Stock (the "Options"), no
exercise of outstanding rights to purchase shares of Common Stock (the
"Rights") and no exercise of outstanding warrants representing the right to
purchase shares of Common Stock (the "Warrants"). After the Offering, a total
of 5,754,072 shares, including the 1,200,000 shares offered hereby (assuming no
exercise of the over-subscription and over-allotment options), will be freely
tradeable without restriction under the Securities Act of 1933, as amended (the
"Securities Act"), except for any shares which are purchased in the Offering by
affiliates of the Company. Of the 1,429,165 shares currently held by
affiliates of the Company, 1,341,609 of these shares (representing 17.2% of the
total number of shares which will be outstanding following completion of the
Offering) could be resold following the Offering by persons who are affiliates
of the Company, subject to certain requirements of Rule 144 under the
Securities Act which generally limit the number of shares that may be sold in
any three-month period to the greater of (a) 1% of the shares outstanding
(78,034 shares following completion of the Offering or 79,834 if the
over-subscription option is exercised in full) or (b) the average weekly
trading volume of shares of Common Stock for the four-week period prior to the
time of such resale. See "SHARES ELIGIBLE FOR FUTURE SALE."
COMPETITION
The Company competes in the financial services industry primarily by
emphasizing highly responsive personalized customer service. The financial
services business is highly competitive and the Company encounters strong
direct competition for deposits, loans and other financial services in all of
its market areas. The Company's principal competitors include other commercial
banks, savings banks, savings and loan associations, mutual funds, money market
funds, finance companies, credit unions, mortgage companies, private issuers of
debt obligations and suppliers of other investment alternatives, such as
securities firms. In addition, in recent years, several major multi-bank
holding companies have entered or expanded in the Chicago metropolitan market.
Generally, these financial institutions are significantly larger than the
Company and have access to greater capital and other resources. Many of the
Company's non-bank competitors are not subject to the same degree of regulation
as that imposed on bank holding companies, federally insured banks and national
or Illinois chartered banks. As a result, such non-bank competitors have
advantages over the Company in providing certain services. The Company
competes for deposits principally by offering depositors a variety of deposit
programs at attractive interest rates, convenient office locations, hours and
other services, and competes for loan originations primarily through the
interest rates and loan fees it charges, the efficiency and quality of services
it provides to borrowers and the variety of its loan products. See "BUSINESS
- -- Competition."
11
<PAGE> 13
SUBSTANTIAL CONTROL BY OFFICERS, DIRECTORS AND OTHER AFFILIATED SHAREHOLDERS
After this Offering, the officers and directors of the Company and
certain members of their families will in aggregate beneficially own
approximately 20.28% of the outstanding shares of Common Stock (assuming
1,200,000 shares are sold in the Offering) and are likely to continue to
exercise substantial control over the Company's affairs. Howard D. Adams and
members of his immediate family will beneficially own approximately 11.87% of
the Common Stock after the Offering. See "PRINCIPAL SHAREHOLDERS."
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Amended and Restated Articles of
Incorporation (the "Articles") and by-laws (the "By-Laws") and the Illinois
Business Corporation Act ("IBCA") may have the effect of impeding the
acquisition or control of the Company by means of a tender offer, a proxy
fight, open-market purchases or otherwise in a transaction not approved by the
board of directors of the Company (the "Board of Directors"). In addition, it
is anticipated that the Board of Directors may consider and may implement a
shareholder rights plan to deter coercive, hostile bids for corporate control.
Such provisions, and a rights plan if adopted, may have the effect of
discouraging a future takeover attempt which is not approved by the Board of
Directors. Certain provisions will also render the removal of the current
Board of Directors or management of the Company more difficult. Among other
provisions, the Company's Articles and By-Laws include the authorization of
"blank check" preferred stock, a staggered board of directors, limiting the
filling of Board of Directors vacancies to the Board of Directors, prohibitions
on shareholder action by written consent, election of the IBCA "fair price"
provision, requiring advance notice with respect to shareholder proposals and
director nominations and requiring an 85 percent vote of the shareholders to
amend certain anti-takeover provisions in the Articles and By-Laws.
REGULATORY RESTRICTIONS ON DIVIDENDS
The Company has not previously paid regular quarterly dividends.
While there can be no assurances, it is anticipated that the Company may
commence payment of dividends, out of funds legally available therefor. The
Company's sources of funds for dividend payments will consist primarily of
dividends from its direct and indirect subsidiaries. Under the provisions of
the Illinois Banking Act, dividends may not be declared by North Shore Bank,
Lake Forest Bank, Hinsdale Bank nor Libertyville Bank except out of each Bank's
net profits (as defined therein), and unless each Bank has transferred to
surplus at least one-tenth of its net profits since the date of the declaration
of the last preceding dividend, until the amount of its surplus is at least
equal to its capital. Presently, the surplus of each of these Banks equals or
exceeds regulatory capital. As a national association, dividends declared in
any calendar year by Barrington Bank may not exceed its net profit for the year
plus the retained net profits for the preceding two years. However, each of
North Shore Bank, Libertyville Bank and Barrington Bank is subject to
additional restrictions prohibiting the payment of dividends by a de novo bank
in its first three years of operations. The de novo periods will end for North
Shore Bank, Libertyville Bank and Barrington Bank in September 1997, October
1998, and December 1999, respectively. Subsequent to these dates, the Banks
would be allowed to pay dividends subject to the regulatory limitations that
are applicable to all state-chartered banks, or in the case of Barrington Bank,
national banks. As of September 30, 1996, based upon applicable regulatory
limitations, Lake Forest Bank had approximately $2.4 million available to pay
as dividends to the Company.
The Company has a covenant with its lender, LaSalle National Bank,
that dividends will not be paid without the lender's prior consent, which
consent will not be unreasonably withheld. In addition, there are certain
dividend restrictions in the financial covenants of First Premium's
securitization facility. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION."
FINANCIAL INSTITUTION REGULATION
The Company, the Banks and their bank holding companies are subject to
extensive federal and state legislation, regulation and supervision. See
"SUPERVISION AND REGULATION." Recently enacted, proposed and future
legislation and regulations have had, will continue to have or may have
significant impact on the financial
12
<PAGE> 14
services industry. Some of the legislative and regulatory changes may benefit
the Company and the Banks; others, however, may increase their costs of doing
business and thereby assist competitors.
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Such forward-looking statements
may be deemed to include, among other things, statements relating to the
Company's anticipated internal growth and plans to pursue additional
specialized earning asset niches, to form additional de novo banks and new
branch offices, and to pursue potential development or acquisition of specialty
finance businesses. Actual results could differ materially from those
addressed in the forward-looking statements as a result of the factors
discussed above in this "RISK FACTORS" section and elsewhere in this
Prospectus.
USE OF PROCEEDS
The net proceeds to the Company from the sale of 1,200,000 shares of
Common Stock in this Offering are estimated to be approximately $____ million
(assuming all shares are sold directly by the Company in the Subscription and
Community Offering with no exercise of the over- subscription option) after
deducting commissions and estimated expenses payable by the Company of
$__________.
The Company will use the net proceeds of this offering to repay
approximately $___ million of indebtedness outstanding as of January __, 1997,
under the Company's $25 million revolving line of credit. Borrowings under the
line bears interest at a floating rate equal to, at the Company's option,
either the lender's prime rate or the London Inter-Bank Offered Rate ("LIBOR")
plus 150 basis points. The weighted average rate at December 31, 1996 was
_____% and loans drawn on the line mature on or before September 1, 1997. The
revolving line of credit is secured by a pledge of the stock of each of the
subsidiary Banks, other than Barrington Bank, and the subsidiary bank holding
companies. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION -- Liquidity and Capital Resources."
Following such repayment, the unused portion of the entire line will
remain available and the Company may use the line for future borrowings from
time to time for general corporate purposes, including continued growth of the
Company's banking and finance subsidiaries, for future branch office openings,
and additional de novo bank formations, and for potential future acquisitions
of specialty finance companies or investments in businesses engaged in niche
consumer lending or selected commercial finance activities.
13
<PAGE> 15
MARKET FOR COMMON STOCK AND DIVIDENDS
LIMITED TRADING MARKET
The Company's Common Stock is freely tradeable by persons other than
those who are currently affiliates of the Company, and it has traded
occasionally in the OTC market where bid and ask prices are quoted on the OTC
Bulletin Board; however, prior to this Offering there has been no active
trading in the Common Stock. While the Company has made application for
inclusion of the Common Stock in The Nasdaq National MarketSM, there can be no
assurance that an active or liquid public market will necessarily develop for
the Common Stock. See "RISK FACTORS -- Limited Market for Shares."
As of the Record Date, the Company had approximately _____ holders of
record of its Common Stock.
DIVIDENDS
Holders of Common Stock are entitled to receive such dividends as may
be declared by the Board of Directors from time to time and paid out of funds
legally available therefor. Because the Company's consolidated net income
consists largely of net income of the Banks and First Premium, the Company's
ability to pay dividends depends upon its receipt of dividends from the Banks
and First Premium. The Banks' ability to pay dividends is regulated by banking
statutes. See "Financial Institution Regulation Generally -- Dividend
Limitations" under "SUPERVISION AND REGULATION."
The declaration by the Company of dividends on the Common Stock is
discretionary and will depend on the Company's earnings and financial
condition, regulatory limitations, tax considerations, and other factors
including limitations imposed by the terms of the Company's revolving line of
credit and First Premium's securitization facility. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION --
Liquidity and Capital Resources." The Company has not previously paid
quarterly dividends on the Common Stock but rather has retained earnings to
facilitate the continued growth of the Company. Although there can be no
assurances that the Company will ever commence payment of regular dividends, it
is anticipated that the Company may commence payment of dividends on the Common
Stock in the future, out of funds legally available therefor.
14
<PAGE> 16
CAPITALIZATION
The following table sets forth the total indebtedness and
capitalization of the Company as of September 30, 1996, pro forma
capitalization adjusted to give effect to the issuance by the Company of 87,556
shares of Common Stock in December 1996 in connection with the recent
acquisition described in "RECENT ACQUISITION" and pro forma capitalization as
further adjusted to reflect the issuance and sale by the Company of the maximum
of 1,200,000 shares of Common Stock offered hereby in the Subscription and
Community Offering (assuming no exercise of the over-subscription or
over-allotment options) and the application of the estimated net proceeds as
set forth under "USE OF PROCEEDS."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------------------------------
PRO FORMA
AS ADJUSTED
ACTUAL PRO FORMA FOR THE OFFERING
--------- ---------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
INDEBTEDNESS:
Notes payable . . . . . . . . . . . . . . $ 16,554 $ 17,054 $ --
======== ========= =========
SHAREHOLDERS' EQUITY:
Preferred Stock . . . . . . . . . . . . . . $ -- $ -- $ --
Common Stock, without par value, 30,000,000
shares authorized; 6,515,864 shares issued
and outstanding; 6,603,420 shares
outstanding pro forma; 7,803,420 shares
outstanding pro forma as adjusted (1) . . 6,516 6,603 7,803
Common stock warrants; 138,592 warrants
issued and outstanding; 155,430
warrants outstanding pro forma and
pro forma as adjusted . . . . . . . . . 75 100 100
Surplus . . . . . . . . . . . . . . . . . 51,681 52,871
Retained earnings . . . . . . . . . . . . (17,511) (17,511) (17,511)
Unrealized gain on investments available
for sale . . . . . . . . . . . . . . . 24 24 24
------- -------- ---------
Total shareholders' equity . . . . . . 40,785 42,087
------- -------- ---------
Total capitalization . . . . . . . . $57,339 $59,141 $
======= ======== =========
</TABLE>
__________________
(1) On a pro forma basis, excludes 1,151,537 shares of Common Stock reserved
for issuance upon exercise of currently outstanding Options, of which
Options to purchase 646,117 shares of Common Stock are currently
exercisable; exercisable Rights to purchase an aggregate of 103,236
shares of Common Stock; and Warrants to purchase an aggregate of 155,430
shares of Common Stock.
The following table sets forth the Company's actual consolidated
regulatory capital ratios at September 30, 1996, and as adjusted to give effect
to the application of the estimated net proceeds from the Subscription and
Community Offering, assuming the sale of 1,200,000 shares.
15
<PAGE> 17
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------------------------------------------------------
ACTUAL PRO FORMA ADJUSTED
---------------------------------------- ----------------------------------------
"WELL-CAPITALIZED" EXCESS "WELL-CAPITALIZED" EXCESS
CAPITAL STANDARD(1) CAPITAL CAPITAL STANDARD(1) CAPITAL
------- ------------------ ---------- ------- ------------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
DOLLAR BASIS:
Tier 1 capital(1) . . . . . . . . . . . . $40,291 $31,040 $ 9,251 $ $ $
Total risk-based capital . . . . . . . . . 44,040 45,400 (1,360)
PERCENTAGE BASIS:
Average equity-to-average asset ratio . . 7.7% N/A N/A % N/A %
Leverage ratio . . . . . . . . . . . . . . 6.5% 5.0% 1.5% 5.0%
Tier 1 risk-based capital ratio . . . . . 8.9% 6.0% 2.9% 6.0%
Total risk-based capital ratio . . . . . . 9.7% 10.0% (0.3)% 10.0%
__________________
</TABLE>
(1) Reflects the amount of capital necessary to meet the "well-capitalized"
regulatory standard. See "SUPERVISION AND REGULATION." The Company
currently meets the "adequately capitalized" standard in both Tier 1 and
risk-based capital.
16
<PAGE> 18
DILUTION
As of September 30, 1996, giving pro forma effect to the issuance of
87,556 shares in the Company's recent acquisition, the Company had an aggregate
of 6,603,420 shares of Common Stock outstanding, and the Common Stock had a pro
forma net tangible book value of $6.10 per share. "Net tangible book value per
share" represents the tangible net worth of the Company (total assets less
goodwill and total liabilities), divided by the number of shares of Common
Stock deemed to be outstanding. Without taking into account any other changes
in net tangible book value after September 30, 1996, other than those resulting
from the sale by the Company of 1,200,000 shares offered hereby, the pro forma
net tangible book value at September 30, 1996, would have been $_____ per
share, representing an immediate increase of $_____ per share to current
shareholders and an immediate dilution of $_____ per share to persons
purchasing the shares offered hereby. The following table illustrates this per
share dilution.
<TABLE>
<S> <C> <C>
Per share Offering price . . . . . . . . . . . . . . . . . . . . . . . . . $
Pro forma net tangible book value per share as of
September 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . $6.10
Increase attributable to new shareholders . . . . . . . . . . . . . . .
-------
Pro forma net tangible book value per share after Offering . . . . . . . .
----------
Per share dilution to new shareholders(1) . . . . . . . . . . . . . . . . . $
==========
</TABLE>
________________
(1) Does not give effect to and assumes no prior exercise of the 155,430
outstanding Warrants; or any of the outstanding Options to purchase up to
an aggregate of 646,117 shares of Common Stock which were exercisable as of
September 30, 1996; or any of the outstanding Rights to purchase 103,236
shares, all of which are currently exercisable.
The following table compares, on a pro forma basis at September 30,
1996, the total number of shares of Common Stock purchased from the Company,
the total cash consideration paid and the average price per share paid by
existing shareholders prior to the Offering and by the persons purchasing
shares offered hereby (giving effect to the issuance of 87,556 shares in the
recent acquisition and assuming the sale of 1,200,000 shares, before deduction
of Selling Agent fees and commissions and estimated Offering expenses).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- --------------------- AVERAGE
PERCENT PERCENT PRICE
NUMBER OF TOTAL AMOUNT OF TOTAL PER SHARE
-------- --------- ------ -------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Existing shareholders(1) . . . . . . . . . . . 6,603,420 85% $62,835 % $9.52
Investors participating in Offering . . . . . . 1,200,000 15
--------- --- ------- ---
Total . . . . . . . . . . . . . . . . . . . . 7,803,420 100% $ 100%
========= === ======= ===
</TABLE>
_________________
(1) Does not give effect to and assumes no prior exercise of the 155,430
outstanding Warrants; or any of the outstanding Options to purchase up to
an aggregate of 646,117 shares of Common Stock which were exercisable as of
September 30, 1996; or any of the outstanding Rights to purchase 103,236
shares, all of which are currently exercisable.
17
<PAGE> 19
TERMS OF THE OFFERING
THE OFFERING
The Company is offering for sale up to 1,200,000 newly issued shares
of its Common Stock, without par value, at an offering price of $ _____ per
share. The Company has entered into an agency agreement (the "Agency
Agreement") with the Selling Agent. Subject to the terms and conditions set
forth in the Agency Agreement, the Selling Agent has agreed to offer up to
1,200,000 shares as agent of and for the account of the Company on a "best
efforts" basis.
The Subscription Offering. The shares are being offered on a priority
basis to shareholders of the Company as of _______________, 1996 ("Record Date
Shareholders") and to certain customers of the Company's banking subsidiaries
as of _________________, 1996 ("Record Date Customers"). The highest priority
will be given to those Record Date Shareholders placing purchase orders prior
to Noon, Central Time, on ______________, 1997.
The Community Offering. While the shares are being offered on a
priority basis to eligible subscribers in the Subscription Offering, the Common
Stock is also being offered concurrently by the Company for sale to the general
public, with a preference being given to residents of the communities in which
the Banks have offices. Depending on market conditions, shares of Common Stock
may be offered for sale in the Community Offering to the general public on a
"best efforts" basis by a selling group of broker dealers managed by the
Selling Agent.
Unless extended by the Company, the Subscription and Community
Offering will terminate at Noon Central Time, on _________________, 1997. The
Company reserves the right in its sole discretion, notwithstanding the
priorities described above, to accept or reject in whole or in part orders in
the Subscription and Community Offering.
Procedures for Subscribing for Common Stock in the Subscription and
Community Offering. The Company will mail, hand deliver, or make available at
its offices Prospectuses and related subscription documents (the "Stock Order
Forms" and the "Certification Forms"). In accordance with Rule 15c2-8 of the
Exchange Act, to ensure that each purchaser receives a Prospectus at least 48
hours prior to the Expiration Date, no Prospectus will be mailed any later than
five days prior to such date or hand delivered any later than two days prior to
such date.
Record Date Shareholders, Record Date Customers, and other investors
interested in subscribing for shares of Common Stock in the Subscription and
Community Offering must return to the Company a properly completed original
Stock Order Form (facsimile copies and photocopies will not be accepted) and a
fully executed Certification Form along with full payment (or appropriate
instructions for authorizing a withdrawal from a deposit account at one of the
Banks) at $___ per share for all shares subscribed for or ordered prior to
Noon, Central Time, on __________, 1997. To receive preference in the
Subscription Offering, Record Date Shareholders must place purchase orders
prior to Noon, Central Time, on __________, 1997. Original Stock Order Forms
and Certification Forms accompany this Prospectus. In order to ensure that
prospective investors are properly identified as to their stock purchase
priorities, Record Date Shareholders and Record Date Customers must provide the
identifying information requested on the Stock Order Forms.
Payment for shares of Common Stock must be made by check, bank draft
or money order drawn upon a United States bank payable to "Wintrust Financial
Corporation" or by withdrawal authorization from a deposit account at one of
the Banks. Wire transfers will not be accepted. Payment by non-certified
personal check will be considered received only upon clearance, and the Company
in its sole discretion may reject subscriptions for which funds have not
cleared at the Expiration Date. Payments made by check, bank draft, or money
order will be placed in a non-interest-bearing escrow account at one of the
Banks until completion or termination of the Offering. The Stock Order Form
contains blanks to authorize deposit withdrawals as payment for shares
subscribed, and holds will be placed on such deposit accounts for the amount of
the subscription until completion or termination of the Offering. Interest on
these accounts will continue at their contractual rates, and no early
withdrawal penalty will be assessed on certificates of deposits used as
payment. To the extent subscription orders are filled, the
18
<PAGE> 20
foregoing escrow and deposit accounts will be charged as of the closing date of
the Offering against issuance of certificates evidencing ownership of the
shares of Common Stock. In the event subscription orders are not filled at all
or only in part, or if the Offering is terminated or extended beyond
__________, 1997, funds placed in escrow will be returned to subscribers
without interest and deposit account holds will be terminated.
The methods of delivery of Stock Order Forms, Certification Forms and
payment for shares are at the election and risk of Record Date Shareholders,
Record Date Customers, and other prospective investors. The Company recommends
that such parties deliver in person to one of the Banks or their full-service
branch offices the properly completed original Stock Order Form along with the
fully executed Certification Form and full payment in advance of the Expiration
Date. Alternatively, such parties may mail them in the pre-addressed,
postage-prepaid business reply envelope accompanying the Prospectus, allowing
for sufficient time for delivery of the mail to the Company and the clearance
of any non- certified personal checks prior to the Expiration Date.
Once made, subscriptions are irrevocable, even if the market price for
the Common Stock falls below the subscription price of $___ per share during
the Subscription and Community Offering. Completion of the Subscription and
Community Offering is not conditioned upon the sale of any minimum number of
shares. See "RISK FACTORS -- Best Efforts Subscription and Community
Offering."
All questions concerning the timeliness, validity, form, and
eligibility of Stock Order Forms received will be determined by the Company in
its sole discretion, including the absolute right of the Company to reject any
order in whole or part in the Subscription and Community Offering without
assigning any reason therefor. The Company may, in its sole discretion, permit
the correction of incomplete or improperly executed Stock Order Forms or waive
the Expiration Date receipt deadline but does not represent that it will do so.
The Company assumes no responsibility to provide, nor will it incur any
liability for failure to give, notification of any defect or irregularity in
connection with the submission of Stock Order Forms.
Prospective investors with questions or needing assistance concerning
the procedures for subscribing for shares of Common Stock should call the Stock
Sale Center at (847) __________ and ask for an EVEREN Securities, Inc.
representative.
The Public Offering. Depending on market conditions, upon the
completion of the Subscription and Community Offering, any shares then
remaining available for sale may be offered to the general public in an
underwritten Public Offering to be managed by the Selling Agent. Completion of
the Public Offering will be subject to the execution of an underwriting
agreement between the Company and the Selling Agent. Whether a Public Offering
occurs and an underwriting agreement is executed with the Selling Agent will
depend upon, among other factors, the negotiation of a mutually acceptable
underwriting agreement, the market conditions then prevailing, the aggregate
number of shares of Common Stock not subscribed for in the Subscription and
Community Offering, and the then-current financial condition of the Company.
The number of shares of Common Stock to be sold in the Public Offering, if any,
will be determined by the Selling Agent and the Company.
Limitations on Purchase of Shares. Record Date Shareholders, Record
Date Customers and other prospective investors must subscribe for at least 100
shares. In addition, no subscription orders will be accepted from parties or
groups which, when combined with any current holdings of Common Stock, would
cause any undue concentration of ownership control as determined by the Company
in its sole discretion. There can be no assurance that Common Stock will be
available to satisfy all subscription orders, and the Company reserves the
absolute right to allocate available shares in its sole discretion.
Delivery of Certificates. Certificates evidencing ownership of shares
purchased in the Subscription and Community Offering will be delivered, along
with any refund due, by U.S. mail, postage-prepaid, directly to the purchasers
thereof at the address indicated on the Stock Order Form as soon as practicable
following completion of the Offering. Until share certificates are available
and delivered to purchasers, purchasers may be unable to sell the shares of
Common Stock purchased by them.
19
<PAGE> 21
PLAN OF DISTRIBUTION FOR THE SUBSCRIPTION, COMMUNITY AND PUBLIC OFFERINGS
The Company, pursuant to the terms of the Agency Agreement, engaged
the Selling Agent as a financial and marketing adviser in connection with the
Offering. The Selling Agent has agreed to use its best efforts to assist the
Company with the solicitation of subscriptions and purchase orders for shares
of Common Stock in the Subscription and Community Offering.
Based upon negotiations between them, the Company and the Selling
Agent have entered into an Agency Agreement engaging the Selling Agent as
financial adviser and marketing agent with respect to the Offering. Pursuant
to the Agency Agreement, the Selling Agent will provide the Company certain
financial and marketing advice regarding the structure of the Offering and sale
of the Common Stock; prepare certain marketing documents ancillary to the
Prospectus; establish, staff, and manage a Stock Sale Center to solicit
purchase orders for the Common Stock and provide technical and administrative
support; and conduct informational meetings for prospective investors. The
Agency Agreement does not obligate the Selling Agent to take or purchase any of
the shares of Common Stock. As compensation for the foregoing services, the
Company will pay the Selling Agent 2.5% of the aggregate actual sale price of
the shares of Common Stock sold directly by the Company in the Subscription and
Community Offering without the use of commissioned registered representatives.
In addition, in the event the Company and the Selling Agent elect to employ
selected broker-dealers (including the Selling Agent) to solicit purchase
orders in the Community Offering using the assistance of commissioned
registered representatives, the Company would pay the Selling Agent 4.0% of the
aggregate actual sale price of the shares of Common Stock sold by the Company
in such manner of which 2.5% would represent the management fee of the Selling
Agent and 1.5% would be paid by the Selling Agent to the selected
broker-dealers. No commissions will be paid to any broker-dealer except the
Selling Agent unless a broker-dealer enters into a written selected dealer's
agreement with the Selling Agent with respect to the Community Offering. The
Company will also reimburse the Selling Agent for certain out-of-pocket
expenses (including fees and expenses of the Selling Agent's counsel) up to a
maximum of $75,000. The Company has also agreed to indemnify the Selling Agent
against certain liabilities, including civil liabilities arising under the
Securities Act, or to contribute to certain payments made in respect thereof.
The Company may, in its sole discretion, increase the number of shares
of Common Stock sold by up to 180,000 additional shares to satisfy unfilled
purchase orders in the Subscription and Community Offering.
The offering price of the shares issued in the Subscription and
Community Offering has been determined by the Company based on a number of
valuation factors including prevailing market and economic conditions, revenues
and earnings of the Company, estimates of the business potential and prospects
of the Company, the present state of the Company's business and operations, an
assessment of the Company's management, and the consideration of the foregoing
factors in relation to market valuations of companies in related businesses,
and, to a lesser extent, the prior trading history for the shares of Common
Stock.
PUBLIC OFFERING
The Company has also retained the Selling Agent to serve as the
managing underwriter of the Public Offering, if any. In the event the Company
and the Selling Agent determine to commence the Public Offering, the terms
thereof would be set forth in a mutually satisfactory underwriting agreement
executed between them. The nature of the underwriting agreement would be such
that the Selling Agent would offer a specified number of shares to the general
public at the offering price per share set forth on the cover page hereof and
purchase such shares from the Company at such price less an underwriting
discount currently estimated to be 6.6%. In the underwriting agreement the
Company would also grant the Selling Agent an option, exercisable within 30
days of the completion of the Public Offering, to purchase up to an additional
15% of the shares offered in the Public Offering to cover over-allotments, if
any, at the same price as would be paid by the Selling Agent for the other
shares purchased pursuant to the underwriting agreement. The Selling Agent
would exercise the option only for the purpose of covering over-allotments, if
any, made in connection with the distribution of the Common Stock offered in
the Public Offering.
20
<PAGE> 22
THE COMPANY
BACKGROUND
The Company, an Illinois corporation headquartered in Lake Forest,
Illinois, which was organized in 1992, is a financial services holding company
consisting of five commercial banks operating in selected affluent suburban
Chicago communities and an insurance premium finance company headquartered in
Deerfield, Illinois, with commercial borrowers in 38 states. The principal
founding shareholders of the Company are Howard D. Adams, Chairman and Chief
Executive Officer, and Edward J. Wehmer, President. Together with other
founding investors, over the past six years Messrs. Adams and Wehmer organized
separate de novo banking operations and completed stock financings to
separately capitalize the holding companies of each of the Banks. Each Bank
was organized to serve the banking and trust needs of individuals and
businesses who prefer the highly personalized service of a locally owned and
managed community-oriented bank. Mr. Adams was also the founder of the holding
company of First Premium, which at one time owned a number of other specialty
finance and insurance businesses. Combined with members of his family, Mr.
Adams is the largest shareholder of the Company.
Effective September 1, 1996, pursuant to the terms of a reorganization
agreement dated as of May 28, 1996, which was approved by shareholders of all
parties, the Company completed a reorganization transaction to combine the
separate activities of the holding companies of each of the Company's operating
subsidiaries (other than Barrington Bank which was opened in December 1996).
As a result of the transaction, the Company (formerly known as North Shore
Community Bancorp, Inc., the name of which was changed to Wintrust Financial
Corporation in connection with the reorganization) became the parent holding
company of each of the separate businesses, and the shareholders and warrant
holders of each of the separate holding companies exchanged their shares for
Common Stock and warrants of the Company (the "Reorganization"). The
Reorganization was accounted for as a pooling of interests transaction and,
accordingly, the Company's financial statements have been restated on a
combined and consolidated basis to give retroactive effect to the combined
operations throughout the reported historical periods.
The Company is committed to an operational philosophy of retaining
decision making in the on-site Bank officers and personnel and the First
Premium management team and their respective boards of directors. This is key
to the Company's strategy of prioritizing highly responsive and personalized
attention to customer service in all of its operations with an emphasis on the
delivery of quality products through traditional and state-of-the-art systems.
Senior management of the Company provides expertise to each of the Banks and
First Premium in the areas of capital planning, long-term strategic planning,
marketing and advertising, financial management, asset/liability management and
technology, while the management teams of the Banks and First Premium have the
full managerial responsibilities with respect to customer service and the
ongoing day-to-day operations of their respective subsidiaries. The boards of
directors of the Company's operating subsidiaries, comprised largely of local
community leaders and influential business persons in their respective target
markets in the case of the Banks, and of First Premium have full oversight
responsibilities of their respective management teams.
Prior to the Reorganization, each of the Banks shared the services of
the persons now serving as the Company's five senior executive officers, who
allocated their time among the different entities. As a larger, combined
financial services company, the Company expects to benefit from greater access
to financial and managerial resources while maintaining its commitment to
localized decision-making and to its community banking philosophy. Management
also believes the Company is positioned to compete more effectively with other
larger and more diversified banks, bank holding companies and other financial
services companies as it pursues its growth strategy through additional branch
openings and de novo bank formations, potential acquisitions of specialized
finance companies and other expansion. See "BUSINESS."
The purpose of the Offering is to enable the Company to repay a
portion of the debt outstanding under the Company's $25 million revolving line
of credit. Following such repayment, the unused portion of the entire line
will remain available for future borrowings from time to time for general
corporate purposes, including continued growth of the Company's banking and
finance subsidiaries, for additional branching and de novo bank formations and
for potential future acquisitions.
21
<PAGE> 23
DE NOVO COMMUNITY BANKING
Since Lake Forest Bank was opened in 1991, the management team has
systematically expanded the Company's operations through successive de novo
bank formations, each time implementing the community banking strategy
developed, and continually enhanced, by the Company. In total, the Company has
opened five new Banks, the most recent in Barrington, Illinois in December
1996. In each case, in planning for a de novo bank formation, the Company has
carefully evaluated potential new markets to identify affluent communities in
the Chicago metropolitan area where management believed the Company's community
banking philosophy could be successfully deployed. Among other factors,
communities attractive to the Company usually exhibit a high level of local
pride by residents in the community and offer potential bank locations in
well-trafficked town or village center areas. The table below sets forth
certain information with respect to each of the Banks:
<TABLE>
<CAPTION>
Total Assets
at
Date September 30, Communities Number of
Bank CEO & President Opened 1996 Served Facilities
---- --------------- ------- ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Lake Forest Bank Edward J. Wehmer December 1991 $242,000 Lake Forest, Illinois 3
Lake Bluff, Illinois 1
Hinsdale Bank Dennis Jones, October 1993 $143,000 Hinsdale, Illinois 2
CEO Clarendon Hills, Illinois(1) 1
Richard Murphy, Western Springs, Illinois -
President Burr Ridge, Illinois -
North Shore Bank John W. Close September 1994 $151,000 Wilmette, Illinois 2
Kenilworth, Illinois -
Glencoe, Illinois 1
Winnetka, Illinois 1
Libertyville Bank J. Albert Carsten October 1995 $66,000 Libertyville, Illinois 2
Mundelein, Illinois -
Vernon Hills, Illinois -
Barrington Bank James Bishop December 1996 N/A Barrington, Illinois 1
Barrington Hills, Illinois -
Lake Barrington, Illinois -
North Barrington, Illinois -
South Barrington, Illinois -
Inverness, Illinois -
</TABLE>
(1) Operates in this community as Clarendon Hills Bank, a branch of Hinsdale
Bank.
Each of the Banks provides a variety of financial services to
individuals, businesses, local governmental units, and institutional clients.
These services include federally insured deposits (demand, NOW, money market,
savings, and time deposit accounts); real estate, consumer, and commercial
loans; and safe deposit services and related services tailored for the client
base. In addition, Lake Forest Bank provides trust services to its customers
and customers of the other Banks. At September 30, 1996, the Company had
consolidated total assets of $621.3 million, deposits of $549.3 million, loans
receivable of $414.4 million, and shareholders' equity of $40.8 million. See
"BUSINESS."
22
<PAGE> 24
OPERATIONAL PHILOSOPHY
Key elements of the Company's business strategy include:
- Maintaining decision-making authority locally within each of the
Banks. The Company's community banking philosophy is driven by its emphasis on
local independence intended to maintain decision-making authority within each
of the Banks. Each Bank is staffed with a management team which has full
managerial responsibilities with respect to customer service and the ongoing
day-to-day operations of their respective Bank. The board of directors of each
Bank, ranging in size from 14 to 20, is comprised largely of local community
leaders and influential business persons in that Bank's target market and has
full oversight responsibilities for that Bank's management team. Management
believes this strategy enables each Bank to maximize its focus on serving the
needs of its particular communities in a highly responsive manner in an effort
to compete most effectively for market share within its target markets.
- Focusing on a highly personal, professional level of service. The
Company's guiding principle is to provide customers with quality products and
services delivered through traditional and state-of-the art systems, while
prioritizing highly responsive and personalized attention to customer service
in all of its operations. The Company believes that local management of the
Banks with point-of-sale decisionmaking is essential to providing a high level
of personal service and attracting and maintaining deposit, loan and trust
customers.
- Utilizing innovative community-oriented marketing. Each of the
Banks has developed a niche within the communities that it serves through the
utilization of innovative community-oriented marketing programs which the
Company expects to continue to utilize as it pursues branching and additional
de novo bank formations. In connection with openings of Bank or branch
facilities, the Banks have offered local residents highly competitive retail
products designed to attract customers to the Bank, providing an opportunity to
introduce the full range of personalized banking services. Different
innovative deposit and loan products have been designed to appeal to the unique
needs of different types of Bank customers such as age groups and other special
segments of the target markets. The Banks market their products aggressively
through creative newspaper and other advertising, special promotions and
frequently sponsored community events. To increase commercial banking services
provided in their respective market areas, the Banks also emphasize business
development calling programs and superior servicing of existing commercial loan
customers consisting primarily of small businesses.
- Employing fewer, experienced individuals at relatively higher
compensation rates. Key to the Company's growth and profitability is
management's extensive experience in providing community banking services. The
Banks' presidents and chief executive officers were selected not only for their
years of banking experience but also for their business development skills and
their strong ties to the communities they serve. To achieve its objective of
providing a highly personal, professional level of service to commercial and
retail customers of the Banks, the Company emphasizes the recruiting and
training of competent and highly motivated employees at all levels of the
organization. Management expects that a well-trained and highly motivated core
of employees will produce lower than average turnover and will allow maximum
personal contact with customers in order to understand and fulfill customer
needs and preferences. The Company's compensation policies and practices are
central to the maintenance of its decentralized management structure, and are
intended to promote and support local Bank autonomy while at the same time
enhancing overall Company performance. In addition to cash incentive plans,
the Company maintains stock option plans to provide incentives for superior
performance and to align the interests of its executive officers and the Banks'
presidents and managers with those of the Company's shareholders.
- Emphasizing trust service needs of small businesses and affluent
individuals residing in the Banks' market areas. Through Lake Forest Bank's
trust department, the Company is currently providing investment management and
trust services to small businesses and individuals residing in many of the
Banks' market areas. The Company intends to more aggressively market its trust
services going forward in an effort to expand its market share in this fee
income segment of banking business. The Company may in the future establish
trust operations in other Bank locations. Management believes the Company can
successfully compete for trust business by targeting
23
<PAGE> 25
customers whose needs will be better served by the personalized attention
offered by the Company's community-oriented Banks.
- Deploying the Banks' expanding deposit base in specialized earning
asset niches at attractive yields and risk profiles. In order to minimize the
time lag typically experienced by de novo banks in redeploying deposits into
higher yielding earning assets, the Company is developing lending programs
focused on specialized earning asset niches having large volumes of homogeneous
assets that can be acquired for the Banks' portfolios and possibly sold in the
secondary market to generate fee income. Currently, the Banks are investing in
premium finance loans generated by First Premium, indirect auto paper and
mortgage warehouse loans.
GROWTH STRATEGY
The Company has experienced significant growth over the last five
years. It has expanded through internal growth and the successive openings of
de novo community banks in selected new market areas where management
identified a perceived need for a community bank alternative. Following the
first Bank opening in 1991, the Company has formed four additional de novo
Banks in district communities and has added four additional full-service
branches. As of December 31, 1996, the Company had a total of 13 banking
facilities. In order to continue the growth of the Company, key elements of
the Company's growth strategy include:
- Internal growth. Management believes that the communities now
served by the Banks' offices, as well as nearby communities, offer attractive
opportunities for profitable growth of its commercial banking operations.
Although the financial services industry continues to be highly competitive as
the rapid pace of consolidation in the industry persists, in light of the
disenchantment of many individuals and small businesses with the perceived
lower level of service offered by the resulting larger institutions, the
Company's community banking philosophy allows it to compete principally on the
basis of a high level of personalized service and responsiveness.
The Company has assembled what management believes to be teams of
highly qualified, experienced community banking officers and personnel at each
of its Banks and has implemented professional, innovative marketing programs.
In addition, each of the Banks has a large board of directors comprised of
influential business persons and well-connected individuals within the
respective communities who assist with business development for the Banks. Due
to the relative start-up nature of its banking operations, however, the Company
believes it has not yet realized the full deposit and asset generation
potential of its market areas. The Company intends to continue to market
aggressively, with special promotions as well as customized loan products, to
increase loan-to-deposit ratios while also pursuing additional specialized
earning asset niches. In addition, the Company intends to actively pursue
increased trust business within the Banks' markets.
- The establishment of branch banks in nearby communities. An
integral part of the Company's growth strategy is the establishment of
additional branches of the Banks in nearby communities. In connection with the
Company's five operating Banks, and additional de novo banks, if any, the
Company intends to expand operations by opening branch facilities in adjacent
areas where management believes targeted customers would benefit from a
community banking alternative. Management believes opening additional branches
will offer a cost-effective means for the Company to gain market share and
provide additional services to clients in the communities they serve.
- The formation of additional de novo banks. The Company plans to
continue its expansion through additional de novo bank formations, seeking new
markets in the Chicago area that offer similar community banking opportunities
where the Company can leverage its experience. Management has identified
several attractive markets as possibilities for a new bank as early as late
1997, although future bank locations have not yet been completely evaluated or
selected.
24
<PAGE> 26
- Identifying and developing niche lending businesses and potential
specialty finance company acquisitions. In order to expand the Company's
opportunities to invest in specialized earning asset niches, the Company may
consider acquisitions or development of specialty finance businesses engaged in
asset generation suitable for bank investment and/or secondary market sales.
While the Company has not yet targeted any specific potential acquisitions of
specialty finance businesses, management has and will continue to explore
various commercial and consumer finance activities.
RECENT ACQUISITION
On October 24, 1996, the Board of Directors approved the acquisition
of Wolfhoya Investments, Inc. ("Wolfhoya"), a company organized prior to the
Reorganization by Howard D. Adams, Edward J. Wehmer and certain other persons
who are directors and/or executive officers of the Company or Barrington Bank,
for purposes of organizing a de novo bank in Barrington, Illinois. In December
1996, the Company issued an aggregate of 87,556 shares of Common Stock to
complete the acquisition, all of which shares are restricted securities under
Rule 144 promulgated under the Securities Act. In addition, there were
outstanding common stock warrants of Wolfhoya that, as a result of the
transaction, converted by their terms into the right to purchase 16,838 shares
of Common Stock of the Company. See "SHARES ELIGIBLE FOR FUTURE SALE" and
"CERTAIN TRANSACTIONS."
By acquiring Wolfhoya in its organizational phase rather than
commencing its own de novo bank formation, the Company achieved an expedited
entry into an affluent community not yet served by the Company's other Banks.
Prior to the acquisition, Wolfhoya had purchased property for the bank site,
leased and furnished a temporary facility in a prime downtown location, and
hired James Bishop to serve as the bank's President. Mr. Bishop has almost 30
years of banking experience in Chicago's northwest suburbs and was key to
attracting other highly qualified senior officers for the Barrington Bank
operation. Management believes the same community banking concept and similar
marketing strategies used by the other Banks can be employed successfully in
the Barrington market under the leadership of the Barrington Bank management
team and the Barrington Bank board of directors to achieve additional growth in
assets for the Company. Barrington Bank opened for business and first received
deposits from community residents on December 19, 1996.
25
<PAGE> 27
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial and
other data of the Company. The selected statements of condition and statements
of operations data, insofar as they relate to the five years in the five-year
period ended December 31, 1995, have been derived from the Company's
consolidated financial statements. The following information should be read in
conjunction with the Company's audited Consolidated Financial Statements and
the Notes thereto, included elsewhere herein. The selected financial data for
the nine months ended September 30, 1996 and 1995, are derived from the
Company's unaudited interim financial statements. Such unaudited interim
financial statements include all adjustments (consisting only of normal,
recurring accruals) that the Company considers necessary for a fair
presentation of the financial position and the results of operations as of the
dates and for the periods indicated. Information for any interim period is not
necessarily indicative of results that may be anticipated for the full year.
The following information should also be read in conjunction with "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION"
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total interest income . . . . . . . . . . . . . $ 27,398 $ 18,022 $ 25,472 $ 17,744 $ 8,239 $ 5,843 $ 11,388
Total interest expense . . . . . . . . . . . . . 17,011 11,124 15,772 9,871 3,884 3,515 7,090
-------- -------- -------- -------- -------- -------- --------
Net interest income . . . . . . . . . . . . . . 10,387 6,898 9,700 7,873 4,355 2,328 4,298
Provision for possible loan losses . . . . . . . 1,344 770 1,430 607 1,127 1,116 1,445
-------- -------- -------- -------- -------- -------- --------
Net interest income after provi-
sion for possible loan losses . . . . . . . 9,043 6,128 8,270 7,266 3,228 1,212 2,853
-------- -------- -------- -------- -------- -------- --------
Gain on sale of premium finance
loans . . . . . . . . . . . . . . . . . . . . 2,659 3,551 4,421 -- -- -- --
Loan servicing fees . . . . . . . . . . . . . . 1,035 782 1,083 -- -- -- --
Fees on mortgage loans sold . . . . . . . . . . 1,023 503 850 399 551 -- --
Trust fees . . . . . . . . . . . . . . . . . . 412 281 399 202 92 -- --
Service charges on deposit accounts . . . . . . 309 187 196 112 92 42 --
Securities gains, net . . . . . . . . . . . . . 18 -- -- 21 23 -- --
Other . . . . . . . . . . . . . . . . . . . . . 400 300 1,595 752 386 717 7,589
-------- -------- -------- -------- -------- -------- --------
Total non-interest income. . . . . . . . . . 5,856 5,604 8,544 1,486 1,144 759 7,589
-------- -------- -------- -------- -------- -------- --------
Salaries and employee benefits. . . . . . . . . 8,133 5,395 8,011 5,319 3,536 3,475 5,095
Occupancy expense, net. . . . . . . . . . . . . 1,245 723 1,520 1,165 790 617 918
Data processing . . . . . . . . . . . . . . . . 732 440 624 335 177 114 63
Advertising and marketing . . . . . . . . . . . 710 367 682 288 150 232 288
Nonrecurring merger related
expenses . . . . . . . . . . . . . . . . . . . 849 -- -- -- -- -- --
Amortization of deferred financing
fee. . . . . . . . . . . . . . . . . . . . . . 337 451 768 641 511 126 --
Other non-interest expenses . . . . . . . . . . 4,448 3,325 4,207 3,004 2,354 3,244 4,164
-------- -------- -------- -------- -------- -------- --------
Total non-interest expense . . . . . . . . . 16,454 10,701 15,812 10,752 7,518 7,808 10,528
-------- -------- -------- -------- -------- -------- --------
Income (loss) from continuing
operations before income taxes. . . . . . . . (1,555) 1,031 1,002 (2,000) (3,146) (5,837) (86)
Income tax benefit. . . . . . . . . . . . . . . (34) (198) (512) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss) from continuing
operations. . . . . . . . . . . . . . . . . . (1,521) 1,229 1,514 (2,000) (3,146) (5,837) (86)
Income (loss) from operations and
sale of discontinued operations . . . . . . . -- (96) (17) (236) (193) 102 1,261
-------- -------- -------- -------- -------- -------- --------
Net income (loss) . . . . . . . . . . . . . . . $ (1,521) $ 1,133 $ 1,497 $ (2,236) $ (3,339) $ (5,735) $ 1,175
======== ======== ======== ======== ======== ======== ========
Net income (loss) per common
share . . . . . . . . . . . . . . . . . . . . $ (0.25) $ 0.19 $ 0.24 $ (0.56) $ (1.14) $ (2.59) $ 0.93
======== ======== ======== ======== ======== ======== ========
Cash dividends per common share . . . . . . . . $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
======== ======== ======== ======== ======== ======== ========
</TABLE>
26
<PAGE> 28
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------------- ----------------------------------------------------------
1996 1995 1995(1) 1994(1) 1993(1) 1992(1) 1991(2)
---- ---- ---- ---- ---- ---- ----
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Financial Condition Data:
Total assets at end of period ............ $621,264 $376,143 $470,890 $354,158 $188,590 $82,864 $52,422
Total deposits at end of period........... 549,303 322,516 405,658 221,985 98,264 42,996 2,361
Total loans at end of period.............. 414,405 218,730 258,231 193,982 109,276 48,527 33,482
Notes payable and subordinated debt
at end of period......................... 16,554 13,028 10,758 6,905 4,837 16,050 32,413
SELECTED FINANCIAL RATIOS AND OTHER DATA(3):
Performance Ratios:
Net interest margin(4)................. 2.86% 2.98% 2.96% 3.35% 3.83% 3.85% N/M
Net interest spread(5)................. 2.32% 2.47% 2.41% 3.07% 3.30% 2.87% N/M
Non-interest income to average
assets................................ 1.47% 2.19% 2.36% 0.57% 0.89% 1.05% N/M
Non-interest expense to average
assets(7)............................. 4.13% 4.18% 4.37% 4.14% 5.84% 10.77% N/M
Return on average assets(6)(7)......... (0.38%) 0.43% 0.40% (0.88)% (2.60)% (7.91)% 1.51%
Return on average equity(7)(8)......... (4.95)% 5.37% 4.66% (12.02)% (25.40)% (46.01)% 14.46%
Loans-to-deposits ratio................ 75.4% 67.8% 63.7% 87.4% 111.2% 112.9% N/M
Average interest-earning assets to
average interest-bearing liabilities.. 111.47% 110.56% 111.37% 106.61% 115.42% 116.93% 14.46%
Asset Quality Ratios:
Non-performing loans to total loans.... 0.53% 0.71% 0.80% 0.01% 0.00% 0.27% 0.02%
Allowance for possible loan
losses to:
Total loans.......................... 0.90% 1.02% 1.07% 0.88% 1.24% 1.98% 2.44%
Non-performing loans................. 171.89% 143.58% 143.91% N/M N/M N/M N/M
Net charge-offs to average loans....... 0.15% 0.20% 0.20% 0.18% 0.92% 2.38% 1.38%
Non-performing assets to total assets.. 0.35% 0.41% 0.41% 0.01% 0.00% 0.16% 0.01%
Other Data at end of period:
Number of:
Bank subsidiaries(9).................. 4 3 4 3 2 1 1
Banking offices(9)........................ 13 7 12 6 3 1 1
</TABLE>
- -------------------
(1) For 1995, 1994 and 1993, reflects results of those Banks then in operation
or in organization, results of finance and leasing subsidiary operations
(some of which have since been curtailed) and results of discontinued
operations. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OEPRATIONS." For 1992, reflects first full-year
of Lake Forest Bank operations and results of finance and lease subsidiary
operations (some of which have since been curtailed, sold or discontinued).
(2) Reflects results of finance and leasing subsidiary operations, some of
which have since been sold, curtailed or discontinued, and start-up of Lake
Forest Bank which opened in December 1991.
(3) Certain financial ratios for interim periods have been annualized.
(4) Net interest income divided by average interest-earning assets.
(5) Yield on average interest-earning assets less rate on average
interest-bearing liabilities.
(6) Net income less preferred dividends divided by average total assets.
(7) For the nine-month period ended September 30, 1996, includes nonrecurring
merger-related expenses of $849,000. Absent such expenses, non-interest
expense to average assets, the return on average assets and return on
average equity for such period would have been 3.92%, (0.17)% and (2.18)%,
respectively.
(8) Net income less preferred dividends divided by average common equity.
(9) Excludes Barrington Bank which commenced operations on December 19, 1996.
27
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion should be read in conjunction with "SELECTED
COMBINED AND CONSOLIDATED FINANCIAL DATA" and the Company's Combined and
Consolidated Financial Statements and Notes thereto, each appearing elsewhere
in this Prospectus. In addition to historical information, the following
Management's Discussion and Analysis of Financial Condition and Results of
Operation contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ significantly from
those anticipated in these forward-looking statements as a result of certain
factors, including those discussed in "RISK FACTORS" contained elsewhere in
this Prospectus.
GENERAL
The profitability of the Company's operations depends primarily on its
net interest income, provision for possible loan losses, non- interest income,
and non-interest expense. 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 possible loan losses reflects the cost of credit risk in the
Company's loan portfolio. Non-interest income consists of gains on sales of
loans, loan servicing fees, fees on loans sold, trust fees, and miscellaneous
fees and income. Non-interest expense includes salaries and employee benefits
as well as occupancy, data processing, marketing, and other expenses.
Non-interest expense also includes amortization of deferred financing fees and,
in 1996, certain non-recurring merger-related expenses resulting from the
Reorganization.
Net interest income is dependent on the amounts and yields of
interest-earning assets as compared to the amounts 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 the loan portfolio, as well as economic and market factors. Gain on sale of
loans and loan servicing fees relate principally to the Company's historical
practice of selling insurance premium finance loans originated into the
secondary market through a securitization facility. The Company's current
strategy is to retain more premium finance loans in the Banks' loan portfolios.
As a result, the Company expects in the future to report relatively higher net
interest income as a result of retaining these relatively higher-yielding
assets in the Company's portfolio and relatively lower gains on sale of
insurance premium finance loans and related loan servicing fee income. Fees on
loans sold relate to the Company's practice of originating long-term fixed-rate
mortgage loans for sale into the secondary market in order to satisfy customer
demand for such loans while avoiding the interest-rate risk associated with
holding long-term fixed-rate mortgages in the Banks' portfolios. These fees
are highly dependent on the volume of real estate transactions and mortgage
refinancing activity. Substantially all of the fees on loans sold related to
the servicing rights that have been sold along with the mortgage loans. The
Company earns trust fees for managing and administering investment funds for
affluent individuals and small businesses. Miscellaneous fees and income
include service charges on deposit accounts and for ancillary banking services.
Non-interest expenses are heavily influenced by the growth of operations, with
additional employees necessary to staff new banks and to open new branch
facilities and marketing expenses necessary to promote them. Growth in the
number of account relationships directly affects such expenses as data
processing costs, supplies, postage and other miscellaneous expenses.
CHARACTERISTICS OF THE COMPANY'S PROFITABILITY
The nature of the Company's de novo bank strategy has led to, and will
likely continue to lead to, differences in earnings patterns as compared to
other established community banking organizations. The Company's net interest
margin, which has ranged from 2.86% to 3.83% over the last three years, is low
compared to industry standards for a variety of reasons. Upon entering new
markets, the Company has aggressively pursued business through competitive
rates in order to garner market share. The Company has been cautious in its
loan origination activities, focusing on strong borrowers who often command
favorable loan rates. Finally, the Company has maintained a relatively shorter
term, and therefore lower-yielding, investment portfolio, in order to
facilitate loan
28
<PAGE> 30
demand as it emerges, provide funds to retain increasingly larger amounts of
insurance premium finance loans in the portfolio, and maintain excess liquidity
in the event deposit levels fluctuate.
As the Company has been growing its balance sheet at relatively high
rates over the past five years, the Company has experienced high overhead
levels in relation to its assets, reflecting the necessary start-up investment
in human resources and facilities to organize additional de novo banks and open
new branch facilities. The Company expects that as its existing Banks mature,
the organizational and start-up expenses associated with future de novo banks
and new banking offices will not have as significant an impact on the Company's
overhead ratio.
DE NOVO BANK FORMATION AND BRANCH OPENING ACTIVITY
The following table illustrates the progression of Bank and branch
openings that have impacted the Company's results of operation over the past
five years.
<TABLE>
<CAPTION>
MONTH YEAR BANK LOCATION TYPE OF FACILITY
- ------- ------ ------- ---------- ----------------
<S> <C> <C> <C> <C>
December 1996 Barrington Bank Barrington, Illinois Bank
August 1996 Hinsdale Bank Clarendon Hills, Illinois(1) Branch
May 1996 North Shore Bank Winnetka, Illinois Branch
November 1995 North Shore Bank Wilmette, Illinois Drive-up/walk-up
October 1995 Hinsdale Bank Hinsdale, Illinois Drive-up/walk-up
October 1995 Libertyville Bank Libertyville, Illinois Bank
Libertyville Bank Libertyville, Illinois Drive-up/walk-up
October 1995 North Shore Bank Glencoe, Illinois Branch
May 1995 Lake Forest Bank West Lake Forest, Illinois Branch
December 1994 Lake Forest Bank Lake Bluff, Illinois Branch
October 1994 North Shore Bank Wilmette, Illinois Bank
April 1994 Lake Forest Bank Lake Forest, Illinois New permanent facilities
October 1993 Hinsdale Bank Hinsdale, Illinois Bank
April 1993 Lake Forest Bank Lake Forest, Illinois Drive-up/walk-up
December 1991 Lake Forest Bank Lake Forest, Illinois Bank
</TABLE>
- ---------------------
(1) Operates in this location as Clarendon Hills Bank, a branch of Hinsdale
Bank.
ANALYSIS OF FINANCIAL CONDITION
Deposits. The Company has experienced significant growth in deposits
over the past three years primarily as a result of de novo bank formations and
new branch openings. Total deposits balances increased to $549.3 million at
September 30, 1996 compared to $405.7 million at December 31, 1995 and $222.0
million at the end of 1994. This followed a $123.7 million increase in
deposits in 1994 from the $98.3 million deposit level at the end of 1993.
29
<PAGE> 31
The following table presents deposit balances by the Banks (excluding
Barrington Bank) and the relative percentage of total deposits held by each
Bank at September 30, 1996 and at December 31 during the past three years:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------------------
1996 1995 1994 1993
---------------------- --------------------- ------------------ -----------------
PERCENT PERCENT PERCENT PERCENT
BALANCE OF TOTAL BALANCE OF TOTAL BALANCE OF TOTAL BALANCE OF TOTAL
----------- ---------- ------------ -------- --------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lake Forest . . . . . . . . . . . $ 224,935 41% $181,186 45% $126,067 57% $81,452 83%
Hinsdale . . . . . . . . . . . . . 129,730 24% 104,402 26% 59,182 27% 16,812 17%
North Shore . . . . . . . . . . . 137,518 25% 93,657 23% 36,736 16% -- --
Libertyville . . . . . . . . . . . 57,120 10% 26,413 6% -- -- -- --
--------- --- -------- --- -------- --- ------- ---
Total Deposits . . . . . . . . . . $ 549,303 100% $405,658 100% $221,985 100% $98,264 100%
========= === ======== === ======== === ======= ===
Annualized percentage
increase from prior
year-end . . . . . . . . . . . . 47.2% 82.7% 125.9% 128.5%
==== ==== ===== =====
</TABLE>
Other liabilities. Other liabilities, consisting of accrued interest
payable and other accrued expenses, increased to $13.1 million at December 31,
1995 from $11.2 million at December 31, 1994.
Total assets and earning assets. Total assets and earning assets were
$621.3 million and $565.6 million, respectively, at September 30, 1996 compared
to $470.9 million and $427.5 million, respectively, at December 31, 1995.
These asset increases during 1996 follow increases in 1995 from year-end 1994
levels of $354.2 million and $322.5 million, respectively. The increases in
total assets and earning assets were funded primarily from continued growth in
the Banks' core deposits. The level of earning assets as a percentage of total
assets remained steady at approximately 91% of total assets at each of
September 30, 1996 and December 31, 1995 and 1994, despite the addition of
bank-owned premises during the period.
The composition of earning assets has shifted as the Company increased
the level of deposit funds invested into loans from shorter-term money market
investments. Loans comprised 73.3%, 60.4% and 60.1% of total earning assets at
September 30, 1996, December 31, 1995 and December 31, 1994, respectively.
CONSOLIDATED RESULTS OF OPERATIONS
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1996 AND SEPTEMBER 30, 1995
General. The net loss for the nine months ended September 30, 1996
was $1.5 million compared to net income of $1.1 million for the nine months
ended September 30, 1995. The nine months ended September 30, 1996, included
$849,000 of merger-related expenses from the Reorganization and $312,000 in
legal fees related to the collection of a significant non-performing asset.
Excluding these expenses, the pre-tax net loss for the nine-month period would
have been $393,000. In addition, the prior nine months included an initial
gain of $763,000 on the sale of premium finance loans into a securitization
facility. Excluding this gain, pre-tax income for the nine months ended
September 30, 1995 would have been $172,000. The $563,000 decrease in pre-tax
income, as adjusted for merger-related expenses, exceptional legal fees, and
the initial gain on sale, was primarily the result of non-interest expenses
associated with the opening of several banking facilities exceeding the
increase in net interest income and non-interest income resulting from the
Company's rapid asset and deposit growth.
Net interest income. Net interest income increased to $10.4 million
for the nine months ended September 30, 1996, from $6.9 million for the
comparable period of 1995. This increase in net interest income
30
<PAGE> 32
of $3.5 million, or 50.6%, was attributable to a 57.0% increase in average
earning assets in 1996 compared to 1995. Partially offsetting the changes due
to volume was a slight decline in net interest margin to 2.86% for the first
nine months of 1996 from 2.98% for the comparable period in 1995, due to a
decline in the general interest rate environment during 1996. Because the
Company's overall earning asset portfolio reprices at a rate quicker than its
liabilities, the decline in interest rates had an unfavorable impact on the
Company's net interest margin.
Provision for possible loan losses. The provision for possible loan
losses increased to $1.3 million in the nine months ended September 30, 1996,
from $770,000 in the prior year period. At September 30, 1996, the allowance
for possible loan losses represented at 0.90% of loans outstanding which
management believed was adequate to cover potential losses in the portfolio.
There can be no assurance that future losses will not exceed the amounts
provided for, thereby affecting future results of operations. The amount of
future additions to the allowance for possible loan losses will be dependent
upon the economy, changes in real estate values, interest rates, the view of
regulatory agencies toward adequate reserve levels, and past due and
non-performing loan levels.
Non-interest income. Total non-interest income increased
approximately $252,000, or 4.5%, to $5.9 million for the first nine months of
1996, as compared to $5.6 million in the same period in 1995.
Gains on the sale of premium finance loans, which are dependent upon
the total loans originated and sold into a securitization facility, decreased
to $2.7 million for the first nine months of 1996 from $3.6 million for the
first nine months of 1995. While total insurance premium finance loans
originated and sold during the first nine months of 1996 remained relatively
steady at $224.0 million compared to $225.0 million for the first nine months
of 1995, an initial gain of $763,000 was recorded in February 1995 when a
significant portion of the existing premium finance loan portfolio was sold to
a newly structured securitization facility. Absent the initial gain
recognition in 1995, the amount of gains recorded was relatively stable.
Loan servicing fees increased to $1.0 million for the first nine
months of 1996 compared to $782,000 for the same period of 1995, primarily due
to an increase in the amount of average managed insurance premiums in the 1996
period. During the first nine months of 1996, average managed insurance
premiums that were serviced by the Company for others were $111.0 million. Due
to the change in the structure of the securitization facility in February 1995
whereby the loans sold into the securitization facility were treated as sales
and therefore qualified to receive a servicing fee, the comparable 1995 period
had only seven months of service fee income on average managed insurance
premium loans for that seven-month period of $102.0 million.
Fees on mortgage loans sold relate to income derived by the Banks for
services rendered in originating and selling residential mortgages into the
secondary market. Such fees doubled to $1.0 million for the first nine months
of 1996 from $503,000 for the first nine months of 1995 primarily due to
increased volume. Approximately $306,000 of the increase was generated from
North Shore Bank which only began such activities during 1995 but which had a
complete period of loan sales in 1996. Libertyville Bank also contributed
approximately $125,000 during the first nine months of 1996.
Service charges on deposit accounts increased by 65.2% to $309,000 for
the nine months ended September 30, 1996, from $187,000 for the nine months
ended September 30, 1995. The increase is a direct result of the 70.3%
increase in deposit balances from September 30, 1995 to September 30, 1996.
The majority of service charges on deposit accounts relates to customary fees
on accounts in overdraft positions and for returned items on an account.
Trust fees increased to $412,000 from $281,000 for the nine months
ended September 30, 1996 and 1995, respectively, due primarily to increased
trust business.
Non-interest expense. Total non-interest expense increased
approximately $5.8 million, or 53.8%, to $16.5 million for the first nine
months of 1996, as compared to $10.7 million in the same period of 1995.
Despite the increases in various non-interest expense categories during the
first nine months of 1996 compared to 1995, the
31
<PAGE> 33
Company's ratio of non-interest expenses, excluding the merger-related costs,
to total average assets declined to 3.9% in 1996 from 4.2% in 1995.
Salaries and employee benefits increased to $8.1 million for the nine
months ended September 30, 1996 as compared to $5.4 million for the same period
of the prior year, principally due to the increase in the number of banking
facilities to 13 at September 30, 1996, from six at September 30, 1995. The
increase of $2.7 million reflects an increase of approximately $700,000 related
to Libertyville Bank, which only had organizational phase salaries in 1995 but
which had a fully operational staff during the first nine months of 1996, and an
increase of $1.1 million at North Shore Bank as a result of four banking
locations being operational in 1996 compared to only one banking location during
the first nine months of 1995. North Shore Bank opened a full service banking
facility in Glencoe, Illinois and a drive-up/walk-up banking facility in
Wilmette, Illinois during the fourth quarter of 1995 and began organizing a full
service banking facility in Winnetka, Illinois during the first quarter of 1996.
The Winnetka facility began full operations during the second quarter of 1996 in
addition to the increased staffing to support the new banking facility, the
growth in deposit and loan accounts at the previously existing banking locations
requiring additional staffing to maintain the standard of customer service.
Also contributing to the increase in salaries were normal salary increases and
the addition of certain additional executive officers during mid-1995 and early
1996 to help manage the Company's growth.
Occupancy expenses increased to $1.2 million for the nine months ended
September 30, 1996, from $723,000 for the first nine months of 1995, primarily
due to the significant increase in the number of the Company's facilities to
almost double the number of physical locations.
For the nine months ended September 30, 1996, data processing expenses
increased by $292,000, or 66.4%, compared to the first nine months of 1995, as
a result of the increase of deposit and loan balances of approximately 70.3%
and 89.5%, respectively.
Advertising and marketing expenses increased to $710,000 for the first
nine months of 1996 compared to $367,000 for the first nine months of 1995,
primarily due to the addition of seven banking locations during the past twelve
months. Management anticipates that higher levels of marketing expense are
likely to be incurred in the future as the Company continues to establish its
base of customers, promotes its newly opened Barrington Bank, and opens
additional banking facilities.
Nonrecurring merger-related expenses were $849,000 through the first
nine months of 1996. The merger of the five entities as discussed earlier in
this report resulted in various legal expenses, accounting and tax related
expenses, printing, and Securities and Exchange Commission filing expenses, and
other applicable expenses to consummate the Reorganization.
Other non-interest expenses increased by $1.1 million, or 33.8%, to
$4.4 million for the nine months ended September 30, 1996 from $3.3 million for
the first nine months of 1995, primarily due to the higher volume of accounts
outstanding at the Banks. Also contributing to the increase was approximately
$312,000 in legal fees related to efforts to collect a significant nonperforming
insurance premium finance asset during the first nine months of 1996 compared to
approximately $78,000 in the same period of 1995. See "BUSINESS -- Lending
Activities."
Income taxes. The Company recorded an income tax benefit of $34,000
for the first nine months of 1996, whereas an income tax benefit of
approximately $198,000 was recorded in the same period of 1995. Prior to
completion of the Reorganization on September 1, 1996, each of the merging
companies except Lake Forest Bank had net operating losses and, based upon the
start-up nature of the organization, there was not sufficient evidence to
justify the full realization of the net deferred tax assets generated by those
losses. Accordingly, a valuation allowance was established against a portion
of the deferred tax assets with the combined result being that a minimal amount
of Federal tax benefit was recorded. As the entities become profitable, it is
anticipated that each entity will have the opportunity to recognize its own tax
loss benefits to the extent it generates operating income.
32
<PAGE> 34
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995 AND
DECEMBER 31, 1994
General. The Company had net income of $1.5 million for the year
ended December 31, 1995, compared with a net loss of $2.2 million for the year
ended December 31, 1994. The increase in net income was due to an increase in
net interest income of $1.8 million, an increase in non-interest income of $7.1
million and the realization of $512,000 in income tax benefits, offset by
increases in the provision for possible loan losses of $823,000 and other
non-interest expenses of $5.1 million.
Net interest income. Net interest income increased by $1.8 million,
or 23.2%, to $9.7 million in 1995 from $7.9 million in 1994. Interest income
increased as average interest-earning assets increased in each major category
due to growth at North Shore Bank, which was in its first year of operations in
1995, the opening of Libertyville Bank in October 1995, and continued growth at
the Company's other subsidiary Banks. Interest income also increased as a
result of generally higher interest rates in 1995 which led to higher yields on
the Company's short-term investments and investment securities. An increase in
net earning assets (average interest-earning assets less interest-bearing
liabilities) of $18.9 million in 1995 over 1994, reflecting increased
non-interest bearing funding provided by a $13.7 million increase in average
non-interest bearing deposits and approximately $12.5 million increase in
average shareholders' equity, also contributed to the increase in interest
income. These increases were offset in part by increased interest expense.
Deposit costs increased primarily due to the higher volume of deposits funding
the higher earning-asset volume as well as higher market rates of interest and
the Company's competitive deposit pricing strategies in its new markets. Net
interest income was also impacted in 1995 by a lower net interest margin, which
declined to 2.96% in 1995 from 3.35% in 1994. The margin decline was largely
due to an unfavorable shift in the Company's earning asset mix in 1995 compared
to 1994 from higher-yielding premium finance loans to loans originated or
purchased by the Banks and other lower-yielding earning assets. Average
premium finance loans decreased by 73.1% in 1995 as a result of the sale in
February 1995 of a significant portion of this portfolio into a securitization
facility. However, as discussed below, the decrease in interest income
attributable to premium finance loans was offset by gains recognized in 1995 on
the sale of such loans.
Provision for possible loan losses. The provision for possible loan
losses increased to $1.4 million in 1995 from $607,000 in 1994, due to volume
increases in the loan portfolio. Total loans increased approximately $64.2
million, or 33.1%, from December 31, 1994 to December 31, 1995. At December
31, 1995, the allowance for possible loan losses represented 1.07% of loans
outstanding, which management believed was adequate to cover potential losses
in the portfolio.
Non-interest income. Non-interest income increased to $8.5 million in
1995 from $1.5 million in 1994 primarily due to a change in the structure of
the securitization facility resulting in recognition of gains on sales of
premium finance loans sold to others.
Gain on the sale of insurance premium finance loans was $4.4 million
in 1995 versus none in 1994. The increase was a result of restructuring the
securitization facility in February 1995 which dictated different accounting
treatment for loans sold pursuant to the securitization facility. The new
structure allowed the Company to record gains on insurance premium finance
loans sold to an independent third party at the time of sale rather than
recording the income over the life of the loan as a component of interest
income. As a result, an initial gain of $763,000 was recorded in February 1995
when existing loans were sold to the new securitization facility, and sales of
receivables subsequent to February 1995 were recorded as gains.
Substantially all of the $1.1 million increase in loan servicing fees
related to premium finance receivables. Beginning in 1995, the change in the
structure of the securitization facility allowed for the insurance premium
finance loans to be sold with servicing retained, while in 1994 no servicing
fees were received on that portfolio.
Fees on mortgage loans sold increased approximately $451,000 in 1995
compared to 1994. Approximately $181,000 of the increase was generated from
Hinsdale Bank which only began such activities during late 1994 but which had a
complete period of mortgage loan sales in 1995. Also, North Shore Bank, which
did not open until the last quarter of 1994, contributed approximately $196,000
during 1995.
33
<PAGE> 35
Trust fees increased to $399,000 in 1995 from $202,000 in 1994
primarily attributable to new trust business generated by new trust officers.
Service charges on deposit accounts increased by 75.0% to $196,000 in
1995 from $112,000 in 1994. The increase is a direct result of the 82.7%
increase in deposits from December 31, 1994 to December 31, 1995.
The gain on settlement of contingencies is primarily a result of a
one-time $735,000 gain from the repurchase of a minority interest in a now
discontinued subsidiary and the settlement of various related contingencies.
The actual costs required to complete the transaction were less than amounts
previously accrued therefor, resulting in recognition of gain as the accruals
were reversed into income.
Non-interest expense. Total non-interest expense increased
approximately $5.0 million, or 47.1%, to $15.8 million in 1995 from $10.8
million in 1994.
Salaries and employee benefits expense increased approximately $2.7
million, principally attributable to growth in the deposit base of 82.7% from
December 31, 1994 to December 31, 1995. The operation of additional facilities
required additional employees in those locations and the Company's successful
generation of new business from new and existing customers required additional
customer support personnel to service the expanding relationships. At Lake
Forest Bank, a branch established in the neighboring community of Lake Bluff in
December 1994 was operational for a full year and another branch was opened in
May 1995 in West Lake Forest, requiring expansion of the payroll by 10
full-time equivalent employees. At Hinsdale Bank, six full-time equivalent
employees were added by year-end 1995, as the Company initiated a lending
department to originate indirect automobile loans for its own portfolio and for
sale to other financial institutions, requiring the addition of three lending
officers. North Shore Bank was in its initial year of operation in 1994 and
thus did not have a full year of salaries and employee benefits in 1994.
Staffing levels began to accumulate in April 1994 and the Bank became
operational in September 1994. In late 1995, North Shore Bank added a
drive-through facility and opened a full-service banking facilities in Glencoe,
with organizational efforts relating to its full-service facility in Winnetka
also well underway. At the end of 1995, North Shore Bank had 22 full-time
equivalent employees. Libertyville Bank began to accumulate staff in May 1995,
and a full staffing complement of 20 full-time equivalent employees was
achieved by October 1995.
Occupancy expenses increased $355,000 to $1.5 million for 1995 from
$1.2 million in 1994 primarily due to the increase in the number of
facilities.
Advertising and marketing expenses amounted to $682,000 during 1995
compared to $288,000 in 1994, due to the promotion of the opening of the new
banking facilities during 1995 and the desire of management to effectively
integrate the opening of those facilities into the Company's overall marketing
plan.
Data processing. Data processing expense increased by approximately
$289,000 or 86.3% in 1995 compared to 1994, reflecting the Company's increase
in deposits and loans over such period. An increase in trust accounts during
1995 also contributed to higher data processing charges.
Other non-interest expense. Other non-interest expenses increased by
approximately $1.2 million or 40.0% to $4.2 million for 1995 from $3.0 million
for 1994, primarily due to the higher volume of accounts outstanding and the
additional depreciation, supplies, and other sundry expenses related to the
opening of the new facilities.
Income taxes. The Company had no consolidated Federal or state income
tax expense for 1995 or 1994. In 1995, an income tax benefit of $512,000 was
recorded. Management determined that the Company's earnings history and
projected future earnings were sufficient to make a judgment that the
realization of a portion of the net deferred tax assets not previously valued
was more likely than not to occur. In 1994, management had established a
valuation allowance against its net deferred tax assets with the result being
that no federal or state income tax expense or benefit was realized in the
financial statements. See Note 11 to the Company's Consolidated Financial
Statements included elsewhere herein.
34
<PAGE> 36
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994 AND
DECEMBER 31, 1993
General. The Company recorded a net loss of $2.2 million for the year
ended December 31, 1994, compared to a net loss of $3.3 million for the year
ended December 31, 1993. The decrease in net loss was due to an increase in
net interest income of $3.5 million, an increase in non-interest income of
$342,000, and a reduction in the provision for possible loan losses of
$520,000, offset by a $3.3 million increase in non-interest expense.
Net interest income. Net interest income increased to $7.9 million in
1994, or 80.8%, from $4.4 million in 1993. The increase in net interest income
of $3.5 million was attributable to a 106.9% increase in average earning assets
in 1994 compared to 1993. Offsetting the positive impact of the volume
increase was a decline in the proportion of average interest-earning assets to
average interest-bearing liabilities to 106.6% in 1994 from 115.4% in 1993.
The Company's net interest margin declined to 3.35% in 1995 form 3.83% in 1994.
The decline in the margin is primarily due to unfavorable shifts in the earning
asset mix, as the level of premium finance loans grew at a lower rate than
other earning asset categories and lower-yielding investments at the Banks
comprised a greater percentage of total average earning asset of the Company.
Net interest margins of de novo banks are typically adversely affected by a
time lag in redeploying the funds generated from deposits into loans with
higher yields than alternative short-term investments. Because 1994 included
the first full year of operations for Hinsdale Bank and the initial months of
operation for North Shore Bank, the impact of the lag in redeploying deposits
was heightened for the Company. These two Banks comprised approximately 21.7%
of total average earning assets for 1994. Another factor contributing to the
decline in the net interest margin was the impact of the aggressive deposit
pricing utilized by the Banks to attract potential customers so that the Banks
could further promote their community based banking services.
Provision for possible loan losses. The provision for possible loan
losses decreased to $607,000 in 1994 from $1.1 million in 1993. The
comparatively high provision for possible loan losses in the prior year related
primarily to the Company's leasing business which was discontinued in 1992.
Management continued to provide for additions to the allowance for possible
loan losses as the loan portfolio increased approximately $146.0 million
between the year-end periods. At December 31, 1994, the allowance for possible
loan losses was 0.88% of total loans which management determined was adequate
to cover potential losses in the portfolio.
Non-interest income. Non-interest income increased by $342,000 to
$1.5 million in 1994 from $1.1 million in 1993. Contributing to this increase
was a result of a $110,000 increase in trust administration fees to $202,000 in
1994 and a gain on the sale of certain fixed assets of approximately $112,000.
Fees on loans sold decreased by $152,000 in 1994 as compared to 1993 due to
lower volume of loan refinancings.
Non-interest expense. Total non-interest expense increased by
approximately $3.3 million to $10.8 million in 1994 from $7.5 million in 1993,
primarily due to a full year of operations at Hinsdale Bank, start-up
operations at North Shore Bank and increased origination of insurance premium
finance loans.
Salaries and employee benefits expense increased by $1.8 million in
1994 from 1993 due to the additional staffing required to open Lake Forest
Bank's permanent offices; commencement of salaries and benefits at North Shore
Bank where staffing levels began to accumulate in April 1994; a full year of
staffing at Hinsdale Bank during 1994; increased salaries and employee benefits
primarily attributable to producing and servicing an increased volume of
insurance premium finance loans; and normal annual salary and wage increases.
Occupancy expense increased $375,000 to $1.2 million, or 47.5%, for
the year ended December 31, 1994 from $790,000 for the year ended December 31,
1993, primarily due to the construction of one new facility as well as the
increase in the number of facilities.
Advertising and marketing expenses increased to $288,000 for 1994
compared to $150,000 for 1993, primarily due to the promotion of the opening of
Lake Forest Bank's permanent offices, the marketing of the
35
<PAGE> 37
opening of North Shore Bank during 1994 and the ongoing marketing at Hinsdale
Bank during its first full year of operations.
Data processing. Data processing expenses increased by approximately
$158,000, or 89.3%, for 1994 compared to 1993, primarily due to the
approximately 125.9% increase during 1994 in deposit balances and the number of
accounts processed.
Other non-interest expense. Other non-interest expenses increased by
approximately $3.2 million, or 27.2%, for 1994 from $2.5 million for 1993,
primarily attributable to the growth in loans and deposits at the Banks and the
increased volume of premium finance loans originated.
Income taxes. The Company had no consolidated Federal or state income
tax expense or benefit for 1994 or 1993. The net operating losses generated by
the Banks during initial years of operation were available to be carried
forward to offset income of the respective entities in these years.
36
<PAGE> 38
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST RATES
AND INTEREST DIFFERENTIAL
The following table sets forth the average balances, the
interest earned or paid thereon, and the effective interest rate yield or cost
for each major category of interest-earning assets, interest-bearing
liabilities and shareholders' equity for the nine months ended September 30,
1996 and 1995, and the years ended December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------------------
1996 1995
------------------------------------- -------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE(1) INTEREST COST BALANCE(1) INTEREST COST
----------- -------- ------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest bearing deposits with banks .......... $ 31,478 $ 1,323 5.60% $ 52,447 $ 2,507 6.37%
Federal funds sold............................. 43,804 1,733 5.28% 32,540 1,409 5.77%
Investment securities.......................... 93,231 3,315 4.74% 54,974 1,933 4.69%
Loans, net of unearned discount ............... 316,279 21,027 8.86% 168,854 12,173 9.61%
-------- ------- ---- -------- ------- ----
Total earning assets....................... $484,792 $27,398 7.54% $308,815 $18,022 7.78%
-------- ------- ---- -------- ------- ----
Cash and due from banks-non-interestbearing.... 11,977 7,512
Allowance for possible loan losses............. (3,166) (1,922)
Premises and equipment, net.................... 26,400 14,281
Other assets................................... 11,150 12,261
-------- --------
Total assets............................... $531,153 $340,947
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits-interest bearing......................
NOW accounts................................. 41,907 1,158 3.68% 20,041 524 3.49%
Savings and money market deposits ........... 133,688 4,049 4.04% 103,828 3,356 4.31%
Time deposits................................ 244,513 10,794 5.89% 128,343 5,970 6.20%
-------- ------- ---- -------- ------- ----
Total interest-bearing deposits........... 420,108 16,001 5.08% 252,212 9,850 5.21%
-------- ------- ---- -------- ------- ----
Short-term borrowings.......................... 647 18 3.71% 13,770 440 4.26%
Term-debt and subordinated debt................ 14,168 992 9.34% 13,349 834 8.33%
-------- ------- ---- -------- ------- ----
Total interest-bearing liabilities......... 434,923 17,011 5.22% 279,331 11,124 5.31%
-------- ------- ---- -------- ------- ----
Non-interest bearing deposits.................. 49,123 26,893
Other liabilities.............................. 6,133 7,407
Shareholders' equity........................... 40,974 27,316
-------- --------
Total liabilities and shareholders'
equity................................... $531,153 340,947
======== ========
Interest income/average earning assets......... 484,792 27,398 7.54% 308,815 18,022 7.78%
Interest expenses/average interest-bearing
liabilities.................................. 434,923 17,011 5.22% 279,331 11,124 5.31%
------- ---- ------- ----
Net interest spread............................ 10,387 2.32% 6,898 2.47%
======= ==== ======= ====
Net yield on average earning assets............ 2.86% 2.98%
==== ====
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1995 1994
------------------------------------- -------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE(1) INTEREST COST BALANCE(1) INTEREST COST
----------- -------- ------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest bearing deposits with banks ........... $ 51,159 $ 3,194 6.24% $ 28,077 $ 1,290 4.59%
Federal funds sold.............................. 35,172 2,048 5.82% 18,323 791 4.32%
Investment securities........................... 58,015 3,202 5.52% 40,721 2,046 5.02%
Loans, net of unearned discount................. 183,614 17,028 9.27% 148,209 13,617 9.19%
-------- ------- ---- --------- ------- ----
Total earning assets........................ $327,960 $25,472 7.77% $ 235,330 $17,744 7.54%
-------- ------- ---- --------- ------- ----
Cash and due from banks-non-interestbearing..... 8,031 5,026
Allowance for possible loan losses ............. (2,038) (1,447)
Premises and equipment, net..................... 17,687 9,034
Other assets.................................... 10,485 11,460
-------- ---------
Total assets................................ $362,125 $ 259,404
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits-interest bearing.......................
NOW accounts.................................. 23,214 844 3.64% 7,586 202 2.66%
Savings and money market deposits............. 106,247 4,541 4.27% 80,324 3,210 4.00%
Time deposits................................. 140,724 8,705 6.19% 44,709 2,086 4.67%
-------- ------- ---- --------- ------- ----
Total interest-bearing deposits............ 270,185 14,090 5.21% 132,619 5,498 4.15%
-------- ------- ---- --------- ------- ----
Short-term borrowings........................... 10,238 474 4.63% 78,741 3,577 4.54%
Term-debt and subordinated debt................. 14,044 1,208 8.60% 9,373 796 8.49%
-------- ------- ---- --------- ------- ----
Total interest-bearing liabilities.......... 294,467 15,772 5.36% 220,733 9,871 4.47%
-------- ------- ---- --------- ------- ----
Non-interest bearing deposits................... 29,304 15,593
Other liabilities............................... 7,181 4,445
Shareholders' equity............................ 31,173 18,633
-------- ---------
Total liabilities and shareholders' equity.. $362,125 $ 259,404
======== =========
Interest income/average earning assets.......... 327,960 25,472 7.77% 235,330 17,744 7.54%
Interest expenses/average interest-bearing
liabilities................................... 294,467 15,772 5.36% 220,733 9,871 4.47%
------- ---- ------- ----
Net interest spread............................. 9,700 2.41% 7,873 3.07%
======= ==== ======= ====
Net yield on average earning assets............ 2.96% 3.35%
==== ====
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1993
--------------------------------------------------------
AVERAGE
AVERAGE YIELD/
BALANCE(1) INTEREST COST
----------- --------- -------
<S> <C> <C> <C>
ASSETS
Interest bearing deposits with banks.................... $ 7,932 $ 274 3.45%
Federal funds sold...................................... 9,005 275 3.05%
Investment securities................................... 17,761 847 4.77%
Loans, net of unearned discount......................... 79,052 6,843 8.66%
-------- ------ ----
Total earning assets................................ $113,750 $8,239 7.24%
-------- ------ ----
Cash and due from banks-non-interestbearing............. 3,703
Allowance for possible loan losses...................... (985)
Premises and equipment, net............................. 3,148
Other assets............................................ 9,194
--------
Total assets........................................ $128,810
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits-interest bearing...............................
NOW accounts.......................................... 3,100 83 2.68%
Savings and money market deposits..................... 39,083 1,365 3.49%
Time deposits......................................... 13,752 525 3.82%
-------- ------ ----
Total interest-bearing deposits..................... 55,935 1,973 3.53%
-------- ------ ----
Short-term borrowings................................... 34,761 1,321 3.80%
Term-debt and subordinated debt......................... 7,861 590 7.51%
-------- ------ ----
Total interest-bearing liabilities.................. 98,557 3,884 3.94%
-------- ------ ----
Non-interest bearing deposits........................... 7,461
Other liabilities....................................... 9,601
Shareholders' equity.................................... 13,191
--------
Total liabilities and shareholders' equity.......... $128,810
========
Interest income/average earning assets.................. 113,750 8,239 7.24%
Interest expenses/average interest-bearing
liabilities........................................... 98,557 3,884 3.94%
------ ----
Net interest spread..................................... 4,355 3.30%
====== ====
Net yield on average earning assets..................... 3.83%
====
</TABLE>
- --------------
(1) Average balances were generally computed using daily balances.
37
<PAGE> 39
CHANGES IN INTEREST INCOME AND EXPENSE
The following table shows the dollar amount of changes in interest
income and expense by major categories of interest-earning assets and
interest-bearing liabilities attributable to changes in volume or rate or both,
for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------------------- -----------------------------------------------------
1996 COMPARED TO 1995 1995 COMPARED TO 1994 1994 COMPARED TO 1993
------------------------------- --------------------- ---------------------
CHANGE CHANGE CHANGE CHANGE CHANGE CHANGE
DUE TO DUE TO TOTAL DUE TO DUE TO TOTAL DUE TO DUE TO TOTAL
RATE VOLUME CHANGE RATE VOLUME CHANGE RATE VOLUME CHANGE
-------- ------ ------ ------ ------ ------ -------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning deposits
with banks ....................... $ (275) $ (909) $(1,184) $ 579 $1,325 $ 1,904 $117 $ 899 $1,016
Federal funds sold ............... (108) 432 324 346 911 1,257 147 369 516
Investment securities ............ 22 1,360 1,382 218 938 1,156 48 1,151 1,199
Loans, net of discount............ (866) 9,720 8,854 129 3,282 3,411 444 6,330 6,774
------ ------- ------- ------ ------- ------- ---- ------ ------
Total interest income .......... (1,227) 10,603 9,376 1,272 6,456 7,728 756 8,749 9,505
------ ------- ------- ------ ------- ------- ---- ------ ------
NOW accounts ..................... 31 603 634 97 545 642 -- 119 119
Savings and money market deposits. (194) 887 693 236 1,095 1,331 222 1,623 1,845
Time deposits .................... (288) 5,112 4,824 872 5,747 6,619 140 1,421 1,561
Short-term borrowings............. (50) (372) (422) 70 (3,173) (3,103) 302 1,954 2,256
Term debt and subordinated debt... 105 53 158 10 402 412 84 122 206
------ ------- ------- ------ ------- ------- ---- ------ ------
Total interest expense.......... (396) 6,283 5,887 1,285 4,616 5,901 748 5,239 5,987
------ ------- ------- ------ ------- ------- ---- ------ ------
Net interest income ............ $ (831) $ 4,320 $ 3,489 $ (13) $ 1,840 $ 1,827 $ 8 $3,510 $3,518
====== ======= ======= ====== ======= ======= ==== ====== ======
</TABLE>
Volume variances are computed using the change in volume multiplied by
the previous year's rate. Rate variances are computed using the changes in
rate multiplied by the previous year's volume. The change in interest due to
both rate and volume has been allocated between the factors in proportion to
the relationship of the absolute dollar amounts of the change in each.
ASSET-LIABILITY MANAGEMENT
As a continuing part of its financial strategy, the Company attempts
to manage the impact of fluctuations in market interest rates on its net
interest income. This effort entails providing a reasonable balance between
interest rate risk, credit risk, liquidity risk and maintenance of yield.
Asset-liability management policies are established and monitored by management
in conjunction with the boards of directors of the Banks, subject to general
oversight by the Company's Board of Directors. The policy establishes
guidelines for acceptable limits on the sensitivity of the market value of
assets and liabilities to changes in interest rates.
38
<PAGE> 40
The following table illustrates the Company's estimated interest rate
sensitivity and periodic and cumulative gap positions as calculated as of
September 30, 1996. An institution with more assets than liabilities repricing
over a given time frame is considered asset sensitive and will generally
benefit from rising rates.
<TABLE>
<CAPTION>
0-90 91-365 1-5 OVER 5
DAYS DAYS YEARS YEARS TOTAL
---- ----- ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS:
Loans ............................ $201,974 $104,364 $81,223 $ 26,844 $414,405
Taxable investments .............. 50,791 15,113 5,467 2,653 74,024
Interest-bearing bank deposits.... 10,000 15,100 -- -- 25,100
Federal funds sold ............... 52,033 -- -- -- 52,033
Other ............................ -- -- -- 55,702 55,702
-------- -------- ------- ------- --------
Total assets.................... $314,798 $134,577 $86,690 $ 85,199 $621,264
======== ======== ======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
NOW .............................. $ 52,658 $ -- $ -- $ -- $ 52,658
Savings and money market.......... 114,103 -- -- 28,566 142,669
Time deposits..................... 151,240 105,494 40,829 890 298,453
Short term borrowings............. 1,812 -- -- -- 1,812
Term debt......................... 16,554 -- -- -- 16,554
Other............................. -- -- -- 109,118 109,118
-------- -------- ------- -------- --------
Total liabilities and
shareholders' equity.......... $336,367 $105,494 $40,829 $138,574 $621,264
======== ======== ======= ======== ========
Rate sensitive assets (RSA)......... $314,798 $449,375 $536,065 $621,264 $621,264
Rate sensitive liabilities (RSL).... $336,367 $441,861 $482,690 $621,264 $621,264
Cumulative gap...................... $(21,569) $ 7,514 $ 53,375
RSA/RSL............................. 0.94 1.02 1.11
RSA/Total assets.................... 0.51 0.72 0.86
RSL/Total assets.................... 0.54 0.71 0.78
GAP/Total assets.................... -3.47% 1.21% 8.59%
GAP/RSA............................. -6.85% 1.67% 9.96%
</TABLE>
While the gap position illustrated above is a useful tool that
management can assess for general positioning of the Company's and its
subsidiaries' balance sheets, management uses an additional measurement tool to
evaluate its asset/liability sensitivity which determines exposure to changes
in interest rates by measuring the percentage change in net income due to
changes in rates over a two-year time horizon. Management measures such
percentage change assuming an instantaneous permanent parallel shift in the
yield curve of 200 basis points, both upward and
39
<PAGE> 41
downward. Utilizing this measurement concept, the interest rate risk of the
Company, expressed as a percentage change in net income over a two-year time
horizon due to changes in interest rates, at September 30, 1996, is as
follows:
<TABLE>
<CAPTION>
+200 BASIS -200 BASIS
POINTS POINTS
---------- -----------
<S> <C> <C>
Percentage change in net income due to an
immediate 200 basis point change in interest
rates over a two-year time horizon . . . . . 64.6% (20.4)%
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The following table reflects various measures of the Company's capital
at September 30, 1996, and at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------------
1996 1995 1994
------------- ------ ------
<S> <C> <C> <C>
Average equity-to-average asset ratio . . . 7.7% 8.6% 7.2%
Ending leverage ratio . . . . . . . . . . . 6.5% 8.5% 7.1%
Ending Tier 1 risk-based capital ratio . . 8.9% 11.1% 8.9%
Ending total risk-based capital ratio . . . 9.7% 11.9% 9.6%
Dividend payout ratio . . . . . . . . . . . 0.0% 0.0% 0.0%
</TABLE>
The Company's consolidated leverage ratio (Tier 1 capital/total assets
less intangibles) was 6.5% at September 30, 1996 which places the Company above
the "well capitalized" regulatory level. Consolidated Tier 1 and total
risk-based capital were 8.9% and 9.7%, respectively. Based on guidelines
established by the Federal Reserve Bank, a bank holding company is required to
maintain a Tier 1 capital to risk-adjusted asset ratio of 4.0% and a total
capital to risk-adjusted asset ratio of 8.0%. See "CAPITALIZATION" for the
anticipated pro forma effect of the Offering on the Company's capital ratios.
The Company's principal funds at the holding company level are
dividends from its subsidiaries, and if necessary, borrowings or additional
equity offerings. Effective September 1, 1996, the Company obtained a $25.0
million revolving credit line from a major commercial bank to consolidate
separate lines previously maintained at the subsidiary holding companies. As
of September 30, 1996, the Company had borrowed $16.6 million under the line.
The revolving line is secured by all of the shares of common stock of the
subsidiary bank holding companies and of each of the Banks, other than
Barrington Bank, and bears interest on the amounts outstanding from time to
time, at the Company's option, at an interest rate of either (a) LIBOR plus 150
basis points, or (b) the lender's prime rate. All principal payments due under
the credit line will mature on or before September 1, 1997.
Banking laws impose restrictions upon the amount of dividends which
can be paid to the Company by the Banks. Based on these laws, the Banks could,
subject to minimum capital requirements, declare dividends to the Company
without obtaining regulatory approval in an amount not exceeding (a) undivided
profits, and (b) the amount of net income reduced by dividends paid for the
current and prior two years. At September 30, 1996, $2.4 million was available
as dividends from the Banks without prior regulatory approval, compared to $1.5
million at January 1, 1996, and no dividend availability from the Banks at
December 31, 1994. No cash dividends were paid to the Company by its
subsidiaries during the nine-month period ended September 30, 1996 or the years
ended December 31, 1995, 1994, or 1993.
40
<PAGE> 42
To finance its insurance premium loans, First Premium has in the past
relied primarily on proceeds of loan sales to a securitization facility. In
such transactions, First Premium transferred loans to First Premium Funding
Corp., its wholly-owned special-purpose corporation, which in turn sold the
loans to an independent multi-seller conduit, which issued commercial paper to
finance the acquisition of the loans. Loans are also financed by short-term
lines of credit.
Liquidity management at the Banks 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
each 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.
Liquid assets refers to money market assets such as Federal funds sold
and interest bearing deposits with banks, as well as available-for-sale debt
securities and held-to-maturity securities with a remaining maturity less than
one year. Net liquid assets would represent the sum of the liquid asset
categories less the amount of assets pledged to secure public funds. At
September 30, 1996, net liquid assets totaled approximately $97.8 million,
compared to approximately $129.1 million at December 31, 1995 and $88.8 million
at December 31, 1994.
Long-term liquidity needs are provided by a large core deposit base,
which is the most stable source of liquidity a community bank can have due to
the nature of long-term relationships generally established with depositors and
the security of deposit insurance provided by the FDIC. At September 30, 1996,
64.5% of total assets were funded by core deposits with balances less than
$100,000, while remaining assets were funded by other funding sources such as
core deposits with balances in excess of $100,000, public funds, purchased
funds, and the capital of the Banks. At December 31, 1995 and 1994, 66.3% and
51.6% of total assets were funded by core deposits, respectively.
The Banks routinely accept deposits from a variety of municipal
entities. Typically, these municipal entities require that banks pledge
marketable securities to collateralize these public deposits. At September 30,
1996, December 31, 1995 and December 31, 1994, the Banks had approximately
$48.4 million, $34.6 million and $15.4 million of securities collateralizing
such public deposits, respectively. Deposits requiring pledged assets are not
considered to be core deposits, and the assets that are pledged as collateral
for these deposits are not deemed to be liquid assets.
41
<PAGE> 43
BUSINESS
The Company is a financial services holding company engaging in
community banking and specialty finance through six operating subsidiaries.
The Banks make secured and unsecured commercial, home equity, mortgage, and
consumer loans, and provide numerous other financial services to their
commercial and individual retail customers within their respective communities.
Management intends to continue to concentrate on servicing the local
communities and expects to achieve growth in its markets by providing high
quality, competitive, personal service leading to comprehensive, long-term
relationships with the Banks' customers. First Premium originates and services
insurance premium finance receivables, almost exclusively from commercial
borrowers, an increasing portion of which loans are being sold to the Banks to
increase the Company's average yield on earning assets. As part of its growth
strategy, the Company intends to pursue additional specialized earning asset
niches that offer attractive yields and risk profiles. See "THE COMPANY --
Strategy."
MARKETS
The Banks are headquartered and have branch offices in various
affluent suburbs of Chicago, including communities located in suburban Cook,
DuPage and Lake Counties. Each of Lake Forest Bank, Hinsdale Bank and
Barrington Bank is the only locally owned and managed full-service commercial
bank in its primary service area. Libertyville Bank is one of only two and
North Shore Bank is one of few locally owned and managed full service
commercial banks in their primary service areas. The table below sets forth
certain information with respect to market areas of each of the Banks:
<TABLE>
<CAPTION>
COMMUNITIES AVERAGE PER
BANK SERVED POPULATION(1) CAPITA INCOME(3)
---- ------------ ------------- ----------------
<S> <C> <C> <C>
Lake Forest Bank Lake Forest, Illinois 18,771 $ 47,200
Lake Bluff, Illinois 6,125 38,100
Hinsdale Bank Hinsdale, Illinois 16,357 39,215
Clarendon Hills, Illinois(2) 7,491 24,884
Western Springs, Illinois 12,464 27,848
Burr Ridge, Illinois 9,232 37,797
North Shore Bank Wilmette, Illinois 27,547 38,465
Kenilworth, Illinois 2,521 69,814
Glencoe, Illinois 8,705 60,012
Winnetka, Illinois 12,899 62,482
Libertyville Bank Libertyville, Illinois 19,757 25,428
Mundelein, Illinois 23,995 16,950
Vernon Hills, Illinois 18,830 20,625
Barrington Bank Barrington, Illinois 9,830 30,048
Barrington Hills, Illinois 4,629 60,257
Lake Barrington, Illinois 4,065 47,156
South Barrington, Illinois 3,760 47,248
North Barrington, Illinois 2,365 51,948
Inverness, Illinois 7,564 47,637
</TABLE>
- --------------------
(1) Reflects 1994 estimates published by Bureau of the Census, U.S. Department
of Commerce.
(2) Operates in this location as Clarendon Hills Bank, a branch of Hinsdale
Bank.
(3) Reflects 1989 information; 1990 US Census Data
42
<PAGE> 44
First Premium is licensed or otherwise qualified to do business as an
insurance premium finance company in 38 states. Virtually all of its
outstanding receivables are commercial accounts.
DEPOSITS
The Banks offer a variety of accounts for depositors designed to
attract both short-term and long-term deposits. The Banks' deposit accounts
include certificates of deposit, savings accounts, checking and NOW accounts
and money market accounts. The Banks continue to aggressively promote products
to the community through innovative marketing programs and attempt to meld
competitive products with superior customer service. For example, the Company
has been successful in attracting NOW account deposits from municipalities
within the Banks' markets by offering a high level of personalized attention.
The following table presents the balances of deposits by category and
each category as a percentage of total deposits at September 30, 1996 and at
December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------------------------------------------------------------
1996 1995 1994 1993
--------------- ------------------- -------------------- -------------------
PERCENT PERCENT PERCENT PERCENT
BALANCE OF TOTAL BALANCE OF TOTAL BALANCE OF TOTAL BALANCE OF TOTAL
-------- -------- --------- -------- ---------- --------- --------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Demand . . . . . . . $ 55,523 10% $ 45,869 11% $ 25,118 11% $ 15,051 15%
Savings . . . . . . 55,194 10% 47,189 12% 45,368 21% 31,786 32%
NOW . . . . . . . . 52,658 10% 33,685 8% 13,087 6% 4,409 5%
Money market . . . . 87,475 16% 74,243 18% 57,814 26% 26,885 27%
Certificates of
deposit . . . . . 298,453 54% 204,672 51% 80,598 36% 20,133 21%
------- --- -------- --- -------- --- -------- ---
Total deposits . . $549,303 100% $405,658 100% $221,985 100% $ 98,264 100%
======== === ======== === ======== === ======== ===
</TABLE>
In connection with its successive openings of new banking facilities,
the Company has aggressively marketed innovative deposit products at highly
competitive rates to garner market share in the communities served. As part of
its strategy to continue to attract deposits, the Banks have at different times
offered a variety of certificate of deposit products, with varying maturities
and rates, including variable rate CDs.
The aggregate amounts of time deposits, in denominations of $100,000
or more, by maturity, are shown below as of the dates indicated (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Three months or less . . . . . . . . . . . . . . . $ 54,872 $ 43,057
Over three through six months . . . . . . . . . . 43,240 13,138
Over six through twelve months . . . . . . . . . . 32,509 16,827
Over twelve months . . . . . . . . . . . . . . . . 17,933 20,596
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . $148,554 $ 93,618
======== ========
</TABLE>
LENDING ACTIVITIES
The Banks aggressively seek quality loan relationships. The Banks'
boards and management teams believe in sound credit analysis and loan
documentation. Management also seeks to avoid undue concentrations of loans to
a single industry or based on a single class of collateral. The Company has
concentrated asset origination efforts on building lending businesses in the
areas of small business and residential real estate loans, including home
equity loans and lines of credit, in addition to the insurance premium finance
activities conducted by First Premium. The
43
<PAGE> 45
Company also purchases loans in the secondary market, primarily indirect auto
paper and mortgage warehouse loans, some of which are later resold.
Classification of loans. The following table sets forth the Company's
loans at September 30, 1996 and as of December 31 for the previous five fiscal
years (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------------------------------------------
1996 1995 1994 1993 1992 1991
------------- --------- ---------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Commercial and commercial
real estate . . . . . . . . . . . . . . . $167,727 $101,271 $45,587 $13,642 $4,659 $ --
Home equity . . . . . . . . . . . . . . . 80,034 54,592 26,244 13,090 6,351 --
Indirect auto . . . . . . . . . . . . . . 79,068 37,323 -- -- -- --
Residential real estate . . . . . . . . . 50,576 37,074 26,188 14,095 9,020 --
Premium finance . . . . . . . . . . . . . 14,838 15,447 91,098 62,256 22,855 5,460
Other loans . . . . . . . . . . . . . . . 22,162 12,524 4,865 6,193 5,642 28,022
-------- -------- -------- -------- ------- -------
Total loans . . . . . . . . . . . . . . $414,405 $258,231 $193,982 $109,276 $48,527 $33,482
======== ======== ======== ======== ======= =======
</TABLE>
Commercial and commercial real estate loans. The commercial loan
component is comprised primarily of commercial real estate loans, lines of
credit for working capital purposes, and term loans for the acquisition of
equipment. Commercial real estate is predominantly owner occupied and secured
by a first mortgage lien and assignment of rents on the property. Equipment
loans are fully amortized over 24 to 60 months and secured by titles and/or
U.C.C. filings. Working capital lines are renewable annually and supported by
business assets, personal guarantees and often some sort of additional
collateral. Commercial business lending is generally considered to involve a
higher degree of risk than traditional bank lending. The vast majority of
commercial loans are made within the Banks' immediate market area. The increase
can be attributed to an emphasis on business development calling programs and
superior servicing of existing commercial loan customers which has increased
referrals.
The following table classifies the commercial loan portfolio category
at December 31, 1995 by date at which the loans mature (in thousands):
<TABLE>
<CAPTION>
1 YEAR FROM 1 AFTER
OR LESS TO 5 YEARS 5 YEARS TOTAL
-------- ------------ -------- --------
<S> <C> <C> <C> <C>
Commercial loans and commercial
real estate loans . . . . . . . . . . $ 71,284 $ 15,927 $ 3,300 $ 90,511
Commercial paper . . . . . . . . . . . 10,760 -- -- 10,760
--------- --------- -------- --------
$ 82,044 $ 15,927 $ 3,300 $101,271
========= ========= ======== ========
</TABLE>
Of those loans maturing after one year, $17.6 million have fixed rates.
Home equity loans. The Company's home equity loan products are
generally structured as lines of credit secured by first or second position
mortgage liens on the underlying property with loan-to-value ratios not
exceeding 80%, including prior liens, if any. The Banks' home equity loans
feature competitive rate structures and fee arrangements. In addition, during
1995, the Banks offered several promotional home equity loan products as part
of its marketing strategy.
Indirect auto loans. The Company purchases fixed rate indirect
automobile loans from unaffiliated automobile dealers. Indirect auto loans
comprise approximately 81.9% of the Company's consumer loan portfolio and is
one of the Company's specialized earning asset niches. Indirect automobile
loans are secured by new and
44
<PAGE> 46
used automobiles and are generated by a network of automobile dealers located
in the Chicago area with which the Company has established relationships.
These credits generally have an original maturity of 36 to 60 months and the
average actual maturity is estimated to be approximately 37 months. The risk
associated with this portfolio is diversified amongst many individual
borrowers. Management continually monitors the dealer relationships and the
Banks are not dependent on any one dealer as a source of such loans. Like
other consumer loans, the indirect auto loans are subject to the Banks'
stringent credit standards.
Residential real estate mortgages. The residential real estate
category includes one- to four-family adjustable rate mortgages that have
repricing terms from one to three years, construction loans to individuals, and
bridge financing loans for qualifying customers. The adjustable rate mortgages
are often non-agency conforming, may have terms based on differing indexes, and
relate to properties located principally in the Chicago metropolitan area or
vacation homes owned by local residents. Adjustable-rate mortgage loans
decrease, but do not eliminate, the risks associated with changes in interest
rates. Because periodic and lifetime caps limit the interest rate adjustments,
the value of adjustable-rate mortgage loans fluctuates inversely with changes
in interest rates. In addition, as interest rates increase, the required
payments by the borrower increases, thus increasing the potential for default.
The Company does not generally originate loans for its own portfolio with
long-term fixed rates due to interest rate risk considerations. However, the
Banks do accommodate customer requests for fixed rate loans by originating and
selling the loans into the secondary market, in connection with which the
Company receives fee income.
In addition to the mortgages originated by the Banks' lending
officers, the Company participates in mortgage warehouse lending by initially
funding residential mortgages originated by mortgage banking companies and then
selling the mortgages into the secondary market. All mortgage warehouse loans,
another specialized asset niche for the Company, are subject to the Banks'
underwriting standards.
Premium finance loans. The Company's most significant specialized
earning asset niche is commercial insurance premium finance receivables. The
Company internally originates premium finance loans at First Premium which
generally sells them to the Banks or funds the loans through asset
securitization facilities. All premium finance loans financed in this manner
are subject to the Company's stringent credit standards. The Company rarely
finances consumer insurance premiums which are regarded by management as
riskier loans.
First Premium offers financing of approximately 80% of an insurance
premium primarily to commercial purchasers of property and casualty and
liability insurance who desire to pay insurance premiums on an installment
basis. The premium finance loan allows the insured to spread the cost of the
insurance policy over time. First Premium markets its financial services
primarily by establishing and maintaining relationships with insurance brokers
and agents and by offering a high degree of service and innovative products.
Senior management is significantly involved in First Premium's marketing
efforts, currently focused almost exclusively on commercial accounts which it
believes provide higher returns at lower risk.
In financing insurance premiums, the Company does not assume the risk
of loss normally borne by insurance carriers. Typically the insured buys an
insurance policy from an independent insurance agent or broker who offers
financing through First Premium. The insured pays a down payment of
approximately 15% to 25% of the total premium and signs a premium finance
agreement for the balance due. The unearned portion of the premium secures
payment of the balance due. Under the terms of the Company's standard form of
financing contract, the Company has the power to cancel the insurance policy if
there is a default in the payment on the finance contract and to collect the
unearned portion of the premium from the insurance carrier. In the event of
cancellation of a policy, the cash returned in payment of the unearned premium
by the insurer is sufficient to cover the loan balance and generally the
interest and other charges due as well.
Other. Included in other loans are a wide variety of personal and
consumer loans to individuals. The Banks have been originating consumer loans
in recent years in order to provide a wider range of financial services to
their customers and because such loans typically have higher interest rate
spreads than mortgage loans. Consumer
45
<PAGE> 47
loans generally have shorter terms and higher interest rates than mortgage
loans but generally involve more credit risk than mortgage loans due to the
type and nature of the collateral.
The Company has no loans to businesses or governments of foreign
countries.
ASSET QUALITY
Nonaccrual, Past Due and Restructured Loans. The following table sets
forth nonaccrual loans as of the dates shown (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------------------------------------------
1996 1995 1994 1993 1992 1991
------------- --------- ---------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual loans . . . . . . . . . . . . . . . $2,002 $1,778 $ 4 $ 4 $ 44 $ 7
Loans past due 90 days or more . . . . . . . . 179 142 16 -- 88 --
Restructured loans . . . . . . . . . . . . . . -- -- -- -- -- --
------ ------ --- ---- ---- ---
Total nonperforming loans . . . . . . . . . 2,181 1,920 20 4 132 7
Other real estate owned . . . . . . . . . . . . -- -- -- -- -- --
------ ------ --- ---- ---- ----
Total nonperforming assets . . . . . . . . . $2,181 $1,920 $20 $ 4 $132 $ 7
====== ====== === ==== ==== ====
Total nonperforming loans to total loans . . . 0.53% 0.74% 0.01% --% 0.27% 0.02%
Total nonperforming assets to total assets . . 0.35% 0.41% 0.01% --% 0.16% 0.01%
Nonaccrual loans to total loans . . . . . . . . 0.48% 0.69% --% --% 0.09% 0.02%
</TABLE>
It is the policy of the Company to discontinue the accrual of interest
income on any loan for which there is a reasonable doubt as to the payment of
interest or principal. Nonaccrual loans are returned to an accrual status when
the financial position of the borrower indicates there is no longer any
reasonable doubt as to the payment of principal or interest. Other than those
loans indicated above, the Company had no significant loans (i) for which the
terms had been renegotiated, or (ii) for which there were serious doubts as to
the ability of the borrower to comply with repayment terms.
Potential Problem Loans. In addition to those loans disclosed under
"Nonaccrual, Past Due and Restructured 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 past maturity more than 45
days, 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 September 30,
1996, and December 31, 1995 were approximately $1.1 million and $604,000,
respectively. Loans in this category generally include loans that were
classified for regulatory purposes. At September 30, 1996, there were no
significant loans which were classified by any bank regulatory agency that are
not included above as nonaccrual, past due or restructured.
Loan Concentrations. Loan concentrations are considered to exist when
there are amounts loaned to a multiple number of borrowers engaged in similar
activities which would cause them to be similarly impacted by economic or other
conditions. The Company had no concentrations of loans exceeding 10% of total
loans at September 30, 1996 or December 31, 1995, except for indirect auto
loans as discussed above.
46
<PAGE> 48
Other Real Estate Owned. The Company did not have any Other Real
Estate Owned at the end any of the reporting periods.
Summary of Loan Loss Experience. The following table summarizes
average loan balances, changes in the allowance for possible loan losses
arising from additions to the allowance which have been charged to earnings,
and loans charged-off and recoveries on loans previously charged-off by loan
category for the periods shown.
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------
1996 1995 1994 1993 1992 1991
------------ -------- -------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period . . . . . . . $ 2,763 $ 1,702 $ 1,357 $ 961 $ 818 $ 1,115
Loans charge off:
-----------------
Residential real estate . . . . . . . . . . -- -- -- -- -- --
Commercial and commercial real estate . . . -- -- (20) -- -- --
Home equity . . . . . . . . . . . . . . . . (111) (25) -- -- -- --
Premium finance . . . . . . . . . . . . . . (107) (247) (40) (5) -- --
Financing leases . . . . . . . . . . . . . . (84) (109) (205) (728) (965) (779)
Other loans . . . . . . . . . . . . . . . . (72) (18) -- -- -- --
-------- -------- -------- ------- ------- -------
Total charge-offs . . . . . . . . . . . . (374) (399) (265) (733) (965) (779)
-------- -------- -------- ------- ------- -------
Recoveries:
-----------
Residential real estate . . . . . . . . . . -- -- -- -- -- --
Commercial and commercial real estate . . . -- -- -- -- -- --
Home equity . . . . . . . . . . . . . . . . -- -- -- -- -- --
Premium finance . . . . . . . . . . . . . . -- 30 3 2 -- --
Financing leases . . . . . . . . . . . . . . -- -- -- -- -- --
Other loans . . . . . . . . . . . . . . . . 16 -- -- -- -- --
-------- -------- -------- ------- ------- -------
Total recoveries . . . . . . . . . . . . . 16 30 3 2 -- --
-------- -------- -------- ------- ------- -------
Net loans charged-off . . . . . . . . . . . (358) (369) (262) (731) (965) (779)
-------- -------- -------- ------- ------- -------
Reduction due to subsidiary sold . . . . . . -- -- -- -- (8) (963)
Provision for possible loan losses . . . . . 1,344 1,430 607 1,127 1,116 1,445
-------- -------- -------- ------- ------- -------
Balance at end of period . . . . . . . . . . $ 3,749 $ 2,763 $ 1,702 $ 1,357 $ 961 $ 818
======== ======== ======== ======= ======= =======
Average total loans outstanding . . . . . . $316,279 $183,614 $148,209 $79,052 $40,528 $56,567
======== ======== ======== ======= ======= =======
Net charge-offs to average total loans . . . 0.15% 0.20% 0.18% 0.92% 2.38% 1.38%
======== ======== ======== ======= ======= =======
</TABLE>
47
<PAGE> 49
At September 30, 1996, management of the Company allocated the
allowance for possible loan losses by specific category as shown in the
following table (dollars in thousands). The allocations were made after
considering all relevant qualitative and quantitative factors about the loan
portfolio.
<TABLE>
<CAPTION>
PERCENT OF
LOANS IN EACH
CATEGORY TO
AMOUNT TOTAL LOANS
-------- -------------
<S> <C> <C>
Commercial and commercial real estate . . . . . . . . $1,242 40%
Home equity . . . . . . . . . . . . . . . . . . . . . 416 19%
Indirect auto . . . . . . . . . . . . . . . . . . . . 366 19%
Residential real estate . . . . . . . . . . . . . . . 34 12%
Premium finance . . . . . . . . . . . . . . . . . . . 316 4%
Other . . . . . . . . . . . . . . . . . . . . . . . . 115 6%
Unallocated . . . . . . . . . . . . . . . . . . . . . 1,260 N/A
------ ----
Total . . . . . . . . . . . . . . . . . . . . . . $3,749 100%
====== ====
</TABLE>
Control of the Company's loan quality is continually monitored by
management and is reviewed by the boards of directors and credit committees of
the Banks on a monthly basis, subject to the oversight by the Company's Board
of Directors through its members who serve on such credit committees.
Independent external review of the loan portfolio is provided by the
examinations conducted by regulatory authorities, independent public
accountants in conjunction with their annual audit, and an independent loan
review performed by an entity engaged by the Board of Directors. The amount of
additions to the allowance for possible loan losses which are charged to
earnings through the provision for possible loan losses are determined based on
a variety of factors, including actual charge-offs during the year, historical
loss experience, delinquent loans, and an evaluation of current and prospective
economic conditions in the market area. Management believes the allowance for
possible loan losses is adequate to cover any potential losses.
INVESTMENT ACTIVITIES
Money Market Investments and Investment Securities. The Company's
objective in managing its securities portfolio is to balance liquidity risk,
interest rate risk and credit quality such that the earnings of the Company are
maximized. Management has maintained the funds that were not invested in loans
in short-term investment securities and money market investments. The carrying
value of such investments is set forth in the table below.
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------
1996 1995 1994
------------ --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal funds sold . . . . . . . . . . . . . . . . . $ 52,033 $ 55,812 $ 24,799
Interest bearing deposits with banks . . . . . . . . 25,100 50,600 42,199
Investment securities . . . . . . . . . . . . . . . 74,024 62,890 61,546
-------- -------- --------
Total money market investments and
investment securities . . . . . . . . . . . . . . $151,157 $169,302 $128,544
======== ======== ========
</TABLE>
Federal Funds Sold, Interest Bearing Deposits with Banks and
Investment Securities. Federal funds sold and interest bearing deposits with
banks are very short-term investments with high-quality banks. The balances in
these accounts fluctuate based upon deposit inflows and loan demand. These
accounts are extremely liquid and provide management with the ability to meet
liquidity needs for supplying loan demand or for other reasons.
48
<PAGE> 50
Investment Securities. The table below sets forth the carrying value
of securities at the dates indicated, presented by category:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------------------
1996 1995(1) 1994 1993
------------ --------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Available-for-Sale
U.S. Treasury obligations . . . . . . . . . . . . $30,794 $ 5,529 $ -- $ 4,919
Federal agency obligations . . . . . . . . . . . . 21,130 25,671 -- --
Corporate notes and other securities . . . . . . . 15,808 25,762 4,773 9,390
Federal Reserve Bank stock . . . . . . . . . . . . 1,290 925 637 385
------- ------- ------- -------
Total available-for-sale . . . . . . . . . . . . 69,022 57,887 5,410 14,694
------- ------- ------- -------
Held-to-Maturity
U.S. Treasury obligations . . . . . . . . . . . . 5,002 5,002 10,596 --
Federal agency obligations . . . . . . . . . . . . -- -- 42,504 10,317
Corporate notes . . . . . . . . . . . . . . . . . -- -- 3,036 2,811
------- ------- ------- -------
Total held-to-maturity . . . . . . . . . . . . . 5,002 5,002 56,136 13,128
------- ------- ------- -------
Total investment securities . . . . . . . . . . . $74,024 $62,889 $61,546 $27,822
======= ======= ======= =======
</TABLE>
_______________
(1) During 1995, the Company elected to transfer securities from the
held-to-maturity classification to the available-for-sale classification
as allowed by SFAS 115. See Note 2 to Consolidated Financial Statements
included elsewhere herein.
Maturities of total investment securities as of September 30, 1996 are
as follows (in thousands):
<TABLE>
<CAPTION>
FEDERAL
WITHIN FROM 1 FROM 5 TO AFTER RESERVE
1 YEAR TO 5 YEARS 10 YEARS 10 YEARS BANK STOCK TOTAL
------- ---------- --------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasuries . . . . . . . . . . . . . . $30,794 $ 5,002 $ -- $ -- $ -- $35,796
Federal agency obligations . . . . . . . . . 21,130 -- -- -- -- 21,130
Corporate notes and other securities . . . . 6,428 9,380 -- -- -- 15,808
Federal Reserve Bank stock . . . . . . . . . -- -- -- -- 1,290 1,290
------- ------- ------- ------- -------- -------
Total . . . . . . . . . . . . . . . . . . $58,352 $14,382 $ -- $ -- $ 1,290 $74,024
======= ======= ======= ======= ======== =======
</TABLE>
The weighted average yield for each range of maturities of securities
is shown below as of September 30, 1996:
<TABLE>
<CAPTION>
FEDERAL
WITHIN FROM 1 FROM 5 TO AFTER RESERVE
1 YEAR TO 5 YEARS 10 YEARS 10 YEARS BANK STOCK TOTAL
------- ---------- --------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasuries . . . . . . . . . . . . . . 5.54% 4.99% -- -- -- 5.46%
Federal agency obligations . . . . . . . . . 5.46% -- -- -- -- 5.46%
Corporate notes and other securities . . . . 6.16% 5.62% -- -- -- 5.85%
Federal Reserve Bank stock . . . . . . . . . -- -- -- -- 6.00% 6.00%
</TABLE>
49
<PAGE> 51
There were no securities of any single issuer which had book value in
excess of 10% of shareholders' equity at September 30, 1996.
TRUST SERVICES
Currently, through Lake Forest Bank's trust department, the Company
provides investment management and trust services for the customers of Lake
Forest Bank, Hinsdale Bank, North Shore Bank and Libertyville Bank. The trust
department had in excess of $100 million of assets under management as of
September 30, 1996. Providing a full complement of asset management services
for individuals and corporations, the major area of concentration for trust
business has been investment management for individuals and small businesses.
The Company markets its trust services primarily to customers whose needs it
believes can be better met through the personalized attention of community bank
trust officers. The Company's strategy includes a focused emphasis on further
growth of the trust business, and management anticipates establishing trust
departments at one or more of the other Banks as deemed appropriate to service
and attract new trust business.
PROPERTIES
The Company's property consists of the property occupied by each of
the Banks and First Premium.
Lake Forest Bank has four physical banking locations. Lake Forest
Bank owns its main bank facility, a three story, 18,000 square foot brick
building located at 727 North Bank Lane in Lake Forest, Illinois. Lake Forest
Bank constructed a drive-in, walk-up banking facility on land leased from the
City of Lake Forest on the corner of Bank Lane and Wisconsin Avenue in Lake
Forest, approximately one block north of the main banking facility. Lake
Forest Bank also leases a 1,200 square foot, full service banking facility at
103 East Scranton Avenue in Lake Bluff, Illinois and a 2,100 square foot, full
service banking facility on the west side of Lake Forest, Illinois at 810 South
Waukegan Road. Lake Forest Bank maintains automated teller machines at each of
its locations except the 810 South Waukegan Road facility. Lake Forest Bank
has no offsite automated teller machines.
Hinsdale Bank currently has three physical banking locations.
Hinsdale Bank owns its main bank facility, a two story brick building located
at 25 East First Street in downtown Hinsdale, Illinois. Hinsdale Bank
constructed a 1,000 square foot drive-in, walk-up banking facility at 130 West
Chestnut, approximately two blocks west of the main banking facility. Hinsdale
Bank maintains automated teller machines at both of its locations. Hinsdale
Bank has no offsite automated teller machines. Hinsdale Bank also has a
building in Clarendon Hills which has approximately 6,000 square feet.
Clarendon Hills Bank, a branch of Hinsdale Bank, currently occupies
approximately 2,000 square feet as a full service banking facility and leases
the remainder of the space to unrelated parties.
North Shore Bank currently has four physical banking locations. North
Shore Bank owns its main bank facility, a one story brick building that is
located at 1145 Wilmette Avenue in downtown Wilmette, Illinois. North Shore
Bank also owns a newly constructed 9,600 square foot drive-in, walk-up banking
facility at 720 12th Street, approximately one block west of the main banking
facility. North Shore Bank leases a full service banking facility at 362 Park
Avenue in Glencoe, Illinois. Additionally, during May, 1996, North Shore Bank
opened a branch banking facility in Winnetka, Illinois where it leases
approximately 4,000 square feet. North Shore Bank maintains automated teller
machines at each of its locations, except Glencoe and Winnetka. North Shore
Bank has no offsite automated teller machines.
Libertyville Bank currently has two physical banking locations.
Libertyville Bank owns its main bank facility, a 13,000 square foot two story
brick building located at 507 North Milwaukee Avenue in downtown Libertyville,
Illinois, which was a former bank building. Libertyville Bank also owns a
2,500 square foot drive-in, walk-up banking facility at 201 Hurlburt Court,
approximately five blocks southeast of the main banking facility. Libertyville
Bank maintains automated teller machines at both of its locations.
Libertyville Bank has no offsite automated teller machines.
50
<PAGE> 52
Barrington Bank currently has one physical banking location, a 2,860
square foot space which it is leasing. The building is located at 202A South
Cook Street in Barrington. This location will serve as a temporary facility for
the Bank until such time as its permanent facility is completed. Barrington Bank
has purchased property located at 201 South Hough in Barrington and has designed
for new construction a 15,000 square foot frame structure with an attached
drive-through facility. This building will serve as Barrington Bank's main bank
facility when construction is completed, currently scheduled for late 1997.
First Premium's offices are located at 520 Lake Cook Road, Suite 300,
Deerfield, Illinois 60015. First Premium leases approximately 12,000 square
feet of office space at a cost of $27,000 per month under a five-year lease
expiring in the year 2000.
COMPETITION
The Company competes in the commercial banking industry through its
subsidiaries, North Shore Bank, Lake Forest Bank, Hinsdale Bank, Libertyville
Bank and Barrington Bank, in the communities each serves. The commercial
banking industry is highly competitive, and the Banks face strong direct
competition for deposits, loans, and other financial-related services. The
Banks compete directly in Cook, DuPage and Lake counties with other commercial
banks, thrifts, credit unions, stockbrokers, and the finance divisions of
automobile companies. Some of these competitors are local, while others are
statewide or nationwide. The Banks have developed a community banking and
marketing strategy. In keeping with this strategy, the Banks provide highly
personalized and responsive service unique to locally-owned and managed
institutions. As such, the Banks compete for deposits principally by offering
depositors a variety of deposit programs, convenient office locations, hours
and other services, and for loan originations primarily through the interest
rates and loan fees they charge, the efficiency and quality of services they
provide to borrowers and the variety of their loan products. Some of the
financial institutions and financial services organizations with which the
Banks compete are not subject to the same degree of regulation as that imposed
on bank holding companies, Illinois banking corporations and national bank
associations. In addition, the larger banking organizations have significantly
greater resources than those that will be available to the Banks. As a result,
such competitors have advantages over the Banks in providing certain
non-deposit services. Currently, major competitors in certain of the Banks'
markets include banking subsidiaries of Harris Bankcorp, Inc., Northern Trust
Corporation, and First Chicago/NBD Corp.
First Premium encounters intense competition from numerous other
firms, including a number of national commercial premium finance companies,
companies affiliated with insurance carriers, independent insurance brokers who
offer premium finance services, banks and other lending institutions. Some of
First Premium's competitors are larger and have greater financial and other
resources and are better known than First Premium. In addition, there are few,
if any, barriers to entry into this industry in the event other firms,
particularly insurance carriers and their affiliates, seek to compete in this
market.
First Premium believes that it offers better service and more
flexibility with regard to late payments and policy cancellations than
affiliates of insurance carriers, banks and other lending institutions. First
Premium competes with these entities by emphasizing a high level of knowledge
of the insurance industry, flexibility in structuring financing transactions,
and the timely purchase of qualifying contracts. First Premium believes that
its commitment to account service also distinguishes it from its competitors.
It is First Premium's policy to notify the insurance agent when an insured is
in default and to assist in collection, if requested by the agent. To the
extent that affiliates of insurance carriers, banks, and other lending
institutions add greater service and flexibility to their financing practices
in the future, the company's operations could be adversely affected. There can
be no assurance that First Premium will be able to continue to compete
successfully in its markets.
LEGAL PROCEEDINGS
The Company and its subsidiaries from time to time are subject to
pending and threatened legal action and proceedings arising in the normal
course of business. Since the Banks act as depositories of funds, they are
from time to time named as defendants in various lawsuits (such as garnishment
proceedings) involving claims to the
51
<PAGE> 53
ownership of funds in particular accounts. Any such litigation currently
pending is incidental to such Bank's business and, based on information
currently available to management, management believes the outcome of such
actions or proceedings will not have a material adverse effect on the
operations or financial condition of the Company or its subsidiaries.
EMPLOYEES
As of September 30, 1996, the Company had 211 full-time equivalent
employees of which 58 full-time equivalent employees were employed by Lake
Forest Bank, 38 full-time equivalent employees were employed by Hinsdale Bank,
51 full-time equivalent employees were employed by North Shore Bank, 21
full-time equivalent employees were employed by Libertyville Bank and 44
full-time equivalent employees were employed by First Premium. In December of
1996, Barrington Bank opened with 13 full-time equivalent employees. The
Company and the Banks provide their employees with a comprehensive program of
benefits, some of which are on a contributory basis, including comprehensive
medical and dental plans, life insurance plans, and 401(k) plans. Management
considers its relationship with its employees to be good.
MANAGEMENT
BOARD OF DIRECTORS
The Company's Board of Directors is divided into three classes of
Directors who are elected to hold office for staggered three-year terms as
provided in the Company's By-laws. Those persons currently serving as Class I
Directors will hold office until the Annual Shareholder Meeting to be held in
1997; Class II Directors will hold office until the Annual Shareholder Meeting
to be held in 1998; and Class III Directors will hold office until the Annual
Shareholder Meeting to be held in 1999.
The names, ages and certain background information of the persons who
constitute the Board of Directors of the Company (the "Directors") are set
forth below.
Howard D. Adams -- (63) Chairman and Chief Executive Officer; Class I Director.
Mr. Adams was the principal organizer of the Company and each of its
subsidiaries. For more than the past 10 years, he has concentrated his
business activities primarily in diversified financial services businesses.
Since 1986, Mr. Adams has served as Chairman of Crabtree Capital Corporation
("Crabtree") and has been an officer and director of its various subsidiaries,
including First Premium. Together with Edward J. Wehmer and certain other
organizers, he founded Lake Forest Bancorp, Inc. ("Lake Forest") in 1991,
Hinsdale Bancorp, Inc. ("Hinsdale") in 1993, North Shore Bank in 1994 and
Libertyville Bancorp, Inc. ("Libertyville") in 1995. He is currently the
Chairman and a Director of Crabtree, Lake Forest and Libertyville, and he is
the Vice-Chairman and a Director of Hinsdale. He also serves as a director of
each of the Banks and First Premium.
Prior to 1986, Mr. Adams was associated in various capacities with the
firm of Booz, Allen & Hamilton Inc. for 23 years. For several years during his
tenure, he was the partner responsible for domestic and international banking
and financial consulting services. When he left Booz Allen in 1986, he had
been serving as the senior advisor in those areas. Mr. Adams is a Trustee of
the Chicago Horticultural Society and Colby College of Waterville, Maine
(retired) and is a member of the Lake Forest Open Lands Association.
Edward J. Wehmer -- (42) President and Class I Director.
Mr. Wehmer has been a principal organizer, together with Howard D.
Adams, of each of the banking organizations. He has served as the President of
Lake Forest and Lake Forest Bank since its establishment in 1991. Mr. Wehmer
serves as the Vice Chairman and a Director of First Premium, Lake Forest,
Hinsdale, Libertyville and each of the Banks.
52
<PAGE> 54
Prior to joining Lake Forest, Mr. Wehmer was President and a director
of Lincoln National Bank, Chicago, Illinois and from 1985 to 1991, Senior Vice
President, Chief Financial Officer, and a director of its parent company, River
Forest Bancorp, Chicago, Illinois. Mr. Wehmer also served as a managing
director of that organization's six other banking subsidiaries and as President
of a mortgage banking subsidiary and a commercial finance subsidiary. Mr.
Wehmer is also a certified public accountant and earlier in his career spent
seven years with the accounting firm of Ernst & Whinney specializing in the
banking field and particularly in the area of bank mergers and acquisitions.
Mr. Wehmer is a Trustee of Barat College, Lake Forest, Illinois, and is
involved in several other charitable and fraternal organizations.
Alan W. Adams -- (31) Class I Director.
Mr. Adams has been Vice President/Lending at Lake Forest Bank since
August 1993 after obtaining his law degree. He is licensed to practice law in
the State of Illinois and is a member of the Illinois and American Bar
Associations. Prior to law school and his association with Lake Forest Bank,
Mr. Adams was the Senior Financial and Strategic Analyst for Crabtree from
March through August 1990. From 1987 through 1989, Mr. Adams was a commercial
lending representative for Harris Trust and Savings Bank, specializing in
banking relationships with companies in the food and agribusiness industries.
Mr. Adams serves on the board of directors of the Gorton Community Center and
the Associate Board of the Lake Forest Open Lands Association. He is the son
of Howard D. Adams.
Peter Crist -- (44) Class III Director.
Mr. Crist is President of Crist Partners, Ltd., an executive search
firm he founded in 1994. Immediately prior thereto he was the Managing
Director of the Chicago office of Russell Reynolds Associates, Inc., the
largest executive search firm in the Midwest, where he was employed for more
than 18 years. He is a Director of Hinsdale and Hinsdale Bank.
Maurice F. Dunne, Jr. -- (69) Class II Director.
Mr. Dunne has been the President of Maurice F. Dunne Ltd., an
educational consulting firm, since September 1991. Prior thereto, he served as
President of the Lake Forest Graduate School of Management, Lake Forest,
Illinois for more than 25 years. Mr. Dunne also served as the chief operating
officer of the Northern Illinois Business Association from September 1991 to
June 1993. Mr. Dunne is a Director of Lake Forest, Lake Forest Bank and North
Shore Bank.
Eugene Hotchkiss III -- (68) Class II Director.
Mr. Hotchkiss served as the President of Lake Forest College from 1970
to 1993 and has been the President Emeritus of Lake Forest College since 1993.
Since 1994, Mr. Hotchkiss has been Senior Fellow of the Foundation for
Independent Higher Education, Chicago, Illinois and since 1996 has been Senior
Fellow of the Association of Governing Boards, Washington, D.C. Mr. Hotchkiss
is a Director of Lake Forest and Lake Forest Bank.
James Knollenberg -- (48) Class II Director.
Mr. Knollenberg serves as the President of First Premium, which he
helped organize, together with an experienced management team, in 1990. Mr.
Knollenberg has 25 years experience in corporate financial services. In 1975,
he co-founded Borg-Warner Insurance Finance Corp., the premium finance unit of
Borg Warner Financial Services, which was later acquired by Transamerica
Corporation. In the 1980's he served four years as Chief Financial Officer of
Willis Corroon's Brokerage Services Group followed by four years as Director of
Receivables Management for Sedgwick, Inc. Mr. Knollenberg is a Director of
First Premium.
53
<PAGE> 55
John S. Lillard -- (66) Class III Director.
Mr. Lillard spent more than 15 years as an executive with JMB
Institutional Realty Corporation, a real estate investment firm, where he
served as President from 1979 to 1991 and as Chairman-Founder from 1992 to
1994. In addition, Mr. Lillard serves as a director of Cintas Corporation and
Stryker Corporation. Mr. Lillard was a general partner of Scudder Stevens &
Clark until joining JMB in 1979. Mr. Lillard is a Director of Lake Forest and
Lake Forest Bank.
James E. Mahoney -- (59) Class I Director.
From 1978 to present, Mr. Mahoney has been the owner and President of
Heidi's Cheese Products, Inc., Mundelein, Illinois. Mr. Mahoney is a Director
of Libertyville and Libertyville Bank.
James B. McCarthy -- (45) Class I Director.
From 1991 to present, Mr. McCarthy has been President and a Director
of Gemini Consulting Group, Inc., Oak Brook, Illinois, a management consulting
firm focusing on the health care industry. Mr. McCarthy is a Director of
Hinsdale and Hinsdale Bank.
Marguerite Savard McKenna -- (54) Class II Director.
Ms. McKenna, an attorney, has practiced law in Wilmette since 1983.
She is a member of the Rotary Club, the Wilmette Chamber of Commerce and the
North Suburban Bar Association. Ms. McKenna is a Director of North Shore Bank.
Albin F. Moschner -- (44) Class II Director.
Mr. Moschner is currently Vice Chairman and director and an officer of
Diba, Inc., a development stage internet technology company, a position he has
held since August 1996. Mr. Moschner served as President and CEO and a
director of Zenith Electronics, Glenview, Illinois, from 1991 to July 1996.
Previously he held the positions of Chief Operating Officer and Senior Vice
President of Operations of Zenith. Mr. Moschner is also a director of Polaroid
Corporation and Pella Windows Corporation. He serves as a Director of Lake
Forest and Lake Forest Bank.
Hollis W. Rademacher -- (61) Class III Director.
Mr. Rademacher is currently self-employed as a business consultant and
private investor. He has participated with Mr. Adams and Mr. Wehmer as an
organizer of four of the five Banks. From 1957 to 1993, Mr. Rademacher held
various positions, including Officer in Charge, U.S. Banking Department and
Chief Credit Officer, of Continental Bank, N.A., Chicago, Illinois, and from
1988 to 1993 held the position of Chief Financial Officer. Mr. Rademacher is a
director of Schawk, Inc. and Cityscape Financial Corp. He currently serves as
a Director of each of the subsidiary holding companies and each of the Banks.
J. Christopher Reyes -- (43) Class I Director.
Since 1979, Mr. Reyes has been Chairman and President of Chicago
Beverage Systems, Inc., a beverage distributorship headquartered in Lake
Forest, Illinois. Mr. Reyes serves on the board of directors of the Boys &
Girls Clubs of Chicago. Mr. Reyes is a Director of Lake Forest and Lake Forest
Bank.
54
<PAGE> 56
John N. Schaper -- (45) Class III Director.
Since 1991, Mr. Schaper has been a general agent for American United
Life Insurance Company. Mr. Schaper is a Director of Libertyville and
Libertyville Bank.
John J. Schornack -- (65) Class III Director.
Mr. Schornack is Chairman and CEO of KraftSeal Corporation, Lake
Forest, Illinois, and is currently serving as Chairman and a director of Binks
Manufacturing Company, Chicago, Illinois. From 1955 to 1991 Mr. Schornack was
with Ernst & Young, serving most recently as Vice Chairman and Managing Partner
of the Midwest Region. He also is the Chairman of the Board of Trustees of
Barat College, Lake Forest, Illinois. Mr. Schornack is a Director of North
Shore Bank.
Jane R. Stein -- (52) Class II Director.
Since 1983, Ms. Stein has been the Executive Director of the Lake
County Medical Society, Vernon Hills, Illinois, a not-for-profit professional
association for physicians in Lake County. Ms. Stein is a Director of
Libertyville and Libertyville Bank.
Katharine V. Sylvester -- (56) Class II Director.
Ms. Sylvester has been active in civic affairs in the Hinsdale area
for many years. She is on the Board of Trustees of the Hinsdale Community
House and is an Associate Member of the Women's Auxiliary of the Robert Crown
Center for Health Education. Ms. Sylvester is a Director of Hinsdale and
Hinsdale Bank.
Lemuel H. Tate, Jr. -- (70) Class I Director.
From 1982 to 1988, Mr. Tate was an executive with Northwestern
Telecommunication Services (now known as Northwestern Technologies Group) which
is a venture partnership jointly owned by Northwestern University and
Northwestern Memorial Hospital Group. He retired as President and Chief
Operating Officer of the company in 1988. Since 1988, he has been active in
volunteer work in the local Chicago area. He is a member of the Evanston
Rotary Club and is active in the International Executive Service Corps. Since
its establishment, Mr. Tate has been Chairman and a Director of North Shore
Bank, which opened in 1994.
Larry Wright -- (56) Class III Director.
For the past 32 years, Mr. Wright has been Vice President of Milbank
Corporation, Chicago, Illinois, an investment advisory firm. He is a Director
of Crabtree.
COMPENSATION OF BOARD OF DIRECTORS
Non-employee members of the Board of Directors are compensated at a
rate of $500 for each board meeting attended. In addition, Directors receive
$200 per meeting for attendance at meetings of any committees of the board on
which they serve. Those Directors who serve on subsidiary boards are also
entitled to compensation for such service.
COMMITTEES OF THE BOARD OF DIRECTORS
Members of the Company's Board of Directors have been appointed to
serve on various committees of the Board of Directors. The Board of Directors
has currently established three committees: (i) the Executive Committee; (ii)
the Compensation Committee (which will also act as a nominating committee); and
(iii) the Audit Committee.
55
<PAGE> 57
Executive Committee. The Executive Committee has the authority to act
in place of the full Board of Directors, when required, in connection with the
following matters: critical real estate purchases and sales; temporary funding
requirements; limited personnel issues (especially as they relate to strategic
expansion initiatives); acquisition negotiations within specifically approved
parameters; capital allocation among subsidiaries; and other issues as
specifically approved by the full Board of Directors. Actions of the Executive
Committee are generally subject to the ratification of the full Board of
Directors. The Executive Committee consists of Mr. Rademacher (Chairman) and
Messrs. Alan Adams, McCarthy, McKenna, Schaper, Tate, Wehmer and Wright.
Compensation Committee. The Compensation Committee is responsible for
reviewing and recommending compensation of the Company's officers and the
chairmen and presidents of the Banks and First Premium; reviewing and
recommending non-cash compensation programs including stock option plans and
grants thereunder, retirement plans, 401(k) plans and employee stock purchase
plans; recommending and slating the Company's Directors; reviewing and
recommending Director compensation for the Company, the Banks and First
Premium; and the preparation of the proxy statement report regarding
compensation philosophy. With respect to stock option grants, it is
anticipated that the committee will recommend allocations among the Banks and
First Premium and will generally rely on recommendations of the Banks and First
Premium as to awards to key employees. The members of the Compensation
Committee are Mr. Howard D. Adams (Chairman) and Messrs. Crist, Dunne,
Hotchkiss, Lillard, Mahoney and Rademacher.
Audit Committee. The Audit Committee reports to the Board of
Directors in discharging its responsibilities relating to the accounting,
reporting and financial control practices of the Company. The Audit Committee
has general responsibility for oversight of financial controls, as well as the
Company's accounting and audit activities, and annually reviews the
qualifications of the independent auditors. The Audit Committee is composed
entirely of outside directors who are not now, and have never been, officers of
the Company. The members of the Audit Committee are Mr. Schornack (Chairman)
and Messrs. Moschner, Stein and Sylvester.
EXECUTIVE OFFICERS
The following persons serve as the executive officers of the Company.
Howard D. Adams -- (63) Chairman and Chief Executive Officer.
Mr. Adams serves as the Company's Chairman and Chief Executive Officer
and oversees the long-term strategic, marketing and organizational planning of
the Company. See the description above under "Board of Directors" for
biographical information.
Edward J. Wehmer -- (42) President.
Mr. Wehmer serves as the Company's President and performs the
functions of the Chief Operating Officer. Accordingly, he is responsible for
overseeing the execution of the Company's day-to-day operations and strategic
initiatives. Mr. Wehmer also serves as President of Lake Forest and Lake
Forest Bank. See the description above under "Board of Directors" for
biographical information.
David A. Dykstra -- (35) Executive Vice President, Chief Financial Officer and
Treasurer.
Mr. Dykstra serves as the Company's Chief Financial Officer and
oversees all financial affairs of the Company, including internal and external
financial reporting. Prior thereto, Mr. Dykstra was employed from 1990 to 1995
in a similar capacity by River Forest Bancorp, Inc., Chicago, Illinois, most
recently holding the position of Senior Vice President and Chief Financial
Officer. Prior to his association with River Forest Bancorp, Mr. Dykstra spent
seven years with KPMG Peat Marwick LLP, most recently holding the position of
Audit Manager in the Financial Institutions practice. In addition to various
civic and charitable activities, Mr. Dykstra is a Trustee of the Village of
Lake Villa. Mr. Dykstra is a Director of Libertyville and Libertyville Bank.
56
<PAGE> 58
Lloyd M. Bowden -- (42) Executive Vice President -- Technology.
Mr. Bowden serves as Executive Vice President - Technology for the
Company and is responsible for planning, implementing and maintaining all
aspects of the Banks' internal data processing systems and technology designed
to service the Banks' customer base. Mr. Bowden joined the Company in April
1996 to serve as the Director of Technology with responsibility for
implementing technological improvements to enhance customer service
capabilities and operational efficiencies. Prior thereto, he was employed by
Electronic Data Systems, Inc. in various capacities since 1982, most recently
in an executive management position with the Banking Services Division and
previously in the Banking Group of the Management Consulting Division.
Robert F. Key -- (41) Executive Vice President -- Marketing.
Mr. Key serves as the Executive Vice President - Marketing for the
Company and directs all advertising and marketing programs for each of the
Banks. Mr. Key joined the Company in March 1996 to serve as Executive Vice
President of Marketing. From 1978 through March 1996, Mr. Key was a Vice
President/Account Director at Leo Burnett Company where he most recently had
responsibility for the $30 million advertising budget of a business with $600
million in sales.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid by the Company
and its subsidiaries to the Chairman and Chief Executive Officer and the four
other most highly paid executive officers (the "Named Executive Officers")
during 1995 and 1994 and the aggregate salary and certain other compensation
estimated to be paid in 1996 based on current compensation arrangements between
the Named Executive Officers and the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
----------------------------------------------------------------------------------
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- -----------
OTHER
ANNUAL SECURITIES ALL OTHER
COMPEN- UNDERLYING COMPEN-
NAME AND SALARY BONUS SATION(1) OPTIONS/ SATION(2)
PRINCIPAL POSITION YEAR ($) ($) ($) SARS(#) ($)
- ----------------------- ---- ------- ----- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Howard D. Adams(3) 1996 331,250 40,000 --(1) -- --
Chairman and CEO 1995 190,000 43,000 629 -- --
1994 141,000 10,000 -- -- --
Edward J. Wehmer(4) 1996 395,000 40,000 --(1) -- --
Chief Operating Officer 1995 326,250 43,000 5,935 -- 3,482
1994 255,000 25,000 4,862 -- --
David A. Dykstra 1996 155,000 32,000 --(1) 6,825 582
Exec. Vice President & Chief 1995 80,889 12,000 2,486 30,880 --
Financial Officer 1994 N/A N/A N/A -- --
Robert F. Key 1996 121,634 40,000 --(1) 29,226 --
Exec. Vice President & 1995 N/A N/A N/A -- --
Director of Marketing 1994 N/A N/A N/A -- --
Lloyd M. Bowden 1996 90,000 20,000 --(1) 18,671 --
Exec. Vice President & 1995 N/A N/A N/A -- --
Director of Technology 1994 N/A N/A N/A -- --
</TABLE>
- ---------------
(1) Other compensation represents the sum of compensation for the use of a
Company car and/or the payment of club dues.
57
<PAGE> 59
(2) Represents compensation to the executive officer for the aggregate life
insurance premium paid on behalf of the named executive officer by the
Company and other miscellaneous compensation.
(3) Howard D. Adams also received a salary from HDA Capital Corporation ("HDA")
of $50,000 for 1995 and 1994. Such amounts are not included as
compensation in the above table. HDA was paid consulting fees from
Crabtree for Mr. Adams' services. Specifically, HDA received consulting
fees of $95,548, $142,692 and $111,030 for the year ended December 31, 1996,
1995 and 1994, respectively. Subsequent to the Reorganization, these
consulting fees were discontinued. HDA is owned by the Alan W. Adams
Family Trust and the Sarah K. Adams Family Trust. See "CERTAIN
TRANSACTIONS."
(4) During 1996, Edward J. Wehmer entered into deferred compensation plans with
Libertyville and Lake Forest. The deferred compensation plans are in the
form of "Phantom Stock Agreements" whereby the amount of compensation
deferred is equal to the value which Mr. Wehmer would have received had he
held 6,000 shares of Libertyville and 1,300 shares of Lake Forest as of the
date of the awards, respectively.
The information presented below summarizes certain information about
the Common Stock underlying options which were granted in 1995 by the Company
or its subsidiaries to the Named Executive Officers.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
% OF POTENTIAL REALIZABLE
NUMBER OF TOTAL VALUE AT ASSUMED
WINTRUST OPTIONS/ ANNUAL RATES OF
SHARES SARS STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION
OPTIONS/ EMPLOYEES OR BASE FOR OPTION TERM
SARS IN FISCAL PRICE EXPIRATION ------------------------
NAME GRANTED YEAR ($/SH) DATE 5% 10%
---- --------- --------- ------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Howard D. Adams ........... -- -- -- -- -- --
Edward J. Wehmer........... -- -- -- -- -- --
David A. Dykstra........... 30,880 18.38% --(1) 2005 $207,850 $526,732
Robert F. Key.............. -- -- -- -- -- --
Lloyd M. Bowden............ -- -- -- -- -- --
</TABLE>
- ----------------
(1) The exercise price per share is $9.30 for Options to purchase 11,608 shares
of Common Stock; $10.77 for Options to purchase 7,241 shares of Common
Stock; $11.62 for Options to purchase 6,194 shares of Common Stock; and
$12.42 for Options to purchase 5,837 shares of Common Stock.
58
<PAGE> 60
Prior to the Reorganization, the following table summarizes the number
and value of stock options relating to Common Stock that were unexercised at
December 31, 1995. No stock options were exercised by the named executives
during 1995 or the first three quarters of 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
DECEMBER 31, 1995 (#) DECEMBER 31, 1995 ($)
SHARES ---------------------- ------------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED ($) UNEXERCISABLE (1) UNEXERCISABLE (1)
---- ------------- ----------- -------------------- -------------------
<S> <C> <C> <C> <C>
Howard D. Adams ........... -- -- 11,234/2,902 18,349/ 10,500
Edward J. Wehmer........... -- -- 84,622/31,458 413,658/144,354
David A. Dykstra........... -- -- 4,712/26,168 9,000/ 45,000
Robert F. Key.............. -- -- --/-- --/--
Lloyd M. Bowden............ -- -- --/-- --/--
</TABLE>
- --------------------
(1) The numbers and amounts in the above table represent shares of Common Stock
subject to stock Options granted by the Company or its subsidiaries that
were unexercised as of December 31, 1995.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with Howard D. Adams on
November 27, 1996 and with Edward J. Wehmer on December 16, 1996. The
employment agreements provide for certain non-compete and confidentiality
agreements as well as reasonable and customary benefits and severance
arrangements. The base salaries to be paid to Messrs. Adams and Wehmer
pursuant to the terms of each of their respective employment agreements, will
be such salary as may from time to time be agreed upon between each of them and
the Company. As such, it is not expected that the base salaries of Mr. Adams
or Mr. Wehmer will differ materially from the amounts estimated in the Summary
Compensation Table above.
It is anticipated that the Company will, together with its
subsidiaries, enter into employment agreements with the other members of senior
management, including the Named Executive Officers other than Messrs. Adams and
Wehmer. It is expected that the base salaries provided for will not differ
materially from the amounts estimated above. Such agreements are also expected
to provide for non-compete and confidentiality agreements as well as reasonable
and customary benefits and severance arrangements.
CERTAIN TRANSACTIONS
Some of the executive officers and Directors of the Company are, and
have been during the preceding three years, customers of the Bank, and some of
the officers and directors of the Company are direct or indirect owners of 10%
or more of the stock of corporations which are, or have been in the past,
customers of the Bank. As such customers, they have had transactions in the
ordinary course of business of the Bank, including borrowings, all of which
transactions are or were on substantially the same terms (including interest
rates and collateral on loans) as those prevailing at the time for comparable
transactions with nonaffiliated persons. In the opinion of management of the
Company, none of the transactions involved more than the normal risk of
collectibility or presented any other unfavorable features. At September 30,
1996, the Bank had $7.2 million in loans outstanding to certain Directors and
executive officers of the Company and certain executive officers of the Banks,
which amount represented 17.6% of total shareholders' equity as of that date.
59
<PAGE> 61
On October 24, 1996, the Board of Directors approved the acquisition
of Wolfhoya, a company organized prior to the Reorganization by Howard D. Adams
and Edward J. Wehmer, and certain other persons who are Directors and/or
executive officers of the Company, for purposes of establishing a de novo bank
in Barrington, Illinois. See "RECENT ACQUISITION." In December 1996, the
Company issued an aggregate of 87,556 shares of Common Stock to complete the
acquisition, all of which shares are restricted securities under Rule 144
promulgated under the Securities Act. Pursuant to the terms of the
transaction, the family of Howard D. Adams, and Messrs. Edward J. Wehmer, David
A. Dykstra, Robert F. Key, Hollis W. Rademacher and Lemuel H. Tate, Jr.
received, in exchange for their respective ownership interests in Wolfhoya,
Common Stock of the Company in the amounts of 36,054 shares (including 18,027
shares which are held in trust for the benefit of Alan W. Adams, a Director of
the Company), 15,342 shares, 5,479 shares, 5,479 shares, 1,095 shares and 5,479
shares, respectively. In addition, outstanding warrants to purchase shares of
Wolfhoya were converted, in accordance with their terms, to Warrants to
purchase Common Stock of the Company, and as a result, members of Howard Adams'
Family and Edward J. Wehmer received Warrants to purchase shares of Common
Stock in the amounts of 12,096 (including Warrants to purchase 6,048 shares
which are held in trust for the benefit of Alan W. Adams) and 4,742,
respectively, at a purchase price of $14.85 per share. Prior to such
acquisition by the Company, Wolfhoya's debt of approximately $500,000 was in
the form of a $500,000 promissory note which was personally guaranteed by
Howard D. Adams and Edward J. Wehmer. Following the acquisition, the
outstanding principal balance and accrued interest on the $500,000 promissory
note was repaid in full.
Prior to the Reorganization, certain of the Directors and officers of
the Company held rights and options to acquire common stock of the various
predecessor companies. In the Reorganization, such rights and options were
converted on the basis of the applicable exchange ratios so as to represent the
right to acquire an aggregate of 1,186,239 shares of Common Stock, at
appropriately adjusted exercise prices.
In addition, certain of the Directors and officers of the Company held
warrants to purchase the common stock of predecessor companies which were
exchanged, in connection with and as part of the Reorganization, for a
combination of Common Stock and Warrants to purchase Common Stock on a basis
reflective of and consistent with the applicable exchange ratios. As a result
of the contribution of the outstanding warrants to the Company in exchange for
Common Stock and Warrants, such directors and officers acquired an aggregate of
98,381 additional shares of Common Stock in the Reorganization without being
required to pay any portion of the cash exercise price relating to their
warrants, as all of such exercise price was reallocated to the Warrants issued
as part of the exchange and will be payable only in the event of subsequent
exercise of the Warrants. Of the Common Stock and Warrants issued in exchange
for outstanding warrants, Howard D. Adams and/or certain members of his family
and Edward J. Wehmer received 35,318 and 10,268 shares, respectively, and
56,231 and 14,398 Warrants, respectively.
Howard D. Adams held certain options relating to shares of a
subsidiary of Crabtree that had discontinued operations prior to the
Reorganization. Such options were amended in connection with the
Reorganization so as to convert to Options to acquire 9,299 shares of Common
Stock at an exercise price appropriately adjusted to reflect such conversion.
In addition, Mr. Adams owned 40,000 shares of Crabtree common stock which were
purchased at a discount of $20 per share from the fair value determined at the
time by the board and were subject to continuing restrictions pursuant to the
Crabtree Capital Corporation 1990 Stock Purchase Plan. As a result of the
Reorganization, Crabtree shares were converted into shares of Common Stock with
no continuing restrictions or discounts on repurchase.
Prior to the Reorganization, Mr. James Knollenberg, the President of
First Premium and a Director of the Company, held certain Options to purchase
950 shares of First Premium. Such Options were converted in the Reorganization
so as to represent options to acquire 65,510 shares of Common Stock at an
exercise price appropriately adjusted to reflect such conversion. The
conversion in the Reorganization was intended to eliminate the possibility of
minority interests in one of the Company's operating subsidiaries from which
the Company may look to receive dividends. Absent such provision of the
Reorganization, Mr. Knollenberg would have continued to hold an option to
purchase a minority position in a wholly-owned subsidiary of a mid-tier holding
company for which it is unlikely there would have developed any established
market for such shares.
60
<PAGE> 62
During 1995, 1994 and 1993, certain of Crabtree's bank debt was
guaranteed by Mr. Howard D. Adams in connection with which Crabtree paid an
annual fee to Mr. Adams at a rate of 1.5 percent of the average balance
outstanding of the debt guaranteed. Pursuant to this arrangement, Crabtree
incurred expense and Mr. Adams received income of $32,973, $29,840 and $68,339
in 1995, 1994 and 1993, respectively. Subsequent to the Reorganization, the
Company repaid the bank debt which terminated Mr. Adams' liability on the
personal guarantee.
Prior to the Reorganization, each of the predecessor companies jointly
reimbursed expenses incurred by HDA for their share of marketing and
secretarial personnel and direct costs incurred on behalf of the respective
companies. HDA provided periodic invoices to each of the companies for such
marketing and secretarial time and direct expenses based upon specific
activities attributable to each of the respective companies and based on actual
cost. The Alan W. Adams Family Trust and the Sarah K. Adams Family Trust are
co-trusteed by Emmett McCarthy and either Alan W. Adams and Sarah K. Adams,
respectively, the two adult children of Howard D. Adams. Alan W. Adams is also
a Director of the Company. In addition to the expense sharing arrangement
noted above, HDA received consulting fees from Crabtree for services rendered
by Howard D. Adams. Such fees amounted to $95,548, $142,692 and $111,030 for
the nine months ended September 30, 1996, and the years ended December 31, 1995
and 1994, respectively. Following consummation of the Reorganization, Howard
D. Adams is compensated directly for his services as an executive officer of
the Company.
61
<PAGE> 63
PRINCIPAL SHAREHOLDERS
The following table sets forth the beneficial ownership of the Common
Stock as of December 31, 1996, and as adjusted to give effect to the Offering
assuming the maximum number of shares are sold in the Offering (assuming no
exercise of the oversubscription or overallotment options), with respect to (i)
each Director and executive officer of the Company; (ii) all Directors and
executive officers of the Company as a whole; and (iii) any shareholder known
to hold in excess of 5% of any class of the Company's voting securities.
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
AMOUNT AND NATURE CLASS BEFORE CLASS AFTER
OF BENEFICIAL OWNERSHIP(1) OFFERING(1) OFFERING
-------------------------- ------------- ---------
DIRECTOR
- --------
<S> <C> <C> <C>
Alan W. Adams(2) . . . . . . . 213,266 3.21% 2.72%
Howard D. Adams(3)** . . . . . 504,261 7.62% 6.45%
Peter Crist . . . . . . . . . . 28,556 * *
Maurice F. Dunne, Jr. . . . . . 55,336 * *
Eugene Hotchkiss III . . . . . 4,035 * *
James Knollenberg . . . . . . . 79,110 1.18% 1.00%
John S. Lillard . . . . . . . . 52,451 * *
James E. Mahoney . . . . . . . 7,124 * *
James B. McCarthy . . . . . . . 16,392 * *
Marguerite Savard McKenna . . . 19,230 * *
Albin F. Moschner. . . . . . . 3,869 * *
Hollis W. Rademacher . . . . . 60,453 * *
J. Christopher Reyes . . . . . 148,478 2.25% 1.90%
John N. Schaper . . . . . . . . 1,811 * *
John J. Schornack . . . . . . . 10,632 * *
Jane R. Stein . . . . . . . . . 604 * *
Katharine V. Sylvester . . . . 5,913 * *
Lemuel H. Tate . . . . . . . . 21,949 * *
Edward J. Wehmer** . . . . . . 269,487 3.99% 3.39%
Larry Wright(4) . . . . . . . . 487,997 7.36% 6.23%
--------- ----- -----
Total Directors . . . . . . . 1,990,954 29.97% 25.39%
--------- ----- -----
NON-DIRECTOR EXECUTIVE OFFICERS
- -------------------------------
Lloyd M. Bowden . . . . . . . . 15,641 * *
David A. Dykstra . . . . . . . 22,601 * *
Robert F. Key . . . . . . . . . 20,152 * *
--------- ----- -----
Total Directors and Executive
Officers . . . . . . . . . 2,049,348 30.86% 26.14%
========= ===== =====
OTHER SIGNIFICANT SHAREHOLDERS
- ------------------------------
Milbank Corporation(5) . . . . 497,670 7.51% 6.36%
Emmett McCarthy(6) . . . . . . 421,937 6.35% 5.38%
</TABLE>
- ---------------------------
* Less than 1%
** Denotes executive officer (in addition to Director)
(1) Beneficial ownership percentages are calculated in accordance with SEC
Rule 13d-3 promulgated under the Securities Exchange Act of 1934.
(2) Includes shares held in certain family trusts for the benefit of Alan W.
Adams and with respect to which he has shared voting and investment power.
Does not include shares held in certain other family trusts (for which
62
<PAGE> 64
Alan W. Adams does not act as co-trustee) and does not include shares held
directly by, or indirectly through other family trusts for the benefit of
Sarah K. Adams, Alan W. Adams' sister. See footnote (6) below. Sarah K.
Adams and Alan W. Adams are the two adult children of Howard D. Adams.
(3) Includes shares held in certain family trusts for the benefit of Mr.
Howard D. Adams' children or in charitable foundations with respect to
which either Mr. Adams or his wife has voting power and with respect to
which Mr. Adams disclaims beneficial ownership. Does not include shares
held directly by, or indirectly through certain other family trusts (for
which neither Mr. Adams nor his wife act as co- trustees) for the benefit
of, Mr. Adams' two adult children.
(4) Includes (i) 21,379 shares and 4,667 Warrants to acquire common shares
held directly by Larry Wright; (ii) 3,000 shares held by Milbank
Corporation ("Milbank") of which Mr. Wright is an officer, director and
principal shareholder and with respect to which shares he exercises shared
voting and investment power; (iii) 26,173 shares and 3,334 Warrants to
acquire Common Stock held by an employee retirement plan of Milbank of
which Mr. Wright is a trustee with shared voting and investment power;
(iv) 401,884 shares and 22,733 Warrants to acquire Common Stock held in
Deerpath Investments LLP, a limited partnership ("Deerpath"), to which
Milbank serves as investment advisor and with respect to which Mr. Wright
exercises shared voting and investment power; and (v) 4,827 shares held in
certain family trusts of another officer of Milbank with respect to which
certain officers of Milbank act as co-trustees and exercise shared voting
power. See footnote (5) below for a description of Milbank's total pro
forma beneficial ownership which includes that of Mr. Wright.
(5) Includes (i) 21,379 shares and 4,667 Warrants to acquire Common Stock held
by Larry Wright, a director of the Company, who is an officer of Milbank;
(ii) 3,000 shares held by Milbank; (iii) 26,173 shares and 3,334 Warrants
to acquire Common Stock held by an employee retirement plan of Milbank of
which Mr. Wright is a trustee with voting and investment power; (iv)
401,884 shares and 22,733 Warrants to acquire Common Stock held in
Deerpath to which Milbank serves as investment advisor and with respect to
which Mr. Wright exercises voting and investment power; and (v) 14,500
shares held in certain family trusts of another officer of Milbank with
respect to which certain officers of Milbank act as co-trustees and
exercise shared voting power. See footnote (4) above for a description of
the beneficial ownership of Mr. Wright included within that of Milbank.
(6) Includes 17,550 shares owned by Emmett D. McCarthy and his family. Also
reflects 197,529 shares held by the Alan W. Adams Family Trust and 206,858
shares held by the Sarah K. Adams Family Trust, irrevocable trusts for
which Emmett D. McCarthy and either Alan W. Adams or Sarah K. Adams,
respectively, serve as co-trustees. The beneficiaries of the respective
trusts are Alan W. Adams and Sarah K. Adams, respectively, the two adult
children of Howard D. Adams, and Mr. McCarthy disclaims beneficial
ownership of all such shares. See footnote (2) above regarding beneficial
ownership of Alan W. Adams, a vice president of Lake Forest Bank and a
Director of the Company.
63
<PAGE> 65
SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated under
federal and state law. References under this heading to applicable statutes or
regulations are brief summaries of portions thereof which do not purport to be
complete and which are qualified in their entirety by reference to those
statutes and regulations. Any change in applicable laws or regulations may
have a material adverse effect on the business of commercial banks and bank
holding companies, including the Company and the Banks. However, management is
not aware of any current recommendations by any regulatory authority which, if
implemented, would have or would be reasonably likely to have a material effect
on liquidity, capital resources, or operations of the Company or the Banks.
BANK HOLDING COMPANY REGULATION
The Company and each of its bank holding company subsidiaries, Lake
Forest, Hinsdale and Libertyville, are registered as "bank holding companies"
with the Federal Reserve and, accordingly, are subject to supervision by the
Federal Reserve under the Bank Holding Company Act (the Bank Holding Company
Act and the regulations issued thereunder, are collectively the "BHC Act").
The Company is required to file with the Federal Reserve periodic reports and
such additional information as the Federal Reserve may require pursuant to the
BHC Act. The Federal Reserve examines the Company and may examine the Banks.
The BHC Act requires prior Federal Reserve approval for, among other
things, the acquisition by a bank holding company of direct or indirect
ownership or control of more than five percent of the voting shares or
substantially all the assets of any bank or bank holding company, or for a
merger or consolidation of a bank holding company with another bank holding
company. With certain exceptions, the BHC Act prohibits a bank holding company
from acquiring direct or indirect ownership or control of voting shares of any
company which is not a bank or bank holding company and from engaging directly
or indirectly in any activity other than banking or managing or controlling
banks or performing services for its authorized subsidiaries. A bank holding
company may, however, engage in or acquire an interest in a company that
engages in activities which the Federal Reserve has determined, by regulation
or order, to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto, such as owning and operating the premium
finance business conducted by Crabtree. Under the BHC Act and Federal Reserve
regulations, the Company and the Banks are prohibited from engaging in certain
tie-in arrangements in connection with an extension of credit, lease, sale of
property, or furnishing of services.
Any person, including associates and affiliates of and groups acting
in concert with such person, who purchases or subscribes for five percent or
more of the Company's Common Stock may be required to obtain prior approval of
the Illinois Commissioner and the Federal Reserve. Under the Illinois Banking
Act, any person who thereafter acquires stock of the Company such that its
interest exceeds ten percent of the Company, may be required to obtain the
prior approval of the Illinois Commissioner and under the Change in Bank
Control Act, a person may be required to obtain the prior regulatory approval
of the FDIC or OCC, in the case of Barrington Bank, and the Federal Reserve
before acquiring the power to directly or indirectly direct the management,
operations or policies of the Company or the Banks or before acquiring control
of 25 percent or more of any class of the Company's or Banks' outstanding
voting stock. In addition, any corporation, partnership, trust or organized
group that acquires a controlling interest in the Company or the Banks may have
to obtain approval of the Federal Reserve to become a bank holding company and
thereafter be subject to regulation as such.
It is the policy of the Federal Reserve that the Company is expected
to act as a source of financial strength to the Banks and to commit resources
to support the Banks. The Federal Reserve takes the position that in
implementing this policy, it may require the Company to provide such support
when the Company otherwise would not consider itself able to do so.
The Federal Reserve has adopted risk-based capital requirements for
assessing bank holding company capital adequacy. These standards define
regulatory capital and establish minimum capital standards in relation to
assets and off-balance sheet exposures, as adjusted for credit risks. The
Federal Reserve's risk-based guidelines
64
<PAGE> 66
apply on a consolidated basis for bank holding companies with consolidated
assets of $150 million or more and on a "bank-only" basis for bank holding
companies with consolidated assets of less than $150 million, subject to
certain terms and conditions. Under the Federal Reserve's risk-based
guidelines, capital is classified into two categories. For bank holding
companies, Tier 1 or "core" capital consists of common shareholders' equity,
perpetual preferred stock (subject to certain limitations) and minority
interests in the common equity accounts of consolidated subsidiaries, and is
reduced by goodwill, certain other intangible assets and certain investments in
other corporations ("Tier 1 Capital"). Tier 2 capital consists of the
allowance for loan and lease losses (subject to certain conditions and
limitations), perpetual preferred stock, "hybrid capital instruments,"
perpetual debt and mandatory convertible debt securities, and term subordinated
debt and intermediate-term preferred stock.
Under the Federal Reserve's capital guidelines, bank holding companies
are required to maintain a minimum ratio of qualifying capital to risk-weighted
assets of eight percent, of which at least four percent must be in the form of
Tier 1 Capital. The Federal Reserve also requires a minimum leverage ratio of
Tier 1 Capital to total assets of three percent, except that bank holding
companies not rated in the highest category under the regulatory rating system
are required to maintain a leverage ratio of one percent to two percent above
such minimum. The three percent Tier 1 Capital to total assets ratio
constitutes the minimum leverage standard for bank holding companies, and will
be used in conjunction with the risk-based ratio in determining the overall
capital adequacy of banking organizations. In addition, the Federal Reserve
continues to consider the Tier 1 leverage ratio in evaluating proposals for
expansion or new activities.
In its capital adequacy guidelines, the Federal Reserve emphasizes
that the foregoing standards are supervisory minimums and that banking
organizations generally are expected to operate well above the minimum ratios.
These guidelines also provide that banking organizations experiencing internal
growth or making acquisitions will be expected to maintain strong capital
positions substantially above the minimum levels.
As of September 30, 1996, on a pro forma combined basis, the Company
had regulatory capital in excess of the Federal Reserve's minimum requirements.
The Company had a total risk-based capital ratio of 8.9% and a leverage ratio
of 6.5% as of September 30, 1996.
BANK REGULATION
Under Illinois law, each of North Shore Bank, Lake Forest Bank,
Hinsdale Bank and Libertyville Bank are subject to supervision and examination
by the Illinois Commissioner. As an affiliate of these Banks, the Company is
also subject to examination by the Illinois Commissioner. Barrington Bank is
subject to supervision and examination by the OCC pursuant to the National Bank
Act and regulations promulgated thereunder. Each of the Banks is a member of
the Federal Home Loan Bank and the Federal Reserve Bank.
The deposits of the Banks are insured by the Bank Insurance Fund under
the provisions of the Federal Deposit Insurance Act (the "FDIA"), and the Banks
are, therefore, also subject to supervision and examination by the FDIC. The
FDIA requires that the appropriate federal regulatory authority (the Federal
Reserve Bank and/or the FDIC in the case of Lake Forest Bank, North Shore Bank,
Hinsdale Bank and Libertyville Bank, or the OCC, in the case of Barrington Bank)
approve any merger and/or consolidation by or with an insured bank, as well as
the establishment or relocation of any bank or branch office. The FDIC also
supervises compliance with the provisions of federal law and regulations which
place restrictions on loans by FDIC-insured banks to their directors, executive
officers and other controlling persons.
Furthermore, banks are affected by the credit policies of other
monetary authorities, including the Federal Reserve, which regulate the
national supply of bank credit. Such regulation influences overall growth of
bank loans, investments, and deposits and may also affect interest rates
charged on loans and paid on deposits. The monetary policies of the Federal
Reserve have had a significant effect on the operating results of commercial
banks in the past and are expected to continue to do so in the future.
65
<PAGE> 67
All banks located in Illinois have traditionally been restricted as to
the number and geographic location of branches which they may establish. The
Illinois Banking Act was amended in June, 1993, however, to eliminate such
branching restrictions. Accordingly, banks located in Illinois are now
permitted to establish branches anywhere in Illinois without regard to the
location of other banks' main offices or the number of branches previously
maintained by the bank establishing the branch.
RECENT REGULATORY EXAMS
The following table describes the most recent regulatory examinations,
listed by type, for the Banks and their holding companies:
<TABLE>
<CAPTION>
EXAMINING DATE OF MOST
REGULATORY RECENT
BANK AGENCY EXAMINATION TYPE OF EXAMINATION
---- -------------- --------------- ---------------------
<S> <C> <C> <C>
North Shore Bank Federal Reserve Bank of Chicago March 1995 Safety and Soundness
Federal Reserve Bank of Chicago August 1995 Consumer Affairs and Community
Reinvestment Act
Illinois Commissioner November 1996 Safety and Soundness
Lake Forest Bank Federal Reserve Bank of Chicago September 1995 Safety and Soundness
Federal Reserve Bank of Chicago December 1996 Consumer Affairs and Community
Reinvestment Act
Federal Reserve Bank of Chicago December 1995 Trust Department
Illinois Commissioner September 1996 Safety and Soundness
Illinois Commissioner June 1995 Trust Department
Hinsdale Bank Federal Reserve Bank of Chicago June 1996 Safety and Soundness
Federal Reserve Bank of Chicago April 1995 Consumer Affairs and Community
Reinvestment Act
Illinois Commissioner July 1996 EDP Examination
Illinois Commissioner January 1996 Safety and Soundness
Libertyville Bank Federal Reserve Bank of Chicago March 1996 Safety and Soundness
Federal Reserve Bank of Chicago November 1996 Consumer Affairs and Community
Reinvestment Act
Illinois Commissioner November 1996 Safety and Soundness
Barrington Bank Federal Reserve Bank of Chicago N/A N/A
OCC N/A N/A
</TABLE>
While the examination reports relating to the examinations listed above
contained certain recommendations by the regulatory agencies for management and
the Board of Directors to consider, such recommendations by regulatory agencies
are typical and are not necessarily indicative of any systemic problems. The
results of the examinations listed above did not contain any material adverse
findings by the respective regulatory agencies.
FINANCIAL INSTITUTION REGULATION GENERALLY
Transactions with Affiliates. Transactions between a bank and its
holding company or other affiliates are subject to various restrictions imposed
by state and federal regulatory agencies. Such transactions include loans and
other extensions of credit, purchases of securities and other assets, and
payments of fees or other distributions. In general, these restrictions limit
the amount of transactions between an institution and an affiliate of such
institution,
66
<PAGE> 68
as well as the aggregate amount of transactions between an institution and all
of its affiliates, and require transactions with affiliates to be on terms
comparable to those for transactions with unaffiliated entities.
Dividend Limitations. As a holding company, the Company is primarily
dependent upon dividend distributions from its operating subsidiaries for its
income. Federal and state statutes and regulations impose restrictions on the
payment of dividends by the Company and the Banks.
Federal Reserve policy provides that a bank holding company should not
pay dividends unless (i) the bank holding company's net income over the prior
year is sufficient to fully fund the dividends and (ii) the prospective rate of
earnings retention appears consistent with the capital needs, asset quality and
overall financial condition of the bank holding company and its subsidiaries.
Illinois law also places certain limitations on the ability of the
Company to pay dividends. For example, the Company may not pay dividends to
its shareholders if, after giving effect to the dividend, the Company would not
be able to pay its debts as they become due. Since a major source of the
Company's revenue is dividends the Company receives and expects to receive from
the Banks, the Company's ability to pay dividends is likely to be dependent on
the amount of dividends paid by the Banks. No assurance can be given that the
Banks will, in any circumstances, pay dividends on their stock.
As Illinois state-chartered banks, none of Lake Forest Bank, North
Shore Bank, Hinsdale Bank nor Libertyville Bank may pay dividends in an amount
greater than its current net profits after deducting losses and bad debts out
of undivided profits provided that its surplus equals or exceeds its capital.
For the purpose of determining the amount of dividends that an Illinois bank
may pay, bad debts are defined as debts upon which interest is past due and
unpaid for a period of six months or more unless such debts are well-secured
and in the process of collection. Without the prior approval of the OCC,
Barrington Bank may not declare dividends in any calendar year in excess of its
net profit for the year plus the retained net profits for the preceding two
years.
In addition to the foregoing, the ability of the Company and the Banks
to pay dividends may be affected by the various minimum capital requirements
and the capital and non-capital standards established under the Federal Deposit
Insurance Corporation Improvements Act of 1991 ("FDICIA"), as described below.
Furthermore, the OCC may, after notice and opportunity for hearing, prohibit
the payment of a dividend by a national bank if it determines that such payment
would constitute an unsafe or unsound practice. The right of the Company, its
shareholders and its creditors to participate in any distribution of the assets
or earnings of its subsidiaries is further subject to the prior claims of
creditors of the respective subsidiaries.
Standards for Safety and Soundness. The FDIA, as amended by FDICIA
and the Riegle Community Development and Regulatory Improvement Act of 1994
requires the Federal Reserve, together with the other federal bank regulatory
agencies, to prescribe standards of safety and soundness, by regulations or
guidelines, relating generally to operations and management, asset growth,
asset quality, earnings, stock valuation, and compensation. The Federal
Reserve, the OCC and the federal bank regulatory agencies have adopted,
effective August 9, 1995, a set of guidelines prescribing safety and soundness
standards pursuant to FDICIA, as amended. The guidelines establish general
standards relating to internal controls and information systems, internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth, and compensation, fees and benefits. In general, the guidelines
require, among other things, appropriate systems and practices to identify and
manage the risks and exposures specified in the guidelines. The guidelines
prohibit excessive compensation as an unsafe and unsound practice and describe
compensation as excessive when the amounts paid are unreasonable or
disproportionate to the services performed by an executive officer, employee,
director or principal shareholder. In addition, each of the Federal Reserve
and the OCC adopted regulations that authorize, but do not require, the Federal
Reserve or the OCC, as the case may be, to order an institution that has been
given notice by the Federal Reserve or the OCC, as the case may be, that it is
not satisfying any of such safety and soundness standards to submit a
compliance plan. If, after being so notified, an institution fails to submit
an acceptable compliance plan or fails in any material respect to implement an
accepted compliance plan, the Federal Reserve or the OCC, as the case may be,
must issue an order directing action to correct the deficiency and may issue an
order directing other
67
<PAGE> 69
actions of the types to which an undercapitalized association is subject under
the "prompt corrective action" provisions of FDICIA. If an institution fails
to comply with such an order, the Federal Reserve or the OCC, as the case may
be, may seek to enforce such order in judicial proceedings and to impose civil
money penalties. The Federal Reserve, the OCC and the other federal bank
regulatory agencies also proposed guidelines for asset quality and earnings
standards.
A range of other provisions in FDICIA include requirements applicable
to closure of branches; additional disclosures to depositors with respect to
terms and interest rates applicable to deposit accounts; uniform regulations
for extensions of credit secured by real estate; restrictions on activities of
and investments by state-chartered banks; modification of accounting standards
to conform to generally accepted accounting principles including the reporting
of off-balance sheet items and supplemental disclosure of estimated fair market
value of assets and liabilities in financial statements filed with the banking
regulators; increased penalties in making or failing to file assessment reports
with the FDIC; greater restrictions on extensions of credit to directors,
officers and principal shareholders; and increased reporting requirements on
agricultural loans and loans to small businesses.
In August, 1995, the Federal Reserve, OCC, FDIC and other federal
banking agencies published a final rule modifying their existing risk-based
capital standards to provide for consideration of interest rate risk when
assessing the capital adequacy of a bank. Under the final rule, the Federal
Reserve, the OCC and the FDIC must explicitly include a bank's exposure to
declines in the economic value of its capital due to changes in interest rates
as a factor in evaluating a bank's capital adequacy. The Federal Reserve, the
FDIC, the OCC and other federal banking agencies also have adopted a joint
agency policy statement providing guidance to banks for managing interest rate
risk. The policy statement emphasizes the importance of adequate oversight by
management and a sound risk management process. The assessment of interest
rate risk management made by the banks' examiners will be incorporated into the
banks' overall risk management rating and used to determine the effectiveness
of management.
Prompt Corrective Action. FDICIA requires the federal banking
regulators, including the Federal Reserve, the OCC and the FDIC, to take prompt
corrective action with respect to depository institutions that fall below
certain capital standards and prohibits any depository institution from making
any capital distribution that would cause it to be undercapitalized.
Institutions that are not adequately capitalized may be subject to a variety of
supervisory actions including, but not limited to, restrictions on growth,
investment activities, capital distributions and affiliate transactions and
will be required to submit a capital restoration plan which, to be accepted by
the regulators, must be guaranteed in part by any company having control of the
institution (such as the Company). In other respects, FDICIA provides for
enhanced supervisory authority, including greater authority for the appointment
of a conservator or receiver for under-capitalized institutions. The
capital-based prompt corrective action provisions of FDICIA and their
implementing regulations apply to FDIC-insured depository institutions.
However, federal banking agencies have indicated that, in regulating bank
holding companies, the agencies may take appropriate action at the holding
company level based on their assessment of the effectiveness of supervisory
actions imposed upon subsidiary insured depository institutions pursuant to the
prompt corrective action provisions of FDICIA.
Insurance of Deposit Accounts. Under FDICIA, as an FDIC-insured
institution, each of the Banks is required to pay deposit insurance premiums
based on the risk it poses to the insurance fund. The FDIC has authority to
raise or lower assessment rates on insured deposits in order to achieve certain
designated reserve ratios in the insurance funds and to impose special
additional assessments. The FDIC recently amended the risk-based assessment
system and on December 11, 1995, adopted a new assessment rate schedule for BIF
insured deposits. The new assessment rate schedule, effective with respect to
the semiannual premium assessment beginning January 1, 1996, provides for an
assessment range of zero to 0.27% (subject to a $2,000 minimum) of deposits
depending on capital and supervisory factors. Each depository institution is
assigned to one of three capital groups: "well capitalized," "adequately
capitalized" or "less than adequately capitalized." Within each capital group,
institutions are assigned to one of three supervisory subgroups: "healthy,"
"supervisory concern" or "substantial supervisory concern." Accordingly, there
are nine combinations of capital groups and supervisory subgroups to
68
<PAGE> 70
which varying assessment rates would be applicable. An institution's
assessment rate depends on the capital category and supervisory category to
which it is assigned.
During the first six months of 1996, the Banks, exclusive of
Barrington Bank, were assessed at an average annual rate of the statutory
minimum of $2,000. Deposit insurance may be terminated by the FDIC upon a
finding that an institution has engaged in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC. The
management of each of the Banks does not know any practice, condition or
violation that might lead to termination of deposit insurance.
The Economic Growth and Regulatory Paperwork Reduction Act of 1996
enacted on September 30, 1996 provides that beginning with semi-annual periods
after December 31, 1996, Bank Insured Fund ("BIF") deposits will also be
assessed to pay interest on the bonds (the "FICO Bonds") issued in the late
1980s by the Financing Corporation to recapitalize the now defunct Federal
Savings & Loan Insurance Corporation. For purposes of the assessments to pay
interest on the FICO Bonds, BIF deposits will be assessed at a rate of 20% of
the assessment rate applicable to SAIF deposits until December 31, 1999. After
the earlier of December 31, 1999 or the date on which the last savings
association ceases to exist, full pro rata sharing of FICO assessments will
begin. It has been estimated that the rates of assessment for the payment of
interest on the FICO Bonds will be approximately 1.3 basis points for
BIF-assessable deposits and approximately 6.4 basis points for SAIF- assessable
deposits. The payment of the assessment to pay interest on the FICO Bonds
should not materially affect the Banks.
Federal Reserve System. The Banks are subject to Federal Reserve
regulations requiring depository institutions to maintain non-interest-earning
reserves against their transaction accounts (primarily NOW and regular checking
accounts). The Federal Reserve regulations generally require three percent
reserves on the first $51.9 million of transaction accounts and $1.6 million
plus ten percent on the remainder. The first $4.0 million of otherwise
reservable balances (subject to adjustments by the Federal Reserve) are
exempted from the reserve requirements. The Banks are in compliance with the
foregoing requirements.
Community Reinvestment. Under the Community Reinvestment Act ("CRA"),
a financial institution has a continuing and affirmative obligation, consistent
with the safe and sound operation of such institution, to help meet the credit
needs of its entire community, including low- and moderate-income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires each federal banking agency, in connection with its examination of a
financial institution, to assess and assign one of four ratings to the
institution's record of meeting the credit needs of its community and to take
such record into account in its evaluation of certain applications by the
institution, including applications for charters, branches and other deposit
facilities, relocations, mergers, consolidations, acquisitions of assets or
assumptions of liabilities, and savings and loan holding company acquisitions.
The CRA also requires that all institutions make public disclosure of their CRA
ratings. Each of the Banks received "satisfactory" ratings from the FDIC on
their most recent CRA performance evaluations. As of the date of this
Prospectus, Barrington Bank has not undergone a regulatory CRA performance
evaluation.
In April 1995, the Federal Reserve, the OCC and other federal banking
agencies adopted amendments revising their CRA regulations. Among other
things, the amended CRA regulations substitute for the prior process-based
assessment factors a new evaluation system that would rate an institution based
on its actual performance in meeting community needs. In particular, the
proposed system would focus on three tests: (i) a lending test, to evaluate the
institution's record of making loans in its assessment areas; (ii) an
investment test, to evaluate the institution's record of investing in community
development projects, affordable housing, and programs benefiting low or
moderate income individuals and businesses; and (iii) a service test, to
evaluate the institution's delivery of services through its branches, ATMs and
other offices. The amended CRA regulations also clarify how an institution's
CRA performance would be considered in the application process.
69
<PAGE> 71
Brokered Deposits. Well-capitalized institutions are not subject to
limitations on brokered deposits, while an adequately capitalized institution
is able to accept, renew or rollover brokered deposits only with a waiver from
the FDIC and subject to certain restrictions on the yield paid on such
deposits. Undercapitalized institutions are not permitted to accept brokered
deposits. None of the Banks currently intends to seek brokered deposits,
although they are eligible under the statutory standard to do so.
Enforcement Actions. Federal and state statutes and regulations
provide financial institution regulatory agencies with great flexibility to
undertake enforcement action against an institution that fails to comply with
regulatory requirements, particularly capital requirements. Possible
enforcement actions range from the imposition of a capital plan and capital
directive to receivership, conservatorship or the termination of deposit
insurance.
Interstate Banking and Branching Legislation. On September 29, 1994,
the Riegle-Neal Interstate Banking and Efficiency Act of 1994 (the "Interstate
Banking Act") was enacted. Under the Interstate Banking Act, adequately
capitalized and adequately managed bank holding companies will be allowed to
acquire banks across state lines subject to certain limitations. In addition,
under the Interstate Banking Act, beginning on June 1, 1997, banks will be
permitted to merge with one another across state lines and thereby create a
main bank with branches in separate states. After establishing branches in a
state through an interstate merger transaction, a bank could establish and
acquire additional branches at any location in the state where any bank
involved in the interstate merger could have established or acquired branches
under applicable federal and state law.
Under the Interstate Banking Act, states may adopt legislation
permitting interstate mergers before June 1, 1997. Alternatively, states may
adopt legislation before June 1, 1997, subject to certain conditions, opting
out of interstate branching. Illinois adopted legislation, effective September
29, 1995, permitting interstate mergers beginning on June 1, 1997. It is
anticipated that this interstate merger and branching ability will increase
competition and further consolidate the financial institutions industry.
MONETARY POLICY AND ECONOMIC CONDITIONS
The earnings of banks and bank holding companies are affected by
general economic conditions and also by the fiscal and monetary policies of
federal regulatory agencies, including the Federal Reserve. Through open
market transactions, variations in the discount rate and the establishment of
reserve requirements, the Federal Reserve exerts considerable influence over
the cost and availability of funds obtainable for lending or investing.
The above monetary and fiscal policies and resulting changes in
interest rates have affected the operating results of all commercial banks in
the past and are expected to do so in the future. The Banks and their
respective holding companies cannot fully predict the nature or the extent of
any effects which fiscal or monetary policies may have on their business and
earnings.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue 30,000,000 shares, without par
value, of common stock (the "Common Stock") and 20,000,000 shares, without par
value, of preferred stock (the "Preferred Stock"). As of January __, 1997,
there were issued and outstanding 6,603,420 shares of Common Stock and no
shares of Preferred Stock, with 1,410,203 additional shares of Common Stock
reserved for issuance upon the exercise of currently outstanding Options,
Rights and Warrants which represent the right to purchase Common Stock. Each
share of Common Stock has the same relative rights as, and is identical in all
respects with, each other share of Common Stock. Each share offered hereby
will be (when issued and delivered in accordance with the terms and conditions
of this offering) duly authorized, fully paid and nonassessable. The transfer
agent and registrar for the Common Stock is Illinois Stock Transfer Company,
Chicago, Illinois.
70
<PAGE> 72
COMMON STOCK
Dividends. The holders of Common Stock will be entitled to receive
and share equally in such dividends, if any, declared by the Board of Directors
out of funds legally available therefor. The Company may pay dividends if, as
and when declared by its Board of Directors. The payment of dividends by the
Company is subject to limitations which are imposed by the IBCA. If the
Company issues Preferred Stock, the holders thereof may have a priority over
the holders of the Common Stock with respect to dividends.
Voting Rights. The holders of Common Stock possess voting rights in
the Company. They elect the Company's Board of Directors and act on such other
matters as are required to be presented to them under Illinois law or the
Company's Articles or as are otherwise presented to them by the Board of
Directors. Each holder of Common Stock will be entitled to one vote per share
and will not have any right to cumulate votes in the election of directors.
Although there are no present plans to do so, if the Company issues Preferred
Stock, holders of the Preferred Stock may also possess voting rights. Certain
matters require an 85% shareholder vote. See "Certain Anti-Takeover Effects of
the Company's Articles and By-Laws and Illinois Law" below.
Liquidation. In the event of any liquidation, dissolution or winding
up of the Company, the holders of its Common Stock would be entitled to
receive, after payment or provision for payment of all debts and liabilities of
the Company, all assets of the Company available for distribution. If
Preferred Stock is issued, the holders thereof may have a priority over the
holders of the Common Stock in the event of any liquidation or dissolution.
Preemptive Rights and Redemption. Holders of the Common Stock will
not be entitled to preemptive rights with respect to any shares which may be
issued by the Company in the future. The Common Stock is not subject to
mandatory redemption by the Company.
PREFERRED STOCK
Currently, no shares of the Company's authorized Preferred Stock are
issued or outstanding. The Preferred Stock authorized may be issued at such
time as the Board of Directors may determine, without further shareholder
action, except as otherwise provided by law. Shareholders will not have
preemptive rights to subscribe for shares of Preferred Stock.
The dividend rights, dividend rates, conversion rights, conversion
prices, voting rights, redemption rights and terms (including sinking fund
provisions, if any), the redemption price or prices and the liquidation
preferences of any series of the authorized Preferred Stock and the numbers of
such shares of Preferred Stock in each series will be established by the Board
of Directors as such shares are to be issued. It is not possible to state the
actual effect of the Preferred Stock on the rights of holders of Common Stock
until the Board of Directors determines the rights of the holders of a series
of the Preferred Stock. However, such effects might include (i) restrictions
on dividends; (ii) dilution of the voting power to the extent that the
Preferred Stock were given voting rights; (iii) dilution of the equity interest
and voting power if the Preferred Stock were convertible into Common Stock; and
(iv) restrictions upon any distribution of assets to the holders of Common
Stock upon liquidation or dissolution until the satisfaction of any liquidation
preference granted to holders of the Preferred Stock.
Furthermore, although it has no present intention to do so, the Board
of Directors could cause the Company to issue, in one or more transactions,
shares of Preferred Stock or additional shares of Common Stock or rights to
purchase such shares (subject to the limits imposed by applicable laws and the
rules of any stock exchange or automated dealer quotation system to the extent
that such rules may become applicable or may be observed by the Company) in
amounts which could make more difficult and, therefore, less likely, a
takeover, proxy contest, change in management of the Company or any other
extraordinary corporate transaction which might be opposed by the incumbent
Board of Directors. Any issuance of Preferred Stock or of Common Stock could
have the effect of diluting the earnings per share, book value per share and
voting power of Common Stock held by the Company's shareholders.
71
<PAGE> 73
WARRANTS
As of January ___, 1997, there were outstanding 155,340 of the
Company's transferable Warrants. Each Warrant represents the right to
subscribe for and purchase from the Company one share of its Common Stock
(subject to certain adjustments as more fully described in the Company's
Warrant Agreement). Of the total Warrants outstanding, 138,592 have an
exercise price of $15.00 per share and the other 16,838 Warrants are
exercisable at $14.85 per share, in each case subject to adjustment.
CERTAIN ANTI-TAKEOVER EFFECTS OF THE COMPANY'S ARTICLES AND BY-LAWS AND
ILLINOIS LAW
General. Certain provisions of the Company's Articles, By-Laws and
the IBCA may have the effect of impeding the acquisition of control of the
Company by means of a tender offer, a proxy fight, open-market purchases or
otherwise in a transaction not approved by the Board of Directors.
These provisions may have the effect of discouraging a future takeover
attempt which is not approved by the Board of Directors but which individual
shareholders may deem to be in their best interests or in which shareholders
may receive a substantial premium for their shares over then current market
prices. As a result, shareholders who might desire to participate in such a
transaction may not have an opportunity to do so. Such provisions will also
render the removal of the current Board of Directors or management of the
Company more difficult.
The provisions of the Articles and By-Laws described below are
designed to reduce, or have the effect of reducing, the vulnerability of the
Company to an unsolicited proposal for the restructuring or sale of all or
substantially all of the assets of the Company or an unsolicited takeover
attempt which is unfair to shareholders.
It is anticipated that the Board of Directors may consider and may
implement a shareholder rights plan to deter coercive, hostile bids for
corporate control and encourage a potential acquiror to negotiate with the
Board of Directors. If a rights plan is implemented, each share of Common
Stock would include an associated preferred or common share purchase right.
The purchase right would entitle the holder to purchase shares of Common Stock
at a price and under such other terms and conditions as set forth in the rights
plan. A rights plan, if implemented, will have certain anti-takeover effects
in addition to those measures described below.
The following description of certain of the provisions of the Articles
and By-Laws of the Company is necessarily general and is qualified in its
entirety by reference to the Articles and By-Laws of the Company and the IBCA.
Although no specific proposals have yet been made, the Board of
Directors expressly reserves the right to introduce in the future additional
measures, including the rights plan, which might have an anti-takeover effect.
Authorized Shares. The Company's Articles authorize the issuance of
30,000,000 shares of Common Stock and 20,000,000 shares of Preferred Stock.
The shares of Common Stock and Preferred Stock have been authorized in an
amount which provides the Board of Directors with as much flexibility as
possible to effect, among other things, transactions, financings, acquisitions,
stock dividends, stock splits, employee stock options and a rights plan.
However, these authorized shares may also be used by the Board of Directors
consistent with its fiduciary duty to deter future attempts to gain control of
the Company. The Board of Directors also has sole authority to determine the
terms of any one or more series of Preferred Stock, including voting rights,
conversion rates, and liquidation preferences. As a result of the ability to
fix voting rights for a series of Preferred Stock, the Board of Directors has
the power to the extent consistent with its fiduciary duty to issue a series of
Preferred Stock to persons friendly to management in order to attempt to block
a merger or other transaction by which a third party seeks control, and thereby
assist the incumbent Board of Directors and management to retain their
respective positions.
Classified Board of Directors, Filling of Board Vacancies. The Board
of Directors is divided into three classes, each of which contains
approximately one-third of the whole number of the members of the Board of
72
<PAGE> 74
Directors. Each class serves a staggered term, with approximately one-third of
the total number of Directors being elected each year. The Articles and
By-Laws provide that the size of the Board of Directors is determined by a
majority of the Directors. The Articles and By-Laws also provide that any
vacancy occurring in the Board of Directors, including a vacancy created by an
increase in the number of Directors or resulting from death, resignation,
retirement, disqualification, removal from office or other cause, shall be
filled for the remainder of the unexpired term exclusively by a majority vote
of the Directors then in office. Although under Illinois law shareholders
together owning one- fifth of the shares of the Company may call a special
meeting for the purpose of removing a Director with or without cause,
shareholders may not elect Directors other than at an annual meeting. The
staggered board is intended to provide for continuity of the Board of Directors
and to make it more difficult and time consuming for a shareholder group to
fully use its voting power to gain control of the Board of Directors without
the consent of the incumbent Board of Directors.
Cumulative Voting; Action by Written Consent and Shareholder Meetings.
The Articles do not provide for cumulative voting for any purpose. The
Articles and By-Laws also provide that any action required or permitted to be
taken by the shareholders may be taken only at an annual or special meeting and
prohibits shareholder action by written consent in lieu of a meeting.
Directors also retain the right to postpone any previously scheduled
shareholder meeting and adjourn any shareholder meeting at any time, whether or
not a quorum is present.
Shareholder Vote Required to Approve Business Combinations. Under
Illinois law, a plan of merger, consolidation or exchange may be approved only
upon each corporation receiving the affirmative vote of at least 2/3 of the
outstanding shares entitled to vote on such plan.
Shareholder Vote Required to Approve Business Combinations with
Interested Shareholders. The Company's Articles expressly elect to be governed
by the provisions of Section 7.85 of the IBCA which applies to a transaction
with an "Interested Shareholder" (as defined below) (the "IBCA fair price
provision"). Under the IBCA, absent this provision, business combinations,
including mergers, consolidations and sales of substantially all of the assets
of a corporation must, subject to certain exceptions, be approved by the vote
of the holders of 2/3 of the outstanding shares of common stock of the
corporation and any other affected class of stock. Under the IBCA fair price
provision and the Company's Articles, the approval of at least 80 percent of
the shares is required in connection with any transaction involving an
Interested Shareholder except (i) in cases where the proposed transaction has
been approved in advance by a majority of those members of the Company's Board
of Directors who are unaffiliated with the Interested Shareholder and were
directors prior to the time when the Interested Shareholder became an
Interested Shareholder or (ii) if the proposed transaction met certain
conditions set forth therein which are designed to afford the shareholders a
fair price in consideration for their shares, in which case approval of only a
majority of the outstanding shares of voting stock is required.
The term "Interested Shareholder" is defined to include any
individual, corporation, partnership or other entity (other than the Company or
any Subsidiary) which owns beneficially or controls, directly or indirectly, 10
percent or more of the outstanding shares of the Company's voting stock. This
provision of the Company's Articles applies to any "Business Combination,"
which is defined to include (i) any merger or consolidation of the Company or
any of its subsidiaries with or into any Interested Shareholder or Affiliate or
Associate (as defined in the Articles) of an Interested Shareholder; (ii) any
sale, lease, exchange, mortgage, transfer, or other disposition to or with any
Interested Shareholder or Affiliate or Associate of 10 percent or more of the
assets of the Company on a consolidated basis; (iii) the issuance or transfer
to any Interested Shareholder or its Affiliate or Associate by the Company (or
any Subsidiary) of any securities of the Company in exchange for any assets,
cash or securities the value of which equals or exceeds 10 percent of the
consolidated assets of the Company; (iv) the adoption of any plan for the
liquidation or dissolution of the Company proposed by or on behalf of any
Interested Shareholder or Affiliate or Associate thereof; and (v) any
reclassification of securities, recapitalization, merger or consolidation of
the Company which has the effect of increasing the proportionate share of
Common Stock or any class of equity or convertible securities of the Company
owned directly or indirectly, by an Interested Shareholder or Affiliate or
Associate thereof.
73
<PAGE> 75
In a Business Combination involving cash or other consideration being
paid to the Company's shareholders, the consideration would be required to be
either cash or the same type of consideration used by the Interested
Shareholder in acquiring the largest portion of shares previously acquired by
it. In the case of payments to holders of Common Stock, the per share fair
market value of such payments generally would have to be at least equal in
value to the higher of (i) the highest per share price paid (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) by the
Interested Shareholder in acquiring any Common Stock during the two-year period
prior to the first public announcement of the proposed Business Combination
(although not an Interested Shareholder at the time of any such acquisitions)
or in the transaction in which it became an Interested Shareholder (whichever
is higher); or (ii) the fair market value of the Company's shares on the first
trading date after the date of such announcement date or on the first trading
date after the date on which the Interested Shareholder became an Interested
Shareholder (whichever is higher); in any case appropriately adjusted for any
stock dividend, stock split, combination of shares or similar event.
In a Business Combination involving cash or other consideration being
paid to the holders of the Company's shares other than Common Stock, the
consideration would have to be at least equal in value to the higher of (i) the
highest per-share price (including any brokerage commissions, transfer taxes
and soliciting dealers' fees) paid by the Interested Shareholder in acquiring
any Common Stock during the two-year period prior to the first public
announcement of the proposed business combination (although not an Interested
Shareholder at the time of any such acquisitions) or in the transaction in
which it became an Interested Shareholder (whichever is higher); or (ii) the
highest per-share amount to which the holders of shares are entitled in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company; or (iii) the fair market value of the Company's shares on the
first trading date after such announcement date or the date on which the
Interested Shareholder became an Interested Shareholder (whichever is higher);
and (iv) the price per-share equal to the fair market value per-share
determined in (iii) above, multiplied by the ratio of (x) the highest per-share
price paid by the Interested Shareholder in acquiring any Common Stock during
the two-year period prior to such announcement date (although not an Interested
Shareholder at the time of any such acquisitions) to (y) the fair market value
per-share on the first day in such two-year period upon which the Interested
Shareholder acquired any shares; in any case appropriately adjusted for any
stock dividend, stock split, combination of shares or similar event.
Fair price provisions are designed to impede two-step takeover
transactions which might otherwise result in disparate treatment of the
Company's shareholders.
Amendment of the Articles and By-Laws. Amendment of the Articles must
be approved by a majority vote of the Board of Directors and also by a 2/3
vote of the outstanding shares of Common Stock, provided, however, that an
affirmative vote of at least 85 percent of the outstanding voting stock
entitled to vote is required to amend or repeal certain provisions of the
Articles, including provisions (i) limiting voting rights, (ii) relating to
certain business combinations, (iii) limiting the shareholders ability to act
by written consent, (iv) regarding the number, classification of directors,
filling of Board of Directors vacancies, newly created directorships,
indemnification of Directors and officers by the Company and limitation of
liability for Directors, (v) regarding shareholder proposals and Director
nominations and (vi) regarding amendment of the foregoing super majority
provisions of the Company's Articles. The Company's By-Laws may be amended
only by the Board of Directors.
Certain By-Law Provisions. The By-Laws of the Company also require a
shareholder who intends to nominate a candidate for election to the Board of
Directors, or to raise new business at a shareholder meeting to provide advance
notice to the Secretary of the Company. The notice provision requires a
shareholder who desires to raise new business to provide certain information to
the Company concerning the nature of the new business, the shareholder and such
shareholder's interest in the business matter. Similarly, a shareholder
wishing to nominate any person for election as a director must provide the
Company with certain information concerning the nominee and such proposing
shareholder.
The provisions described above are intended to reduce the Company's
vulnerability to takeover attempts and certain other transactions which have
not been negotiated with and approved by members of its Board of Directors.
74
<PAGE> 76
Attempts to take over corporations have recently become increasingly
common. An unsolicited non-negotiated proposal can seriously disrupt the
business and management of a corporation and cause it great expense.
Accordingly, the Board of Directors believes it is in the best interests of the
Company and its shareholders to encourage potential acquirors to negotiate
directly with management and that these provisions will encourage such
negotiations and discourage non-negotiated takeover attempts. It is also the
view of the Boards of Directors that these provisions should not discourage
persons from proposing a merger or other transaction at a price that reflects
the true value of the Company and that otherwise is in the best interest of all
shareholders.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 7,803,420
shares of Common Stock issued and outstanding, assuming no exercise of any
Options, Rights or Warrants (7,983,420 if the over-subscription or
over-allotment option is exercised in full). Of these shares, 6,374,255
shares, including 1,200,000 shares to be sold in this Offering (assuming no
exercise of the over-subscription or over-allotment option) will be freely
tradeable by persons other than "affiliates" of the Company without restriction
or registration under the Securities Act. Of the remaining 1,429,165 shares
(the "Affiliate Shares"), all but 87,556 shares (the "Restricted Shares") were
previously registered and are held by certain Directors, officers and other
affiliates of the Company and can be resold by such persons subject to certain
requirements. The Restricted Shares were issued and sold by the Company in
reliance upon exemptions from registration under the Securities Act. Neither
the Affiliate Shares nor the Restricted Shares may be sold in the absence of
registration under the Securities Act unless an exemption from registration is
available.
Subject to the 180-day lock-up agreements, if any, described below,
the Affiliate Shares will be eligible for sale after the Offering, and the
Restricted Shares will be eligible for sale commencing in November 1998,
pursuant to the exemption set forth in Rule 144 under the Securities Act, if
the conditions of that rule have been met. In general, under Rule 144, as
currently in effect, a person (or persons whose shares are aggregated) who,
together with any prior holder who was not an affiliate of the Company, has
beneficially owned Restricted Shares for at least two years is entitled to sell
within any three-month period a number of shares that does not exceed the
greater of one percent of the then outstanding shares of Common Stock (78,034
shares immediately after this Offering or 79,834 if the over-allotment option
is exercised in full) or the average weekly trading volume in the Common Stock
during the four calendar weeks preceding such sale. Sales under Rule 144 are
also subject to certain manner-of-sale provisions, notice requirements and the
availability of current public information about the Company. However, a
person who is deemed not to have been an "affiliate" of the Company at any time
during the three months preceding a sale and who, together with any prior
holder who was not an affiliate of the Company, has beneficially owned
Restricted Shares for at least three years, would be entitled to sell such
shares under Rule 144 without regard to volume limitations, manner-of-sale
provisions, notice requirements or the availability of current public
information about the Company.
Pursuant to lock-up agreements to be entered into between the
Directors and officers of the Company and the Selling Agent in the event of a
Public Offering, it is contemplated that the Directors and officers, who own an
aggregate of 1,429,165 shares as of the date of this Prospectus, will agree not
to offer, sell or contract to sell any Common Stock for a period of 180 days
after the Company's issuance of the Common Stock without the prior written
consent of the Selling Agent. Upon expiration of this 180-day period, if
applicable, all of these shares, except the Restricted Shares, could be resold
by the Directors, officers and other persons who are affiliates of the Company,
subject to certain requirements of Rule 144 under the Securities Act as
discussed above.
Prior to this offering, there has been only a limited public market
for the Common Stock. The shares are traded occasionally in the OTC Market and
bid and ask prices are quoted on the OTC Bulletin Board. The Company has
applied to have its Common Stock approved for quotation and trading on The
Nasdaq National MarketSM, under the symbol "WTFC." No predictions can be made
as to the effect, if any, that market sales of shares or the availability of
shares for sale will have on the market price prevailing from time to time.
Nevertheless, sales of substantial amounts of Common Stock in the public market
could adversely affect prevailing market prices.
75
<PAGE> 77
LEGAL MATTERS
Certain legal matters in connection with this offering are being
passed upon for the Company by Vedder, Price, Kaufman & Kammholz, 222 North
LaSalle Street, Chicago, Illinois 60601 and for the Selling Agent by Much
Shelist Freed Denenberg Ament Bell & Rubenstein, P.C., Chicago, Illinois.
Douglas J. Lipke, a partner in the law firm of Vedder, Price, Kaufman
& Kammholz, serves as a non-voting advisor to the Hinsdale Board of Directors
and as of January __, 1997, owned 5,105 shares, Warrants to purchase 1,834
shares and Options to purchase 2,413 shares of the Common Stock.
EXPERTS
The consolidated financial statements of the Company as of December
31, 1995 and 1994 and for each of the years in the three-year period ended
December 31, 1995, have been included herein and in the Registration Statement
in reliance upon the report of KPMG Peat Marwick LLP ("KPMG"), independent
certified public accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing. KPMG's report
on the accompanying consolidated financial statements, insofar as it relates to
the amounts included for Crabtree Capital Corporation, is based upon the report
of Arthur Andersen LLP.
The financial statements of Crabtree Capital Corporation (not included
in this registration statement) to the extent and for the periods indicated in
their report, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, which is
included herein in reliance upon the authority of said firm as experts in
giving said report.
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-1 under the
Securities Act with the Securities and Exchange Commission (the "Commission")
in connection with the Common Stock offered by this Prospectus. This
Prospectus omits certain information, exhibits and undertakings set forth in
the Registration Statement which the Company has filed with the Commission.
Such materials may be inspected and copied upon payment of prescribed rates, at
the public reference facilities of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Regional Office of the Commission at the
following locations: Seven World Trade Center, Suite 1300, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. This
information is also available on the Internet at the Commission's website. The
address for the web site is: http://www.sec.gov. For further information with
respect to the Company, reference is hereby made to the Registration Statement
and the exhibits thereto. Statements contained in this Prospectus concerning
the provisions of any contract, agreement or other document are not necessarily
complete, and in each instance reference is made to the copy of such contract,
agreement or other document filed as an exhibit to the Registration Statement
for a full statement of the provisions thereof. Each such statement in this
Prospectus is qualified in all respects by such reference.
The Company will furnish to its shareholders annual reports of the
Company, including consolidated financial statements of the Company, certified
by independent public accountants.
The Company is subject to the reporting requirements of the Exchange
Act and, in accordance therewith, files reports and other information with the
Commission including but not limited to filing with the Commission annual
reports on Form 10-K within 90 days of year-end, quarterly reports on Form 10-Q
within 45 days of quarter end, and other current reports on Form 8-K. As a
reporting company, the Company is subject to the proxy solicitation rules,
reporting requirements and restrictions on stock purchases and sales by
Directors, officers and greater than 10% shareholders, the annual and periodic
reporting and certain other requirements of the Exchange Act. Reports, proxy
statements and other information filed by the Company under the Exchange Act
may be inspected and copied at prescribed rates at the public reference
facilities of the Commission at the addresses set forth above.
76
<PAGE> 78
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
WINTRUST FINANCIAL CORPORATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of KPMG Peat Marwick LLP, Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Report of Arthur Andersen LLP, Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Condition as of September 30, 1996 (unaudited),
and December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations for the nine months
ended September 30, 1996 and 1995 (unaudited), and for
the years ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Changes in Shareholders' Equity for
the nine months ended September 30, 1996 (unaudited), and
for the years ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1996 and 1995 (unaudited), and for
the years ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
</TABLE>
77
<PAGE> 79
Independent Auditors' Report
The Board of Directors
Wintrust Financial Corporation:
We have audited the accompanying consolidated balance sheets of Wintrust
Financial Corporation and subsidiaries (Company) as of December 31, 1995 and
1994, and the related consolidated statements of operations, changes in
shareholders' equity, and cash flows for each of the years in the three year
period ended December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We did
not audit the consolidated financial statements of Crabtree Capital Corporation
and subsidiaries, a wholly-owned subsidiary of Wintrust Financial Corporation,
which statements reflect total assets constituting 4 percent and 28 percent as
of December 31, 1995 and 1994, respectively and total revenues constituting 27
percent, 54 percent and 51 percent for the years ended December 31, 1995, 1994,
and 1993, respectively, of the related consolidated totals. Those financial
statements were audited by Arthur Andersen LLP whose report has been furnished
to us, and our opinion, insofar as it relates to the amounts included for
Crabtree Capital Corporation and subsidiaries, is based solely on the report of
Arthur Andersen LLP.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of Arthur Andersen LLP provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of Arthur Andersen LLP, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Wintrust Financial Corporation and
subsidiaries as of December 31, 1995 and 1994, and the consolidated results of
their operations and their cash flows for each of the years in the three year
period ended December 31, 1995 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Chicago, Illinois
December 23, 1996
F-1
<PAGE> 80
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Crabtree Capital Corporation:
We have audited the consolidated balance sheets of CRABTREE CAPITAL CORPORATION
(an Illinois corporation) AND SUBSIDIARIES (the "Company") as of December 31,
1995 and 1994 (not presented in this registration statement), and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years ended December 31, 1995 (not presented in this registration
statement). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above (not
included in this registration statement) present fairly, in all material
respects, the financial position of Crabtree Capital Corporation and
Subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years ended December 31,
1995, in conformity with generally accepted accounting principles.
As explained in Note 2 to the financial statements (not included in this
registration statement), the Company has given retroactive effect to the change
in accounting for the consolidation of First Premium Funding Corporation and
the recording of compensation expense related to the issuance of permanent
discount stock under the 1990 Stock Purchase Plan.
ARTHUR ANDERSEN LLP
Chicago, Illinois
May 20, 1996
F-2
<PAGE> 81
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30 December 31 December 31
1996 1995 1994
----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks-noninterest bearing $ 19,753 $ 12,622 $ 11,023
Federal funds sold 52,033 55,812 24,799
Interest-bearing deposits with banks 25,100 50,600 42,199
Available-for-Sale securities, at fair value 69,022 57,887 5,410
Held-to-Maturity securities, at amortized cost
(fair value of $4,875 in 1996, $4,959
in 1995, and $55,244 in 1994) 5,002 5,002 56,136
Loans 414,405 258,231 193,982
Less: Allowance for possible loan losses 3,749 2,763 1,702
----------- ----------- -----------
Net loans 410,656 255,468 192,280
Premises and equipment, net 28,410 23,999 13,538
Accrued interest receivable and other assets 10,818 8,919 8,224
Goodwill and organizational costs 470 581 549
----------- ----------- -----------
Total assets $ 621,264 $ 470,890 $ 354,158
----------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 55,523 $ 45,869 $ 25,118
Interest bearing 493,780 359,789 196,867
----------- ----------- -----------
Total deposits 549,303 405,658 221,985
Short-term borrowings 1,812 867 88,696
Notes payable 16,554 10,758 6,905
Other liabilities 12,810 13,120 11,206
----------- ----------- -----------
Total liabilities 580,479 430,403 328,792
----------- ----------- -----------
Shareholders' equity
Preferred stock, 20,000,000 shares authorized; no shares
issued and outstanding at September 30, 1996, and 113,063
issued and outstanding at December 31, 1995 and 1994. -- 503 503
Common stock, no par value; 30,000,000 shares authorized;
6,515,864, 5,830,866 and 4,744,747 shares issued and
outstanding at September 30, 1996, December 31, 1995
and December 31, 1994, respectively 6,516 5,831 4,745
Surplus 51,681 50,053 38,621
Common stock warrants 75 75 75
Retained deficit (17,511) (15,990) (18,442)
Unrealized holding gains (losses) on
Available-for-Sale securities, net of tax 24 15 (136)
----------- ----------- -----------
Total shareholders' equity 40,785 40,487 25,366
----------- ----------- -----------
Total liabilities and shareholders' equity $ 621,264 $ 470,890 $ 354,158
----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE> 82
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31,
------------------------ --------------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Interest income
Interest and fees on loans $ 21,045 $ 12,174 $ 17,028 $ 13,617 $ 6,843
Interest-bearing deposits with banks 1,323 2,516 3,194 1,290 274
Federal funds sold 1,733 1,400 2,048 791 275
Securities 3,297 1,932 3,202 2,046 847
---------- ---------- ---------- ---------- ----------
Total interest income 27,398 18,022 25,472 17,744 8,239
---------- ---------- ---------- ---------- ----------
Interest expense
Interest on deposits 16,001 9,875 14,090 5,498 1,973
Interest on short-term borrowings
and notes payable 1,010 1,249 1,682 4,373 1,911
---------- ---------- ---------- ---------- ----------
Total interest expense 17,011 11,124 15,772 9,871 3,884
---------- ---------- ---------- ---------- ----------
Net interest income 10,387 6,898 9,700 7,873 4,355
Provision for possible loan losses 1,344 770 1,430 607 1,127
---------- ---------- ---------- ---------- ----------
Net interest income after provision for
possible loan losses 9,043 6,128 8,270 7,266 3,228
---------- ---------- ---------- ---------- ----------
Noninterest income
Gain on sale of loans 2,659 3,551 4,421 -- --
Loan servicing fees 1,035 782 1,101 -- --
Fees on loans sold 1,023 503 850 399 551
Trust fees 412 281 399 202 92
Service charges on deposit accounts 309 187 196 112 92
Securities gains, net 18 -- -- 21 23
Gain on settlement of contingencies
(note 14) -- -- 735 -- --
Other 400 300 842 752 386
---------- ---------- ---------- ---------- ----------
Total noninterest income 5,856 5,604 8,544 1,486 1,144
---------- ---------- ---------- ---------- ----------
Noninterest expense
Salaries and employee benefits 8,133 5,395 8,011 5,319 3,536
Occupancy, net 1,245 723 1,520 1,165 790
Data processing 732 440 624 335 177
Marketing 710 367 682 288 150
Amortization of deferred financing fee 337 451 768 641 511
Merger related expenses 849 -- -- -- --
Other 4,448 3,325 4,207 3,004 2,354
---------- ---------- ---------- ---------- ----------
Total noninterest expense 16,454 10,701 15,812 10,752 7,518
---------- ---------- ---------- ---------- ----------
Income (loss) before from continuing
operations before income taxes (1,555) 1,031 1,002 (2,000) (3,146)
Income tax benefit (34) (198) (512) -- --
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing operations (1,521) 1,229 1,514 (2,000) (3,146)
Income (loss) from operations of
discontinued subsidiaries -- (96) (17) (236) (193)
---------- ---------- ---------- ---------- ----------
Net income (loss) $ 1,521 $ 1,133 $ 1,497 $ (2,236) $ (3,339)
---------- ---------- ---------- ---------- ----------
Net income (loss) per common share $ (0.25) $ 0.19 $ 0.24 $ (0.56) $ (1.14)
---------- ---------- ---------- ---------- ----------
Weighted average common shares outstanding 5,992 5,571 6,153 4,035 2,948
---------- ---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE> 83
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOTES
RECEIVABLE
FROM OFFICERS
PREFERRED COMMON FROM SALE OF
STOCK STOCK SURPLUS COMMON STOCK
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1992 $ 503 $ 2,437 $ 23,347 $ (202)
Payment of note receivable from Officer
from sale of common stock -- -- -- 144
Issuance of common stock, net of issuance costs -- 1,046 7,555 --
Issuance of warrant to acquire common stock -- -- -- --
Allocation of undivided profit -- -- (1,000) --
Issuance of preferred stock 500 -- -- --
Conversion of preferred stock to common stock (500) 127 373 --
Dividends on preferred stock -- -- -- --
Net loss -- -- -- --
Change in unrealized gain on securities
available-for-sale, net of tax effect -- -- -- --
---------- ---------- ---------- -----------
Balance at December 31, 1993 503 3,610 30,275 (58)
Payment of note receivable from Officer
from sale of common stock -- -- -- 58
Issuance of common stock, net of issuance costs -- 1,016 8,965 --
Issuance of preferred stock 500 -- -- --
Issuance of warrant to acquire common stock -- -- -- --
Conversion of preferred stock to common stock (500) 119 381 --
Dividends on preferred stock -- -- -- --
Allocation of undivided profit -- -- (1,000) --
Net loss -- -- -- --
Change in unrealized gain (loss) on securities
available-for-sale, net of tax effect -- -- -- --
---------- ---------- ---------- -----------
Balance at December 31, 1994 503 4,745 38,621 --
Issuance of common stock, net of issuance costs -- 1,086 12,432 --
Dividends on preferred stock -- -- -- --
Allocation of undivided profit -- -- (1,000) --
Net income -- -- -- --
Change in unrealized gain on securities
available-for-sale, net of tax effect -- -- -- --
---------- ---------- ---------- -----------
Balance at December 31, 1995 503 5,831 50,053 --
Common stock issuance -- 567 1,298 --
Conversion of preferred stock to common stock (503) 122 381 --
Repurchase of common stock -- (4) (44) --
Net loss -- -- -- --
Cash value of fractional shares -- -- (7) --
Change in unrealized gain on securities
available-for-sale, net of tax effect -- -- -- --
---------- ---------- ---------- -----------
Balance at September 30, 1996 (unaudited) $ -- $ 6,516 $ 51,681 $ --
========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN (LOSS) TOTAL
ON SECURITIES SHARE-
RETAINED AVAILABLE HOLDERS'
WARRANTS DEFICIT FOR SALE EQUITY
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1992 $ 25 $ (14,819) $ -- $ 11,291
Payment of note receivable from Officer
from sale of common stock -- -- -- 144
Issuance of common stock, net of issuance costs -- -- -- 8,601
Issuance of warrant to acquire common stock 25 -- -- 25
Allocation of undivided profit -- 1,000 -- --
Issuance of preferred stock -- -- -- 500
Conversion of preferred stock to common stock -- -- -- --
Dividends on preferred stock -- (11) -- (11)
Net loss -- (3,339) -- (3,339)
Change in unrealized gain on securities
available-for-sale, net of tax effect -- -- 16 16
---------- ---------- ---------- -----------
Balance at December 31, 1993 50 (17,169) 16 17,227
Payment of note receivable from Officer
from sale of common stock -- -- -- 58
Issuance of common stock, net of issuance costs -- -- -- 9,981
Issuance of preferred stock -- -- -- 500
Issuance of warrant to acquire common stock 25 -- -- 25
Conversion of preferred stock to common stock -- -- -- --
Dividends on preferred stock -- (37) -- (37)
Allocation of undivided profit -- 1,000 -- --
Net loss -- (2,236) -- (2,236)
Change in unrealized gain (loss) on securities
available-for-sale, net of tax effect -- -- (152) (152)
---------- ---------- ---------- -----------
Balance at December 31, 1994 75 (18,442) (136) 25,366
Issuance of common stock, net of issuance costs -- -- -- 13,518
Dividends on preferred stock -- (45) -- (45)
Allocation of undivided profit -- 1,000 -- --
Net income -- 1,497 -- 1,497
Change in unrealized gain on securities
available-for-sale, net of tax effect -- -- 151 151
---------- ---------- ---------- -----------
Balance at December 31, 1995 75 (15,990) 15 40,487
Common stock issuance -- -- -- 1,865
Conversion of preferred stock to common stock -- -- -- --
Repurchase of common stock -- -- -- (48)
Net loss -- (1,521) -- (1,521)
Cash value of fractional shares -- -- -- (7)
Change in unrealized gain on securities
available-for-sale, net of tax effect -- -- 9 9
---------- ---------- ---------- -----------
Balance at September 30, 1996 (unaudited) $ 75 $ (17,511) $ 24 $ 40,785
========== ========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 84
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine months ended
September 30, Year ended December 31,
------------------------- ---------------------------------------
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) from continuing
operations $ (1,521) $ 1,133 $ 1,514 $ (2,000) $ (3,146)
Adjustments to reconcile net
income (loss) to net cash
used for, or provided by,
operating activities:
Provision for possible loan losses 1,344 770 1,430 607 1,127
Depreciation and amortization 1,147 931 1,811 1,124 855
Deferred income tax benefit (34) (198) (331) -- --
Gain on sale of investment
securities, net -- -- -- (21) (23)
Net accretion/amortization
of investment securities -- -- (390) (97) 281
Net loss of discontinued operations -- -- (17) (236) (193)
Decrease in net assets of
discontinued operations -- -- 1,875 666 734
(Increase) decrease in other
assets, net (1,866) (993) (4,813) (1,809) 1,640
Increase (decrease) in
other liabilities, net (301) (325) 1,907 6,533 461
----------- ----------- ----------- ----------- -----------
NET CASH (USED FOR) PROVIDED
BY OPERATING ACTIVITIES (1,231) 1,318 2,986 4,767 1,736
----------- ----------- ----------- ----------- -----------
INVESTING ACTIVITIES:
Proceeds from maturities of
Available-for-Sale
securities 288,102 24,698 80,234 8,900 --
Proceeds from sales of
Available-for-Sale
securities 498 3,755 5,006 4,944 6,140
Proceeds from maturities of
Held-to-Maturity
securities -- 64,766 64,766 31,320 14,955
Purchases of securities (299,734) (87,994) (150,805) (78,972) (43,124)
Net decrease (increase)
in interest bearing
deposits at banks 25,500 5,099 (8,401) (29,000) (3,199)
Net increase in loans (156,532) (24,996) (62,649) (85,764) (63,484)
Other, net -- -- -- (131) (270)
Purchases of premises
and equipment, net (5,447) (6,245) (11,409) (6,334) (5,952)
----------- ----------- ----------- ----------- -----------
NET CASH USED FOR INVESTING ACTIVITIES (147,613) (20,917) (83,258) (155,037) (94,934)
----------- ----------- ----------- ----------- -----------
FINANCING ACTIVITIES:
Increase in deposit accounts 143,645 100,531 183,673 123,721 55,268
Increase (decrease) in
short-term borrowings, net 945 (8,747) (4,849) 70 5,413
Commercial paper notes
originated -- 310,040 310,040 1,051,245 566,107
Commercial paper notes
principal repaid -- (393,020) (393,020) (1,027,677) (514,557)
Proceeds from notes payable 5,796 10,286 5,822 4,542 2,750
Repayment of notes payable -- -- (1,998) (2,500) (15,900)
Repurchase of common stock (48) -- -- -- --
Other, net -- -- (257) 58 (190)
Cash value of fractional shares
upon exchange of shares (7) -- -- -- --
Issuance of common stock 1,865 2,132 13,518 9,980 8,601
Issuance of preferred stock -- -- -- 500 500
Issuance of common stock warrants -- -- -- 25 25
Cash dividends paid on
preferred shares -- (45) (45) (37) (11)
----------- ----------- ----------- ----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 152,196 21,177 112,884 159,927 108,006
----------- ----------- ----------- ----------- -----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 3,352 1,578 32,612 9,657 14,808
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 68,434 35,822 35,822 26,165 11,357
----------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 71,786 $ 37,400 $ 68,434 $ 35,822 $ 26,165
----------- ----------- ----------- ----------- -----------
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION -
CASH PAID DURING THE
YEAR FOR:
INTEREST $ 16,978 $ 11,012 $ 14,880 $ 6,225 $ 2,594
INCOME TAXES -- -- -- -- --
----------- ----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE> 85
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Wintrust Financial Corporation ("Wintrust" or "Company") is a multi-bank
holding company currently engaged in the business of providing financial
services primarily through its banking subsidiaries to customers in the
Chicago metropolitan area and financing the payment of insurance premiums,
on a national basis, through its subsidiary, First Premium Services, Inc.
("First Premium"). First Premium is a wholly owned subsidiary of Crabtree
Capital Corporation ("Crabtree"). As of September 30, 1996, Wintrust owned
four bank subsidiaries ("Banks"), all of which were de novo institutions,
including Lake Forest Bank & Trust Company ("Lake Forest"), Hinsdale Bank
& Trust Company ("Hinsdale"), North Shore Community Bank & Trust Company
("North Shore"), Libertyville Bank & Trust Company ("Libertyville").
The consolidated Wintrust entity was formed on September 1, 1996 through a
merger transaction (the "Reorganization") whereby the holding companies of
Lake Forest, Hinsdale, Libertyville and First Premium were merged with
newly formed wholly-owned subsidiaries of North Shore Community Bancorp,
Inc. (which changed its name to Wintrust Financial Corporation concurrent
with the merger). The merger transaction was accounted for in accordance
with the pooling-of-interest method of accounting for a business
combination. Accordingly, the consolidated financial statements included
herein reflect the combination of the historical financial results of the
five entities and the recorded assets and liabilities have been carried
forward to the consolidated company at their historical cost.
In the preparation of the consolidated financial statements, management is
required to make certain estimates and assumptions that affect the
reported amounts contained in the consolidated financial statements.
Management believes that the estimates made are reasonable; however,
changes in estimates may be required if economic or other conditions
change significantly beyond management's expectations.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Wintrust have been prepared in
conformity with generally accepted accounting principles and prevailing
practices of the banking industry. All material inter-company accounts and
transactions have been eliminated in the consolidated financial
statements.
F-7
<PAGE> 86
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
INVESTMENT SECURITIES
The Company classifies securities in one of three categories: trading,
held-to-maturity, or available-for-sale. Trading securities are bought
principally for the purpose of selling them in the near term.
Held-to-maturity securities are those securities in which the Bank has the
ability and positive intent to hold the security until maturity. All other
securities are classified as available-for-sale as they may be sold prior
to maturity.
Held-to-maturity securities are stated at amortized cost which represents
actual cost adjusted for amortization of premium and accretion of discount
using methods that generally approximate the effective interest method.
Available-for-sale securities are stated at fair value. Unrealized holding
gains and losses on available-for-sale securities, net of related taxes,
are excluded from earnings and reported as a separate component of
shareholders' equity until realized. A decline in the market value of any
available-for-sale or held-to-maturity security below cost, that is deemed
to be other than temporary, is charged to earnings.
Trading account securities are stated at fair value. Trading account gains
and losses from closing positions and from changes in market values of the
trading inventory are reflected in the accompanying statement of
operations as part of other noninterest income. The Company did not
maintain any trading account securities in 1995, 1994, or 1993.
A decline in the market value of any available-for-sale or
held-to-maturity security below cost that is deemed other than temporary
is charged to earnings, resulting in the establishment of a new cost basis
for the security. Dividend and interest income are recognized when earned.
Realized gains and losses for securities classified as available-for-sale
and held-to-maturity are included in noninterest income and are derived
using the specific identification method for determining the cost of
securities sold.
F-8
<PAGE> 87
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
Loans are recorded at the principal amount outstanding. Interest income is
recognized when earned. The Bank receives loan fees for loans originated
by the Bank, as well as for loan referrals. Fees and costs associated with
loans originated by the Bank are generally deferred and amortized over the
life of the loan as an adjustment of yield using the interest method. Loan
fees for referrals are recognized as income when received.
Finance charges on premium finance receivables are earned over the term of
the loan based on actual funds outstanding, beginning with the funding
date, using a method which approximates the effective yield actuarial
method.
Interest income is not accrued on loans where management has determined
that the borrowers may be unable to meet contractual principal and/or
interest obligations, or where interest or principal is 90 days or more
past due, unless the loans are adequately secured and in the process of
collection. Cash receipts on nonaccrual loans are generally applied to the
principal balance until the remaining balance is considered collectible,
at which time interest income may be recognized when received.
The allowance for possible loan losses is maintained at a level adequate
to provide for possible loan losses. In estimating possible losses, the
Company recognizes impaired loans. A loan is considered impaired when,
based on current information and events, it is probable that a creditor
will be unable to collect all amounts due. Impaired loans are generally
considered by the Company to be nonaccrual loans, restructured loans and
loans with principal and/or interest at risk, even if the loan is current
with all payments of principal and interest. Impairment is measured by
determining the fair value of the loan based on the present value of
expected cash flows, the market price of the loan, or the fair value of
the underlying collateral. If the fair value of the loan is less than the
recorded book value, a valuation allowance is established as a component
of the allowance for possible loan losses.
F-9
<PAGE> 88
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
On January 1, 1996, the Company adopted Financial Accounting Standards
Board Statement No. 122, Accounting for Mortgage Servicing Rights, an
amendment to FASB Statement No. 65 (SFAS No. 122). SFAS No. 122 provides
guidance for the recognition of mortgage servicing rights as a separate
asset when servicing mortgage loans for others, regardless of how those
rights are acquired. Also, SFAS No. 122 requires the measurement of
impairment of those servicing rights based upon the difference between the
carrying amount of the servicing rights and their current fair value with
a valuation allowance utilized to account for the difference. The impact
of the adoption of SFAS No. 122 was not material to the Company.
SERVICED PREMIUM FINANCE RECEIVABLES
Beginning in February, 1995, First Premium began selling its premium
finance receivables to a wholly owned subsidiary, First Premium Financing
Corporation ("FPFIN") which in turn sells the receivables to an
independent third party who issues commercial paper to fund the purchase
("Commercial Paper Issuer"). FPFIN is a bankruptcy remote subsidiary
established to facilitate the sale to the independent third party. First
Premium retains servicing rights in connection with the sales of
receivables. First Premium recognizes the contractual servicing and
management fee income over the term of the receivables as it is earned. In
addition, any excess income earned by the Commercial Paper Issuer above
that which is required to fund interest on its outstanding commercial
paper and provide for normal servicing to First Premium is payable as
additional servicing ("Excess Servicing"). Excess Servicing income over
the expected life of the receivables sold is estimated by First Premium at
the time of each sale and recorded as a sales gain receivable on the
financial statements of First Premium.
F-10
<PAGE> 89
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation
and amortization. For financial reporting purposes depreciation and
amortization are computed using the straight-line method over the
estimated useful lives of the related assets ranging from three to ten
years for equipment and the useful life or life of the lease for premises
and leasehold improvements. Additions to premises are capitalized.
Maintenance and repairs are charged to expense as incurred.
LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-lived Assets and
for Long-lived Assets to be Disposed Of," which requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. The impairment is measured based on the
present value of expected future cash flows from the use of the asset and
its eventual disposition. If the expected future cash flows are less than
the carrying amount of the asset, an impairment loss is recognized based
on current fair values. As the Company regularly reviews its long-lived
assets for impairment and adjusts the carrying amounts as appropriate, the
adoption of this statement did not have a material impact on the
consolidated financial statements of the Company.
INTANGIBLE ASSETS
Goodwill, representing the cost in excess of the fair value of net assets
acquired is amortized on a straight-line basis over a period of 25 years.
Deferred organizational costs consist primarily of professional fees and
other start-up costs and are being amortized over 5 years.
F-11
<PAGE> 90
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
TRUST ASSETS
Assets held in fiduciary or agency capacity for customers are not included
in the consolidated financial statements as such are not assets of
Wintrust or its subsidiaries. Fee income is recognized on an accrual basis
for financial reporting purposes.
INCOME TAXES
Beginning September 1, 1996, Wintrust will file consolidated Federal and
state income tax returns. The subsidiaries will provide for income taxes
on a separate return basis and remit to Wintrust amounts determined to be
currently payable.
Prior to the Reorganization on September 1, 1996, each of the Lake Forest,
Hinsdale, Libertyville, North Shore, and First Premium and their
respective holding companies filed separate consolidated Federal and state
income tax returns. Tax benefits attributable to losses are recognized and
allocated to the extent that such losses can be utilized in the
consolidated return.
Wintrust and subsidiaries record income taxes under the asset and
liability method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. A valuation allowance shall be established against
deferred tax assets to the extent there is not sufficient evidence for
management to conclude that it is more likely than not that such asset
will be realized. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes
the enactment date.
CASH EQUIVALENTS
For purposes of the consolidated statement of cash flows, Wintrust
considers all cash on hand, cash items in the process of collection,
amounts due from correspondent banks and federal funds sold to be cash
equivalents.
F-12
<PAGE> 91
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
EARNINGS PER SHARE
Earnings per share are calculated by dividing net income, after
consideration of preferred stock dividends, by the weighted
average number of shares of common stock and common stock equivalents
outstanding during the period. Common stock equivalents were calculated
using the treasury stock method. Because no active market for the
Company's stock existed during the three years ended December 31, 1995,
estimates of market value based on limited trading volume were used to
determine the dilutive effects of the outstanding stock options, stock
rights and stock warrants.
DISCONTINUED OPERATIONS
The Company has presented as discontinued operations, the results of
operations and loss on sale of certain insurance operating subsidiaries.
Information regarding the results of operations are not presented as
they are not deemed material by management.
UNAUDITED FINANCIAL INFORMATION
The accompanying unaudited financial information as of and for the period
ended September 30, 1996 and 1995 has been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. In
the opinion of management, all adjustments necessary for a fair
presentation for the periods presented have been reflected and are of a
normal and recurring nature. Results of operations for the interim periods
are not necessarily indicative of the results to be expected for the year.
F-13
<PAGE> 92
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
(2) INVESTMENT SECURITIES
The following tables present carrying amounts and gross unrealized gains
and losses for the investment securities held-to-maturity and available-
for-sale at December 31, 1995 and 1994 (in thousands). This table is by
contractual maturity which may differ from actual maturities because
borrowers may have the right to call or repay obligations with or without
call or prepayment penalties.
<TABLE>
<CAPTION>
December 31, 1995
----------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held-to-maturity:
U.S. Treasury - due
in one to five years $ 5,002 - (43) 4,959
- ------------------------------------------------------------------------------
Available-for-sale:
U.S. Treasury - due in one
year or less 5,520 9 - 5,529
Federal agencies - due in one
year or less 23,197 - (17) 23,180
Federal agencies - due in one
to five years 2,503 - (12) 2,491
Corporate notes - due in one
year or less 15,594 16 (3) 15,607
Corporate notes - due in one
to five years 10,125 39 (9) 10,155
Federal Reserve Bank stock 925 - - 925
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total securities available-for-sale 57,864 64 (41) 57,887
==============================================================================
Total investment securities $ 62,866 64 (84) 62,846
==============================================================================
</TABLE>
F-14
<PAGE> 93
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
<TABLE>
<CAPTION>
December 31, 1994
----------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held-to-maturity:
U.S. Treasury - due in one
year or less $ 587 - (3) 584
U.S. Treasury - due
in one to five years 10,009 - (494) 9,515
Federal agencies -
due in one year or less 42,504 8 (337) 42,175
Corporate notes - due in one
year or less 899 1 - 900
Corporate notes - due in one
to five years 2,137 31 (98) 2,070
- ------------------------------------------------------------------------------
Total securities held-to-maturity 56,136 40 (932) 55,244
- ------------------------------------------------------------------------------
Available-for-sale:
Corporate notes - due in one
year or less 700 1 - 701
Corporate notes - due in one
to five years 4,208 19 (155) 4,072
Federal Reserve Bank stock 637 - - 637
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total securities available-for-sale 5,545 20 (155) 5,410
==============================================================================
Total investment securities $ 61,681 60 (1,087) 60,654
==============================================================================
</TABLE>
In 1995, 1994 and 1993, Wintrust had gross realized gains on sales of
investment securities classified as available for sale of $200, $21,000 and
$46,000, respectively. Wintrust had no realized losses on sales of
investment securities in 1995 and 1994. In 1993, Wintrust had gross
realized losses of $23,000. Proceeds from sales of investment securities
during 1995, 1994 and 1993 were $5,006,000, $4,944,000 and $6,140,000,
respectively. At December 31, 1995 and 1994, investment securities having a
carrying value of $29,240,000 and $27,559,000, respectively, were pledged
as collateral for securities sold under
F-15
<PAGE> 94
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
agreement to repurchase, public deposits, and trust deposits. Securities
carried at $0 and $5,006,000 were sold under agreement to repurchase at
December 31, 1995 and 1994, respectively.
The Financial Accounting Standards Board's (FASB's) issuance of A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in
Debt & Equity Securities, permitted the transfer of securities from the
Held-to-Maturity classification to the Available-for-Sale classification
during the period from November 15, 1995 to December 31, 1995, with no
recognition of any related unrealized gain or loss in current earnings. On
December 29, 1995, the amortized cost and net unrealized gain of
Wintrust's portfolio of securities held-to-maturity transferred to the
securities available-for-sale classification was $59,356,000 and $334,000,
respectively.
(3) LOANS
A summary of the loan portfolio by category at December 31, 1995 and 1994
is as follows (in thousands):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Commercial and commercial real estate $ 101,271 45,587
Home equity 54,592 26,244
Residential 37,074 26,188
Installment 51,355 4,865
Premium finance 15,703 93,349
- ------------------------------------------------------------------------------
259,995 196,233
Less: Unearned finance charges 1,764 2,251
- ------------------------------------------------------------------------------
Total loans $ 258,231 193,982
==============================================================================
</TABLE>
Certain officers and directors of Wintrust and its subsidiaries and
certain corporations and individuals related to such persons borrowed
funds from the Bank. These loans totaling $4,430,000 at December 31, 1995
were made at substantially the same terms, including interest
F-16
<PAGE> 95
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
rates and collateral, as those prevailing at the time for comparable
transactions with other borrowers.
(4) ALLOWANCE FOR POSSIBLE LOAN LOSSES
A summary of the allowance for possible loan losses for years ending
December 31, 1995, 1994 and 1993 is as follows (in thousands):
<TABLE>
<CAPTION>
------------------------------------------------------------------------
1995 1994 1993
------------------------------------------------------------------------
<S> <C> <C> <C>
Allowance at beginning of period $ 1,702 1,357 961
Provision 1,430 607 1,127
Charge-offs (399) (265) (733)
Recoveries 30 3 2
------------------------------------------------------------------------
Allowance at end of period $ 2,763 1,702 1,357
------------------------------------------------------------------------
</TABLE>
The provision for loan losses are charged to operations, and recognized
loan losses (recoveries) are charged (credited) to the allowance. At
December 31, 1995 and 1994, non-accrual loans had a carrying value of
$1,778,000 and $0, respectively.
At December 31, 1995, loans that were considered to be impaired totaled
$1,736,000 for which no specific allowance for loan losses was required as
of and for the year ended December 31, 1995. The average balance of
impaired loans during 1995 was approximately $930,000. All of the impaired
loans are included in the nonaccrual loan amount listed above. Management
evaluated the value of the loans primarily by using the fair value of the
collateral. Interest income foregone on these loans during 1995 was not
material.
(5) SERVICED RECEIVABLES AND SECURITIZATION FACILITY
Receivables sold and serviced by First Premium amount to $101,248,000 at
December 31, 1995. The receivables are sold pursuant to a securitization
facility established January 31, 1995. Unamortized deferred costs
associated with this facility amounted to $461,000 at December 31, 1995.
F-17
<PAGE> 96
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
The securitization facility is an independent vehicle into which $200
million of receivables may be sold and funded by the Commercial Paper
Issuer, subject to certain terms and conditions. In connection with this
facility, First Premium formed a wholly owned, bankruptcy remote
subsidiary, FPFIN, to purchase the receivables from First Premium and
simultaneously sell the receivables to the Commercial Paper Issuer. All
the receivable sales are without recourse. The sale of loans to the
Commercial Paper Issuer were accounted for as sales and, accordingly, the
loans are not included in the consolidated financial position of the
Company. FPFIN recognizes a gain at the time of each sale based on its
estimate of excess servicing, as defined in Note 1, to be earned over the
life of the receivables sold. All of FPFIN's accounts are maintained by
First Premium and consolidated in the financial statements.
Also, pursuant to the Sales and Servicing Agreement, First Premium is
required to maintain facility collateral at an amount equal to 105.5% of
commercial paper outstanding. The amount of this overcollateralization is
recorded as loans on the Company's consolidated financial statements and
was $6,630,000 at December 31, 1995.
(6) PREMISES AND EQUIPMENT, NET
A summary of premises and equipment at December 31, 1995 and 1994 is as
follows (in thousands):
<TABLE>
<CAPTION>
========================================================================
1995 1994
------------------------------------------------------------------------
<S> <C> <C>
Land $ 4,159 1,800
Buildings and improvements 16,392 8,900
Furniture and equipment 5,308 3,149
Construction in progress 30 681
------------------------------------------------------------------------
25,889 14,530
Less accumulated depreciation and amortization 1,890 992
------------------------------------------------------------------------
Premises and equipment, net $ 23,999 13,538
========================================================================
</TABLE>
F-18
<PAGE> 97
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
(7) TIME DEPOSITS
Certificates of deposit in amounts of $100,000 or more approximated
$93,618,000 and $39,257,000, respectively, at December 31, 1995 and 1994.
Interest expense related to these deposits approximated $2,769,000,
$955,000 and $297,000 for the periods ended December 31, 1995, 1994 and
1993, respectively.
(8) COMMERCIAL PAPER
Prior to the formation of its current securitization facility on February
2, 1995, First Premium sold its premium finance receivables to First
Premium Funding Corporation ("FPFC"), a special purpose corporation
nominally capitalized by a third party, which issued commercial paper to
fund its purchases. The commercial paper notes had maturities of 1 to 270
days, and were secured by the premium finance receivables. Due to the
nominal third party capitalization of FPFC, the Company's consolidated
financial statements include the results of operations and financial
position of FPFC, including the related commercial paper.
The table below sets forth information concerning outstanding commercial
paper and its related cost. These amounts are computed using the average
daily balances during the period from January 1, 1995 through February 2,
1995, and January 1, 1994, through December 31, 1994.
<TABLE>
<CAPTION>
January 1, 1995 January 1, 1994
through through
February 2, 1995 December 31, 1994
---------------- -----------------
<S> <C> <C>
Average amount outstanding $ 81,015,757 $ 74,769,633
Maximum month-end amount
outstanding during the $ 85,000,000 $ 82,565,000
period
Average yield at:
End of period 6.10% 6.12%
During the period 5.96% 4.54%
</TABLE>
FPFC was required to pledge finance receivables as collateral for the
commercial paper. As of December 31, 1994, FPFC had pledged $85,865,000 of
finance receivables to secure the commercial paper outstanding at that
date.
F-19
<PAGE> 98
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
A party provided credit enhancement ("Credit Enhancer") for commercial
paper issued by FPFC. The Credit Enhancer also provided temporary
liquidity to FPFC. As an incentive for the Credit Enhancer to participate
in the facility, First Premium issued warrants to purchase its common
stock and a subordinated promissory note with a face value of $557,000 to
the Credit Enhancer. In conjunction with the Reorganization, the Credit
Enhancer exchanged its warrants to acquire First Premium stock for
Wintrust common stock. The exercise price for the warrants were
contributed to Wintrust by the warrant holder and the proceeds thereof
were used to retire the subordinated promissory note held by the Credit
Enhancer.
(9) NOTES AND LOANS PAYABLE
A summary of notes and loans payable at December 31, 1995 and 1994, is as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
----- ----
<S> <C> <C>
Revolving credit line -
secured
Banking subsidiaries $ 5,552 $ 2,742
Premium finance
subsidiary 200 -
Revolving credit line -
unsecured 1,700 1,950
Subordinated notes payable 1,992 1,963
Note payable, other 1,314 250
----------- ------------
$ 10,758 $ 6,905
=========== ============
</TABLE>
Revolving credit lines - secured, premium finance subsidiary, represents
amounts outstanding under a revolving loan agreement used to fund
overcollateralization requirements for the securitization facility. The
credit line, which matures on March 31, 1996, provides a lien and first
security interest in the retained premium finance receivables as well as
restrictions on maintenance of various operating ratios and tangible net
worth. The credit line provides financing up to a maximum of $13,000,000
with interest charged at prime or prime plus 1.5% depending upon the
extent of funds borrowed. The average daily amount outstanding pursuant to
the credit line was approximately $2,976,000 and $2,988,000 respectively
for 1995 and 1994.
F-20
<PAGE> 99
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
Revolving credit lines - secured, banking subsidiaries, represent various
financing arrangements to meet operating needs. These arrangements are
100% secured by the common stock of the banks and bear interest at prime
rate with commitment fees of 1/4 of 1% per annum on amounts undrawn. The
average daily amount outstanding pursuant to the credit lines was
$4,120,000 and $1,670,000, respectively, for 1995 and 1994.
Revolving credit line - unsecured represents amounts outstanding under a
$2,000,000 loan arrangement. This loan is guaranteed by a shareholder of
the Company. Average amounts outstanding were approximately $1,954,000 and
$1,739,000 in 1995 and 1994 respectively.
Subordinated notes represent $1,500,000 due to a shareholder and $492,000
representing advances from the credit enhancer of the securitization
facility. The $1,500,000 note bears interest at prime plus 0.5% to 1.5%
and matures on December 23, 1997. The note may be repaid at the option of
the holder through exercise of stock warrants issued in connection with
the subordinated note. No value has been assigned to the warrants as the
exercise price is substantially in excess of the fair value of common
stock involved. The $492,000 note has a face value of $557,000, and is
discounted to result in an effective rate of 6.0% and matures on February
2, 1998.
Notes payable - other consists principally of amounts borrowed to fund the
purchase of banking subsidiary real estate and to cover initial start-up
expenses. This note bears interest at 9% per annum and matures on July 1,
1999.
Total interest expense for notes and loans payable aggregated
approximately $1,208,000, $796,000 and $590,000 for the years ended
December 31, 1995, 1994 and 1993, respectively.
Subsequent to the Reorganization, each of the above referenced notes and
loans payable were retired. Effective September 1, 1996, the Company
entered into a $25 million revolving credit line of credit, which bears
interest at a floating rate equal to, at the Company's option, either the
lender's prime rate or the London Inter-Bank Offered Rate plus 1.50%. This
revolving credit line is secured by the stock of the subsidiary bank
holding companies and the subsidiary banks.
F-21
<PAGE> 100
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
(10) LEASE EXPENSE AND OBLIGATIONS
Gross rental expense for all noncapitalized leases was $203,000, $134,000,
and $127,000, in 1995, 1994, and 1993, respectively. Lease commitments are
primarily for office space. Minimum gross rental commitments as of
December 31, 1995 for all noncancelable leases are as follows (in
thousands):
<TABLE>
==========================================================================
<S> <C>
1996 $ 652
1997 628
1998 643
1999 664
2000 545
2001 and thereafter 1,201
--------------------------------------------------------------------------
Total minimum future rentals $ 4,333
==========================================================================
</TABLE>
Minimum gross rental income as of December 31, 1995 for all noncancelable
leases are as follows:
<TABLE>
==========================================================================
<S> <C>
1996 $ 80
1997 32
1998 34
1999 28
2000 27
2001 and thereafter 45
--------------------------------------------------------------------------
Total minimum future rentals $ 246
==========================================================================
</TABLE>
(11) INCOME TAXES
Wintrust had no Federal or state income tax expense in each of the years
in the three-year period ended December 31, 1995. In 1995, Wintrust
recorded a tax benefit of $512,000 as management determined that the
realization of certain deferred tax assets not previously valued was more
likely than not to occur.
Income taxes for 1995, 1994 and 1993 differ from the expected tax expense
for those years (computed by applying the applicable statutory U.S.
Federal income tax rate to income before income taxes) as follows (in
thousands).
F-22
<PAGE> 101
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
<TABLE>
<CAPTION>
=====================================================================================
1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed "expected" income tax expense (benefit) $ 341 (679) (1,070)
Increase (decrease) in tax resulting from:
Change in the beginning-of-the-year balance of
the valuation allowance for deferred tax assets (698) 684 (1,070)
Other, net (155) (5) -
- -------------------------------------------------------------------------------------
Income tax benefit $ (512) - -
=====================================================================================
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1995 and 1994 are presented below (in thousands):
<TABLE>
<CAPTION>
================================================================================
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for possible loan losses $ 503 309
Startup costs 425 222
Federal net operating loss carryforward 8,685 8,055
State net operating loss carryforward 1,496 1,230
Unrealized loss on marketable equity securities - 53
Other, net 396 310
- --------------------------------------------------------------------------------
Total gross deferred tax assets 11,505 10,179
Valuation allowance 8,990 8,898
- --------------------------------------------------------------------------------
Total net deferred tax assets 2,515 1,281
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Premises and equipment, due to
differences in depreciation 313 115
Accrual to cash adjustment 1,218 747
Unrealized gain on marketable equity securities 114 -
Other, net 521 419
- --------------------------------------------------------------------------------
Total gross deferred tax liabilities 2,166 565
- --------------------------------------------------------------------------------
Net deferred tax assets $ 349 -
- --------------------------------------------------------------------------------
</TABLE>
F-23
<PAGE> 102
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
During 1994, realization of deferred tax assets was uncertain due to the
lack of an adequate earnings history for Wintrust and its subsidiaries. As
a result, in 1994, a valuation allowance was established for the portion
of the gross deferred tax assets not offset by deferred tax liabilities.
During 1995, management determined that a valuation allowance should only
be established for a portion of the deferred tax asset. This determination
was made based upon the profitability attained by certain of the operating
subsidiaries during 1995 and future earnings estimates for 1996. As such,
management established a valuation allowance as indicated in the table
above.
At December 31, 1995, Wintrust and its subsidiaries had Federal net
operating losses of approximately $25,600,000 and state net operating
losses of approximately $20,800,000. Such amounts are available for
carryforward to offset future taxable income and expire in 2000-2010.
(12) COMPENSATION PLANS
Wintrust, Lake Forest Bancorp, Inc., Hinsdale Bancorp, Inc., North Shore
Community Bancorp, Inc., Libertyville Bancorp, Inc., Crabtree Capital
Corporation and First Premium Services, Inc. each have authorized and
approved various stock option plans (Plans) which provides options to
purchase shares of Wintrust's common stock at the fair market value of the
stock on the date the option is granted. The Plans permit the grant of
incentive stock options, nonqualified stock options, and restricted stock.
Collectively, the Plans cover substantially all employees of Wintrust. The
incentive and nonqualified options expire at such time as the Stock Option
Committee shall determine at the time of grant, however, in no case shall
they be exercisable later than ten years after the grant. At the
subsidiary bank holding companies, the options generally vest at a rate of
10% in the first year subsequent to the grant, 10% in the second year
subsequent to the grant, and continue to vest 20% in the year in which the
Bank attains certain profitability levels, and 20% in the subsequent three
years, if the respective subsidiary bank holding company is profitable.
All of the Crabtree and First Premium options are or will become fully
vested during 1996.
F-24
<PAGE> 103
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
A summary of the aggregate activity of the Plans for 1995, 1994 and 1993
is as follows:
<TABLE>
<CAPTION>
================================================================================
Common Range of
Shares Strike Prices
--------------------------------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1992 410,444 $5.80-$21.13
Granted 112,685 $7.75
Exercised -
Forfeited or canceled -
--------------------------------------------------------------------------
Outstanding at December 31, 1993 523,129 $5.80-$21.13
Granted 253,059 $7.75-$9.69
Exercised 1,935 $7.24
Forfeited or canceled 22,249 $7.24
--------------------------------------------------------------------------
Outstanding at December 31, 1994 752,004 $5.80-$21.13
Granted 168,029 $9.30-$14.53
Exercised 11,250 $7.75
Forfeited or canceled 2,418 $7.75-$9.30
--------------------------------------------------------------------------
Outstanding at December 31, 1995 906,365 $5.80-$21.13
================================================================================
</TABLE>
Wintrust and its subsidiaries also provide a 401(k) Retirement Savings
Plans (401(k) Plans). The plans cover all employees meeting certain
eligibility requirements. Contributions by employees are made through
salary reductions at their direction, limited to $9,240 annually. Employer
contributions to the 401(k) Plans are made at the employer's discretion.
Generally, participants completing 501 hours of service are eligible to
share in an allocation of employer contributions. The Company's expense
for the employer contributions to the 401(k) Plans was $32,718, $22,986,
and $14,610 in 1995, 1994 and 1993, respectively.
The Company does not currently offer other postretirement benefits such as
health care or other pension plans.
F-25
<PAGE> 104
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
(13) REGULATORY RESTRICTIONS
Banking laws place restrictions upon the amount of dividends which can be
paid to Wintrust by the Banks. Based on these laws, the Bank could,
subject to minimum capital requirements, declare dividends to Wintrust
without obtaining regulatory approval in an amount not exceeding (a)
undivided profits, and (b) the amount of net income reduced by dividends
paid for the current and prior two years. No cash dividends were paid to
Wintrust during the periods ended December 31, 1995, 1994 and 1993.
The Banks are also required by the Federal Reserve Act to maintain
reserves against deposits. Reserves are held either in the form of vault
cash or balances maintained with the Federal Reserve Bank and are based on
the average daily deposit balances and statutory reserve ratios prescribed
by the type of deposit account. At December 31, 1995 and 1994, reserve
balances of approximately $1,686,000 and $726,400 , respectively, were
required.
(14) COMMITMENTS AND CONTINGENCIES
In connection with a purchase agreement for a subsidiary of Crabtree, a
provision was made for additional contingent consideration pending the
outcome of certain tax litigation and other contingencies of that
subsidiary. If such contingencies were favorably resolved, Crabtree would
have been required to contribute up to $3,450,000 to the subsidiary. This
additional capital contribution was fully reserved for in the Company's
financial statements in 1987. In early 1995, the last remaining
contingency under the purchase agreement was satisfied and in March, 1995,
the subsidiary made a formal request of Crabtree for the maximum amount of
the contribution. Crabtree disputed the amounts owed and in September,
1995, Crabtree reached a settlement with the subsidiary. Under the terms
of the settlement agreement, Crabtree effectively bought out the minority
shareholders of the subsidiary by having the subsidiary repurchase all of
its stock held by the minority shareholders. A purchase price was
negotiated which included a deemed capital contribution by Crabtree of
$1.7 million. As a result of this settlement, a gain of $735,000 was
recorded in 1995.
First Premium has filed suit against an obligor in federal court to
collect the remaining balance of approximately $1,094,000 owing on an
original premium finance loan in the amount of $4,592,000. In addition,
First Premium seeks accumulated interest, late charges, and attorney fees
due it. Additional defendants include (1) the obligor Director of
Insurance of over 16 years, who executed the premium finance agreement,
(2) two separate insurance agents who, along with the obligor's Director
of Insurance, falsely presented in writing to First Premium the named
insurers involved and the effective dates, policy numbers, premium
amounts, insurer names and policy terms for the insurance policies being
financed, (3) three separate insurance companies and the managing general
agent for two of them, who directed that premiums be remitted to them via
the insurance agent (their agent) who falsely represented the coverages to
First Premium, and who also were unjustly enriched because they
misappropriated premiums paid by First Premium for specific financed
policies to pay other policies not financed by First Premium. In addition,
at an appropriate time, First Premium anticipates filing suit against
Errors and Omissions insurance companies covering the obligor, obligor's
Director of Insurance and one of the insurance agents.
F-26
<PAGE> 105
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
The lawsuit is expected to go to trial in late 1996 or early 1997.
Presently, discovery via depositions of defendants and document production
and examination is occurring.
Management, after consultation with legal counsel, believes the ultimate
result of this legal action in this matter will result in a favorable
settlement or, in the alternative, a favorable jury verdict and subsequent
collection in full of the amount due to First Premium because of the
underlying facts, applicable law, the number of defendants, many of which
appear to be severally liable for the entire amount due to First Premium
and the financial ability of the defendants to pay the anticipated
settlement or judgment.
In the ordinary course of business, there are various other legal
proceedings pending against the Company. Management considers that the
aggregate liabilities, if any, resulting from such actions would not have
a material adverse effect on the financial position of the Company.
(15) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair
values of Wintrust's financial instruments at December 31, 1995. Financial
Accounting Standards Board Statement No. 107, Disclosures about Fair Value
of Financial Instruments, defines the fair value of a financial instrument
as the amount at which the instrument could be exchanged in a current
transaction between willing parties.
F-27
<PAGE> 106
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
<TABLE>
<CAPTION>
==========================================================================
Carrying Fair
Value Value
-------------------------------------------------------------------------
<S> <C> <C>
Financial Assets:
Cash and demand balances from banks $ 12,622 12,622
Interest-bearing deposits at banks 50,600 50,600
Federal funds sold 55,812 55,812
Held-to-maturity securities 5,002 4,959
Available-for-sale securities 57,888 57,888
Loans 258,231 258,424
Allowance for possible loan losses (2,763) --
Accrued interest receivable 2,742 2,742
-------------------------------------------------------------------------
Financial liabilities:
Non-maturity deposits 200,986 200,986
Deposits with stated maturities 204,672 206,170
Notes payable 10,758 10,758
Short-term borrowings 867 867
Accrued interest payable 649 649
=========================================================================
</TABLE>
Cash and demand balances from banks and Federal funds sold: The carrying
value of cash and demand balances from banks approximates fair value due
to the short maturity of those instruments.
Interest-bearing deposits at banks and securities: Fair values of these
instruments are based on quoted market prices, when available. If quoted
market prices are not available, fair values are based on quoted market
prices of comparable assets.
Loans: Fair values are estimated for portfolios of loans with similar
financial characteristics. Loans are analyzed by type such as commercial,
residential real estate, etc. Each category is further segmented into
fixed and variable interest rate terms.
For variable-rate loans that reprice frequently, estimated fair values are
based on carrying values. The fair value of residential real estate loans
is based on secondary market sources for securities backed by similar
loans, adjusted for differences in loan characteristics. The fair value
for other
F-28
<PAGE> 107
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
loans is estimated by discounting scheduled cash flows through the
estimated maturity using estimated market discount rates that reflect the
credit and interest rate inherent in the loan.
Accrued interest receivable and accrued interest payable: The carrying
value of accrued interest receivable and accrued interest payable
approximates market value due to the relatively short period of time to
expected realization.
Deposit liabilities: The fair value of deposits with no stated maturity,
such as non-interest bearing deposits, savings, NOW accounts and money
market accounts, is equal to the amount payable on demand as of year-end
(i.e. the carrying value). The fair value of certificates of deposit is
based on the discounted value of contractual cash flows. The discount rate
is estimated using the rates currently in effect for deposits of similar
remaining maturities.
Notes payable and Short-term borrowings: The carrying value of notes
payable and short-term borrowings approximate fair value due to the
relatively short period of time to maturity or repricing.
Commitments to extend credit and standby letters of credit: The fair value
of commitments to extend credit is based on fees currently charged to
enter into similar arrangements, the remaining term of the agreement, the
present creditworthiness of the counterparty, and the difference between
current interest rates and committed interest rates on the commitments.
Because most of Wintrust's commitment agreements were recently entered
into and/or contain variable interest rates, the carrying value of
Wintrust's commitments to extend credit approximates fair value. The fair
value of letters of credit is based on fees currently charged for similar
arrangements.
(16) RELATED-PARTY TRANSACTIONS
During 1995 and 1994, Crabtree's bank debt was guaranteed by a significant
shareholder and principal officer of the Company. Crabtree agreed to pay a
fee to this individual for the guarantee at a rate of 1.5% of the balance
of the debt guaranteed. These transactions resulted in expense of $32,973,
$29,840 and $68,339 in 1995, 1994 and 1993, respectively, and are included
in other expense on the Company's consolidated statement of income.
Various shareholders, from time to time, perform advisory and consulting
services for the Company. Amounts paid to shareholders and other related
parties for these services were $301,000, $282,000 and $409,000 in 1995,
1994 and 1993, respectively.
F-29
<PAGE> 108
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
(17) RIGHTS AND WARRANTS TO ACQUIRE COMMON STOCK
The Company maintains a stock rights plan that entitles the holder to
purchase one share of the Company's common stock at purchase prices
ranging from $7.75 to $11.62 per share. The plan was adopted on December
1, 1993 and expires on December 1, 2003. The plan provides for the
issuance of a total of 103,236 such rights. All of the stock rights under
the plan have been awarded. As of December 31, 1995, none of the stock
rights have been exercised.
From time to time, the Company has also issued warrants to acquire common
stock. The warrants entitle the holder to purchase one share of the
Company's common stock at purchase prices ranging from $5.22 to $12.42
per share. There were 169,724 outstanding warrants to acquire common stock
at December 31, 1995 with expirations dates ranging from December, 2002
through November, 2005.
(18) BUSINESS COMBINATION
On September 1, 1996, Wintrust Financial Corporation (formerly known as
North Shore Community Bancorp, Inc.) issued approximately 5.3 million
shares of common stock and approximately 122,000 warrants to acquire
common stock in exchange for all outstanding common stock and warrants, if
applicable, of Lake Forest Bancorp, Inc., Hinsdale Bancorp, Inc.,
Libertyville Bancorp, Inc. and Crabtree Capital Corporation based upon
exchange ratios approved by shareholders of each of the companies. The
combination was accounted for under the pooling of interests method.
The results of operations previously reported by the separate enterprises
and the combined amounts presented in the accompanying consolidated
financial statements are summarized below.
<TABLE>
<CAPTION>
Year ended
-----------------------------------
1995 1994 1993
----------- ------------ ---------
<S> <C> <C> <C>
Net interest income:
Lake Forest Bancorp, Inc. $ 4,431 $ 2,877 $ 1,804
Hinsdale Bancorp, Inc. 2,067 573 7
North Shore Community
Bancorp, Inc. 1,746 184 -
Libertyville Bancorp, Inc. 157 - -
Crabtree Capital Corporation 1,299 4,239 2,544
-------- ------- ---------
Combined $ 9,700 $ 7,873 $ 4,355
======== ======= =========
Other noninterest income:
Lake Forest Bancorp, Inc. $ 1,115 $ 649 $ 783
Hinsdale Bancorp, Inc. 572 237 43
North Shore Community
Bancorp, Inc. 264 36 -
Libertyville Bancorp, Inc. 21 - -
Crabtree Capital Corporation 6,572 564 318
-------- ------- ---------
Combined $ 8,544 $ 1,486 $ 1,144
======== ======= =========
</TABLE>
F-30
<PAGE> 109
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
<TABLE>
<CAPTION>
Year ended
----------------------------------
1995 1994 1993
<S> <C> <C> <C>
Net income (loss):
Lake Forest Bancorp, Inc. $ 1,015 $ 508 $ 200
Hinsdale Bancorp, Inc. 420 (893) (565)
North Shore Community
Bancorp, Inc. (862) (896) -
Libertyville Bancorp, Inc. (958) - -
Crabtree Capital Corporation 1,882 (955) (2,974)
-------- --------- --------
Combined $ 1,497 $ (2,236) $ (3,339)
======== ========= ========
</TABLE>
(19) NET INCOME (LOSS) PER AVERAGE COMMON SHARE
The following table sets forth the number of shares and the net income
used to determine net income per common share for 1995, 1994, and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------- -------
<S> <C> <C> <C> <C>
Net income (loss) available
for common shareholders (A) $1,452 ($2,273) ($3,350)
====== ======= =======
Average common shares outstanding 5,315 4,035 2,948
Average common share equivalents 838 -- --
------ ------- -------
Weighted average common shares and
common share equivalents (B) 6,153 4,035 2,948
====== ======= =======
Net income (loss) per average
common share (A/B) $ 0.24 ($ 0.56) ($ 1.14)
====== ======= =======
</TABLE>
Common share equivalents result from stock options, stock rights and stock
warrants being treated as if they had been exercised and are computed by
application of the treasury stock method. No common share equivalents were
assumed to be outstanding for the years ended December 31, 1994 and 1993
because accounting standards require that the computation of earnings per
share shall not give effect to common stock equivalents for any period in
which their inclusion would have the effect of decreasing the loss per
share amount otherwise computed.
F-31
<PAGE> 110
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
(20) WINTRUST FINANCIAL CORPORATION (PARENT COMPANY ONLY)
The Company's condensed balance sheets as of December 31, 1995 and 1994, and the
related condensed statements of operations and cash flows for the two years
ended December 31, 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
===============================================================
BALANCE SHEET DATA
- ---------------------------------------------------------------
As of December 31 1995 1994
- ---------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash $ 1,113 $ 1,027
Investment in subsidiaries 39,162 24,219
Other assets 212 120
- ---------------------------------------------------------------
Total assets $ 40,487 $ 25,366
===============================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Other liabilities $ $
- -
Shareholders' equity 40,487 25,366
- ---------------------------------------------------------------
Total liabilities and shareholders'
equity $ 40,487 $ 25,366
===============================================================
</TABLE>
F-32
<PAGE> 111
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
Prior to the Reorganization, Wintrust Financial Corporation was North Shore
Community Bancorp, Inc. As a result of the reorganization, North Shore Community
Bancorp, Inc. was renamed Wintrust Financial Corporation. North Shore Community
Bancorp, Inc. had no operations prior to 1994 and, as such, the following
statements of operations and cash flows are not applicable for the year ended
December 31, 1993.
<TABLE>
<CAPTION>
===============================================================
STATEMENTS OF OPERATION DATA
- ---------------------------------------------------------------
Years Ended December 31 1995 1994
- ---------------------------------------------------------------
INCOME:
<S> <C> <C>
Interest income $ - $ 26
Other income - 19
- ---------------------------------------------------------------
Total income - 45
- ---------------------------------------------------------------
EXPENSES:
Interest expense - 12
Salaries and employee benefits - 243
Other expenses 56 95
Goodwill and organizational cost
amortization 14 9
- ---------------------------------------------------------------
Total expenses 70 359
- ---------------------------------------------------------------
Loss before income taxes and equity in
undistributed net income (loss) of
subsidiaries (70) (314)
Income tax benefit - -
- ---------------------------------------------------------------
Loss before equity in undistributed net
income (loss) of subsidiaries (70) (314)
Equity in undistributed net income
(loss) of subsidiaries 1,567 (1,922)
- ---------------------------------------------------------------
Net income (loss) $ 1,497 $ (2,236)
- ---------------------------------------------------------------
Net income (loss) per common share $ 0.24 $ (0.56)
===============================================================
</TABLE>
F-33
<PAGE> 112
WINTRUST FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
<TABLE>
<CAPTION>
===============================================================
STATEMENTS OF CASH FLOWS
- ---------------------------------------------------------------
Years Ended December 31 1995 1994
- ---------------------------------------------------------------
<S> <C> <C>
Operating activities:
Net income (loss) $ 1,497 $ (2,236)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Amortization of goodwill and
organizational costs 14 9
Increase in other assets 92 120
Equity in undistributed net income
(loss) of subsidiaries 1,567 (1,922)
- ---------------------------------------------------------------
Net cash provided by (used for)
operating activities 3,170 (4,029)
- ---------------------------------------------------------------
Investing activities:
Capital infusions to subsidiaries (16,557) (5,471)
- ---------------------------------------------------------------
Net cash used for investing activities (16,557) (5,471)
- ---------------------------------------------------------------
Financing activities:
Common stock issuance, net 13,518 9,981
Preferred stock issuance - 500
Dividends on preferred stock (45) (37)
Issuance of common stock warrants - 25
Other - 58
- ---------------------------------------------------------------
Net cash provided by financing activities 13,473 10,527
- ---------------------------------------------------------------
Net increase in cash 86 1,027
Cash at beginning of year 1,027 -
- ---------------------------------------------------------------
Cash at end of year $ 1,113 $ 1,027
===============================================================
</TABLE>
F-34
<PAGE> 113
================================================================================
No dealer, salesperson or other person has been authorized to give
information or to make any representation not contained in this Prospectus in
connection with the offer contained herein and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date as of which
information is set forth herein. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation.
TABLE OF CONTENTS
Prospectus Summary . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . 9
Use of Proceeds . . . . . . . . . . . . . . . . 13
Market for Common Stock and Dividends . . . . . 14
Capitalization . . . . . . . . . . . . . . . . 15
Dilution . . . . . . . . . . . . . . . . . . . 17
Terms of the Offering . . . . . . . . . . . . . 18
The Company . . . . . . . . . . . . . . . . . . 21
Recent Acquisition . . . . . . . . . . . . . . 25
Selected Consolidated Financial Data . . . . . 26
Management's Discussion and Analysis of
Financial Condition and Results of Operation. 28
Business . . . . . . . . . . . . . . . . . . . 42
Management . . . . . . . . . . . . . . . . . . 52
Certain Transactions . . . . . . . . . . . . . 59
Principal Shareholders . . . . . . . . . . . . 62
Supervision and Regulation . . . . . . . . . . 64
Description of Capital Stock . . . . . . . . . 70
Shares Eligible for Future Sale . . . . . . . . 75
Legal Matters . . . . . . . . . . . . . . . . . 76
Experts . . . . . . . . . . . . . . . . . . . . 76
Available Information . . . . . . . . . . . . . 76
Index to Consolidated Financial Statements . . 77
1,200,000 SHARES
WINTRUST
FINANCIAL
CORPORATION
COMMON STOCK
--------------------
PROSPECTUS
---------------------
EVEREN SECURITIES, INC.
__________________ , 1996
================================================================================
<PAGE> 114
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with this offering are as set forth
in the following table.
<TABLE>
<S> <C>
SEC registration fee . . . . . . . . . . . . . . . . $ 5,455
NASD filing fee . . . . . . . . . . . . . . . . . . . 2,300
Nasdaq listing fee . . . . . . . . . . . . . . . . . *
Printing and engraving expenses . . . . . . . . . . . *
Accounting fees and expenses . . . . . . . . . . . . *
Legal fees and expenses . . . . . . . . . . . . . . . *
Blue Sky fees and expenses . . . . . . . . . . . . . *
Transfer agent fees . . . . . . . . . . . . . . . . . *
Miscellaneous . . . . . . . . . . . . . . . . . . . . *
-------
$ *
=======
</TABLE>
_________
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
In accordance with the Illinois Business Corporation Act (being
Chapter 805, Act 5 of the Illinois Compiled Statutes), Articles Eight and Nine
of the Registrant's Certificate of Incorporation provide as follows:
** ARTICLE EIGHT: No director of the corporation shall be liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director except for liability (a) for any breach of the director's
duty of loyalty to the corporation or its shareholders, (b) for acts or
omissions not in good faith or that involve intentional misconduct of a knowing
violation of law, (c) under Section 8.65 of the BCA, as the same exists or
hereafter may be amended, or (d) for any transaction from which the director
derived an improper personal benefit.
** ARTICLE NINE, PARAGRAPH 1: The corporation shall indemnify, to the
full extent that it shall have power under applicable law to do so and in a
manner permitted by such law, any person made or threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
or she is or was a director, officer, employee or agent of the corporation, or
who is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against liabilities and expenses reasonably incurred or paid by
such person in connection with such action, suit or proceeding. The corporation
may indemnify, to the full extent that it shall have power under applicable law
to do so and in a manner permitted by such law, any person made or threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or she is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against liabilities and expenses reasonably
incurred or paid by such person in connection with such action, suit or
proceeding. The words "liabilities" and "expenses" shall include, without
limitation: liabilities, losses, damages, judgments, fines, penalties, amounts
paid in settlement, expenses, attorneys' fees and costs. Expenses incurred in
defending a civil, criminal, administrative, investigative or other action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding in accordance with the provisions of Section
8.75 of the BCA.
The indemnification and advancement of expenses provided by this
Article shall not be deemed exclusive of any other rights to which any person
indemnified may be entitled under any statute, by-law, agreement, vote of
II-1
<PAGE> 115
shareholders, or disinterested directors or otherwise, both as to action in his
official capacity and as to action in any other capacity while holding such
office, and shall continue as to a person who has ceased to be such director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
PARAGRAPH 2: The corporation may purchase and maintain insurance on
behalf of any person referred to in the preceding paragraph against any
liability asserted against him or her and incurred by him or her in any such
capacity, or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify him or her against such liability
under the provisions of this Article or otherwise.
PARAGRAPH 3: For purposes of this Article, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article with respect to the resulting or surviving corporation as he or she
would have with respect to such constituent corporation if its separate
existence had continued.
PARAGRAPH 4: The provisions of this Article shall be deemed to be a
contract between the corporation and each director or officer who serves in any
such capacity at any time while this Article and the relevant provisions of the
BCA, or other applicable law, if any, are in effect, and any repeal or
modification of any such law or of this Article shall not affect any rights or
obligations then existing with respect to any state of facts then or
theretofore existing or any action, suit or proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such state
of facts.
PARAGRAPH 5: For purposes of this Article, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to any employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he or she reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in
a manner not opposed to the best interests of the corporation.
The Illinois Business Corporation Act provides for indemnification of
officers, directors, employees and agents as follows:
5/8.75 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE. (a) A corporation may indemnify any person who was or is a party,
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or who is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, if such person acted in good faith and in a manner he or
she reasonably believed to be in, or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
which he or she reasonably believed to be in or not opposed to the best
interests of the corporation or, with respect to any criminal action or
proceeding, that the person had reasonable cause to believe that his or her
conduct was unlawful.
II-2
<PAGE> 116
(b) A corporation may indemnify any person who was or is a party, or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that such person is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit, if
such person acted in good faith and in a manner he or she reasonably believed
to be in, or not opposed to, the best interests of the corporation, provided
that no indemnification shall be made with respect to any claim, issue, or
matter as to which such person, has been adjudged to have been liable to the
corporation, unless, and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses as
the court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful, on the merits or otherwise, in the defense of
any action, suit or proceeding referred to in subsections (a) and (b), or in
defense of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) (unless ordered
by a court) shall be made by the corporation only as authorized in the specific
case, upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in subsections (a) or (b). Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable,
if a quorum of disinterested directors so directs, by independent legal counsel
in a written opinion, or (3) by the shareholders.
(e) Expenses incurred in defending a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the director, officer, employee or agent to repay such
amount if it shall ultimately be determined that he or she is not entitled to
be indemnified by the corporation as authorized in this Section.
(f) The indemnification and advancement of expenses provided by or
granted under the other subsections of this Section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
shareholders or disinterested directors, or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding
such office.
(g) A corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
corporation, or who is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of his
or her status as such, whether or not the corporation would have the power to
indemnify such person against such liability under the provisions of this
Section.
(h) If a corporation has paid indemnity or has advanced expenses to a
director, officer, employee or agent, the corporation shall report the
indemnification or advance in writing to the shareholders with or before the
notice of the next shareholders meeting.
(i) For purposes of this Section, references to "the corporation"
shall include, in addition to the surviving corporation, any merging
corporation (including any corporation having merged with a merging
corporation) absorbed in a merger which, if its separate existence had
continued, would have had the power and authority to indemnify its directors,
officers, and employees or agents, so that any person who was a director,
II-3
<PAGE> 117
officer, employee or agent of such merging corporation, or was serving at the
request of such merging corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Section with
respect to the surviving corporation as such person would have with respect to
such merging corporation if its separate existence had continued.
(j) For purposes of this Section, reference to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries. A person who acted in good faith and in a manner he or she
reasonably believed to be in the best interests of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interest of the corporation" as referred to in
this Section.
(k) The indemnification and advancement of expenses provided by or
granted under this Section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the heirs, executors, and
administrators of that person. (Last amended by P.A. 88-43, L. '93, eff.
1-1-94.)
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Wintrust Financial Corporation (the "Company") was formed pursuant to
a reorganization of five companies as more fully described in the Company's
Registration Statement on Form S-4, as amended, as filed with the Commission on
July 22, 1996 (Registration No. 333-4645). Pursuant to that reorganization,
all previously issued and outstanding shares of stock, and all outstanding
warrants representing a right to purchase shares of common stock, of the five
separate companies were exchanged effective September 1, 1996, for shares of
common stock (the "Common Stock") and Common Stock warrants of the Company
registered pursuant to the Registration Statement on Form S-4.
The predecessor companies had also issued, prior to the
reorganization, certain rights and options to purchase shares of common stock
of the respective companies. Such rights and options were issued by the
predecessor companies in transactions exempt from registration under Rule 701
promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), or Section 4(2) of the Securities Act. In connection with the
reorganization, such rights and options were automatically adjusted in
accordance with their terms into options and rights to purchase shares of the
Company's Common Stock, not involving the sale of securities by the Company.
In December 1996, in connection with the Company's acquisition of
Wolfhoya Investments, Inc. ("Wolfhoya"), the Company issued an aggregate of
87,556 shares of Common Stock to the shareholders of Wolfhoya, all of whom are
directors or officers of the Company or its subsidiaries, in reliance on the
exemption from registration pursuant to Section 4(2) of the Securities Act. As
part of such acquisition, each outstanding warrant to purchase shares of common
stock of Wolfhoya was adjusted in accordance with its terms to represent the
right to purchase an appropriately adjusted number of shares of Common Stock of
the Company. An aggregate of 16,838 Warrants were received by the former
shareholders of Wolfhoya as a result of that transaction, not involving the
sale of securities by the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The exhibits filed as a part of this Registration Statement are
as follows:
1.1* Form of Agency Agreement.
3.1 Amended and Restated Articles of Incorporation of Wintrust
Financial Corporation.
II-4
<PAGE> 118
3.2 By-laws of Wintrust Financial Corporation (incorporated by
reference to pages AC-1 to AC-16 of Amendment No. 1 to
Registrant's Form S-4 Registration Statement (No. 333-4645)
filed with the Securities and Exchange Commission on July
22, 1996).
5.1* Opinion of Vedder, Price, Kaufman & Kammholz re: legality.
10.1 $25 Million Revolving Loan Agreement between LaSalle
National Bank and Wintrust Financial Corporation, dated
September 1, 1996.
10.2 Form of Wintrust Financial Corporation Warrant Agreement
(incorporated by reference to Exhibit 10.29 to Amendment
No. 1 to Registrant's Form S-4 Registration Statement (No.
333-4645), filed with the Securities and Exchange
Commission on July 22, 1996).
10.3 Hinsdale Bancorp, Inc. 1993 Stock Option Plan (incorporated
by reference to Exhibit 10.6 to Amendment No. 1 to
Registrant's Form S-4 Registration Statement (No. 333-4645)
filed with the Securities and Exchange Commission on July
22, 1996).
10.4 Lake Forest Bancorp, Inc. 1991 Stock Option Plan
(incorporated by reference to Exhibit 10.6 to Amendment No.
1 to Registrant's Form S-4 Registration Statement (No.
333-4645) filed with the Securities and Exchange Commission
on July 22, 1996).
10.5 Lake Forest Bancorp, Inc. 1993 Stock Option Plan
(incorporated by reference to Exhibit 10.6 to Amendment No.
1 to Registrant's Form S-4 Registration Statement (No.
333-4645) filed with the Securities and Exchange Commission
on July 22, 1996).
10.6 Libertyville Bancorp, Inc. 1995 Stock Option Plan
(incorporated by reference to Exhibit 10.6 to Amendment No.
1 to Registrant's Form S-4 Registration Statement (No.
333-4645) filed with the Securities and Exchange Commission
on July 22, 1996).
10.7 North Shore Community Bancorp, Inc. 1994 Stock Options Plan
(incorporated by reference to Exhibit 10.6 to Amendment No.
1 to Registrant's Form S-4 Registration Statement (No.
333-4645) filed with the Securities and Exchange Commission
on July 22, 1996).
10.8 Crabtree Capital Corporation 1987 Stock Option Plan
(incorporated by reference to Exhibit 10.6 to Amendment No.
1 to Registrant's Form S-4 Registration Statement (No.
333-4645) filed with the Securities and Exchange Commission
on July 22, 1996).
10.9 The Credit Life Companies, Incorporated 1987 Stock Option
Plan (incorporated by reference to Exhibit 10.6 to
Amendment No. 1 to Registrant's Form S-4 Registration
Statement (No. 333-4645) filed with the Securities and
Exchange Commission on July 22, 1996).
10.10 First Premium Services, Inc. 1992 Stock Option Plan
(incorporated by reference to Exhibit 10.6 to Amendment No.
1 to Registrant's Form S-4 Registration Statement (No.
333-4645) filed with the Securities and Exchange Commission
on July 22, 1996).
10.11 Wolfhoya Investments, Inc. 1995 Stock Option Plan
(Barrington Bank and Trust Company Stock Option Plan).
10.12 North Shore Community Bancorp, Inc. 1993 Stock Rights Plan
(incorporated by reference to Exhibit 10.6 to Amendment No.
1 to Registrant's Form S-4 Registration Statement (No.
333-4645) filed with the Securities and Exchange Commission
on July 22, 1996).
II-5
<PAGE> 119
10.13 Crabtree Capital Corporation 1990 Stock Purchase Plan
(incorporated by reference to Exhibit 10.6 to Amendment No.
1 to Registrant's Form S-4 Registration Statement (No.
333-4645) filed with the Securities and Exchange Commission
on July 22, 1996).
10.14 Phantom Stock Agreement between Lake Forest Bancorp, Inc.
and Edward J. Wehmer (incorporated by reference to Exhibit
10.6 to Amendment No. 1 to Registrant's Form S-4
Registration Statement (No. 333-4645) filed with the
Securities and Exchange Commission on July 22, 1996).
10.15 Phantom Stock Agreement between Libertyville Bancorp, Inc.
and Edward J. Wehmer (incorporated by reference to Exhibit
10.6 to Amendment No. 1 to Registrant's Form S-4
Registration Statement (No. 333-4645) filed with the
Securities and Exchange Commission on July 22, 1996).
10.16 Phantom Stock Agreement between North Shore Community
Bancorp, Inc. and Anne M. Adams (incorporated by reference
to Exhibit 10.6 to Amendment No. 1 to Registrant's Form S-4
Registration Statement (No. 333-4645) filed with the
Securities and Exchange Commission on July 22, 1996).
10.17 Form of Warrant Agreement relating to the right to purchase
shares of North Shore Community Bancorp, Inc. (incorporated
by reference to Exhibit 10.6 to Amendment No. 1 to
Registrant's Form S-4 Registration Statement (No. 333-4645)
filed with the Securities and Exchange Commission on July
22, 1996).
10.18 Lake Forest Bank & Trust Company Lease for drive-up
facility located at the corner of Bank Lane & Wisconsin
Avenue, Lake Forest, Illinois, dated December 11, 1992
(incorporated by reference to Exhibit 10.6 to Amendment No.
1 to Registrant's Form S-4 Registration Statement (No.
333-4645) filed with the Securities and Exchange Commission
on July 22, 1996).
10.19 Lake Forest Bank & Trust Company Lease for banking facility
located at 810 South Waukegan Road, Lake Forest, Illinois
(incorporated by reference to Exhibit 10.6 to Amendment No.
1 to Registrant's Form S-4 Registration Statement (No. 333-
4645) filed with the Securities and Exchange Commission on
July 22, 1996).
10.20 Lake Forest Bank & Trust Company Lease for banking facility
located at 666 North Western Avenue, Lake Forest, Illinois,
dated July 19, 1991 and Amendment (incorporated by
reference to Exhibit 10.6 to Amendment No. 1 to
Registrant's Form S-4 Registration Statement (No. 333-4645)
filed with the Securities and Exchange Commission on July
22, 1996).
10.21 Lake Forest Bank & Trust Company Lease for banking facility
located at 103 East Scranton Avenue, Lake Bluff, Illinois,
dated November 1, 1994 (incorporated by reference to
Exhibit 10.6 to Amendment No. 1 to Registrant's Form S-4
Registration Statement (No. 333-4645) filed with the
Securities and Exchange Commission on July 22, 1996).
10.22 North Shore Bank & Trust Company Lease for banking facility
located at 362 Park Avenue, Glencoe, Illinois, dated July
27, 1995 (incorporated by reference to Exhibit 10.6 to
Amendment No. 1 to Registrant's Form S-4 Registration
Statement (No. 333-4645) filed with the Securities and
Exchange Commission on July 22, 1996).
10.23 North Shore Bank & Trust Company Lease for banking facility
located at 794 Oak Street, Winnetka, Illinois, dated June
16, 1995 (incorporated by reference to Exhibit 10.6 to
Amendment No. 1 to Registrant's Form S-4 Registration
Statement (No. 333-4645) filed with the Securities and
Exchange Commission on July 22, 1996).
II-6
<PAGE> 120
10.24 Barrington Bank and Trust Company Lease for property
located at 202A South Cook Street, Barrington, Illinois,
dated December 29, 1995.
10.25 Real Estate Contract by and between Wolfhoya Investments,
Inc. and Amoco Oil Company, dated March 25, 1996, and
amended as of __________, 1996, relating to the purchase of
property located at 201 South Hough, Barrington, Illinois.
10.26 Form of Employment Agreement (entered into between the
Company and each of Howard D. Adams, Chairman and Chief
Executive Officer, and Edward J. Wehmer, President).
21.1 Subsidiaries of the Registrant.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Vedder, Price, Kaufman & Kammholz (included in
Exhibit 5.1).
24.1 Powers of Attorney (set forth on Signature page).
99.1 Subscription and Community Offering Stock Order Form and
Certification Form.
- -----------------------
* To be filed by amendment
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high and of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee."
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in
the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-7
<PAGE> 121
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any financial
statements required by Rule 3-19 of this chapter at the start of any delayed
offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided, that the registrant includes in the prospectus, by means of
a post-effective amendment, financial statements required pursuant to this
paragraph (a)(4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3, a post-effective amendment need not be
filed to include financial statements and information required by Section
10(a)(3) of the Act or Rule 3-19 of this chapter if such financial statements
and information are contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the Form
F-3.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to Item 20 of this Registration Statement, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
(i) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-8
<PAGE> 122
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the State of
Illinois, on December 23, 1996.
WINTRUST FINANCIAL CORPORATION
By: HOWARD D. ADAMS
-----------------------------
Howard D. Adams, Chairman
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Howard D. Adams, Edward J. Wehmer or
David A. Dykstra, or any of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and re-substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully for all intents and purposes as he might or could do in person, hereby
ratifying and confirming any and all such acts said attorneys-in-fact and
agents or their substitutes or substitute may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
HOWARD D. ADAMS Chairman and December 23, 1996
- ---------------------- Chief Executive Officer
Howard D. Adams
EDWARD J. WEHMER President and Director December 23, 1996
- ----------------------
Edward J. Wehmer
DAVID A. DYKSTRA Chief Financial Officer December 23, 1996
- ---------------------- (and principal accounting officer)
David A. Dykstra
ALAN W. ADAMS Director December 23, 1996
- ----------------------
Alan W. Adams
PETER CRIST Director December 23, 1996
- ----------------------
Peter Crist
MAURICE F. DUNNE, JR. Director December 23, 1996
- -----------------------
Maurice F. Dunne, Jr.
EUGENE HOTCHKISS, III Director December 23, 1996
- -----------------------
Eugene Hotchkiss, III
JAMES C. KNOLLENBERG Director December 23, 1996
- -----------------------
James C. Knollenberg
</TABLE>
II-9
<PAGE> 123
<TABLE>
<S> <C> <C>
JOHN S. LILLARD Director December 23, 1996
- ----------------------------
John S. Lillard
JAMES E. MAHONEY Director December 23, 1996
- ----------------------------
James E. Mahoney
JAMES B. MCCARTHY Director December 23, 1996
- ----------------------------
James B. McCarthy
MARGUERITE SAVARD MCKENNA Director December 23, 1996
- ----------------------------
Marguerite Savard McKenna
Director December 23, 1996
- ----------------------------
Albin F. Moschner
HOLLIS W. RADEMACHER Director December 23, 1996
- ----------------------------
Hollis W. Rademacher
J. CHRISTOPHER REYES Director December 23, 1996
- ----------------------------
J. Christopher Reyes
JOHN N. SCHAPER Director December 23, 1996
- ----------------------------
John N. Schaper
JOHN J. SCHORNACK Director December 23, 1996
- ----------------------------
John J. Schornack
Director December 23, 1996
- ----------------------------
Jane R. Stein
Director December 23, 1996
- ----------------------------
Katharine V. Sylvester
LEMUEL H. TATE, JR. Director December 23, 1996
- ----------------------------
Lemuel H. Tate, Jr.
LARRY WRIGHT Director December 23, 1996
- ----------------------------
Larry Wright
</TABLE>
II-10
<PAGE> 124
EXHIBIT INDEX
Exhibit
1.1* Form of Agency Agreement.
3.1 Amended and Restated Articles of Incorporation of Wintrust Financial
Corporation.
3.2 By-laws of Wintrust Financial Corporation (incorporated by reference
to pages AC-1 to AC-16 of Amendment No. 1 to Registrant's Form S-4
Registration Statement (No. 333-4645) filed with the Securities and
Exchange Commission on July 22, 1996).
5.1* Opinion of Vedder, Price, Kaufman & Kammholz re: legality.
10.1 $25 Million Revolving Loan Agreement between LaSalle National Bank and
Wintrust Financial Corporation, dated September 1, 1996.
10.2 Form of Wintrust Financial Corporation Warrant Agreement (incorporated
by reference to Exhibit 10.29 to Amendment No. 1 to Registrant's Form
S-4 Registration Statement (No. 333-4645), filed with the Securities
and Exchange Commission on July 22, 1996).
10.3 Hinsdale Bancorp, Inc. 1993 Stock Option Plan (incorporated by
reference to Exhibit 10.6 to Amendment No. 1 to Registrant's Form S-4
Registration Statement (No. 333-4645) filed with the Securities and
Exchange Commission on July 22, 1996).
10.4 Lake Forest Bancorp, Inc. 1991 Stock Option Plan (incorporated by
reference to Exhibit 10.6 to Amendment No. 1 to Registrant's Form S-4
Registration Statement (No. 333-4645) filed with the Securities and
Exchange Commission on July 22, 1996).
10.5 Lake Forest Bancorp, Inc. 1993 Stock Option Plan (incorporated by
reference to Exhibit 10.6 to Amendment No. 1 to Registrant's Form S-4
Registration Statement (No. 333-4645) filed with the Securities and
Exchange Commission on July 22, 1996).
10.6 Libertyville Bancorp, Inc. 1995 Stock Option Plan (incorporated by
reference to Exhibit 10.6 to Amendment No. 1 to Registrant's Form S-4
Registration Statement (No. 333-4645) filed with the Securities and
Exchange Commission on July 22, 1996).
10.7 North Shore Community Bancorp, Inc. 1994 Stock Options Plan
(incorporated by reference to Exhibit 10.6 to Amendment No. 1 to
Registrant's Form S-4 Registration Statement (No. 333-4645) filed with
the Securities and Exchange Commission on July 22, 1996).
10.8 Crabtree Capital Corporation 1987 Stock Option Plan (incorporated by
reference to Exhibit 10.6 to Amendment No. 1 to Registrant's Form S-4
Registration Statement (No. 333-4645) filed with the Securities and
Exchange Commission on July 22, 1996).
10.9 The Credit Life Companies, Incorporated 1987 Stock Option Plan
(incorporated by reference to Exhibit 10.6 to Amendment No. 1 to
Registrant's Form S-4 Registration Statement (No. 333-4645) filed with
the Securities and Exchange Commission on July 22, 1996).
10.10 First Premium Services, Inc. 1992 Stock Option Plan (incorporated by
reference to Exhibit 10.6 to Amendment No. 1 to Registrant's Form S-4
Registration Statement (No. 333-4645) filed with the Securities and
Exchange Commission on July 22, 1996).
II-11
<PAGE> 125
10.11 Wolfhoya Investments, Inc. 1995 Stock Option Plan (Barrington Bank and
Trust Company Stock Option Plan).
10.12 North Shore Community Bancorp, Inc. 1993 Stock Rights Plan
(incorporated by reference to Exhibit 10.6 to Amendment No. 1 to
Registrant's Form S-4 Registration Statement (No. 333-4645) filed with
the Securities and Exchange Commission on July 22, 1996).
10.13 Crabtree Capital Corporation 1990 Stock Purchase Plan (incorporated by
reference to Exhibit 10.6 to Amendment No. 1 to Registrant's Form S-4
Registration Statement (No. 333-4645) filed with the Securities and
Exchange Commission on July 22, 1996).
10.14 Phantom Stock Agreement between Lake Forest Bancorp, Inc. and Edward
J. Wehmer (incorporated by reference to Exhibit 10.6 to Amendment No.
1 to Registrant's Form S-4 Registration Statement (No. 333-4645) filed
with the Securities and Exchange Commission on July 22, 1996).
10.15 Phantom Stock Agreement between Libertyville Bancorp, Inc. and Edward
J. Wehmer (incorporated by reference to Exhibit 10.6 to Amendment No.
1 to Registrant's Form S-4 Registration Statement (No. 333-4645) filed
with the Securities and Exchange Commission on July 22, 1996).
10.16 Phantom Stock Agreement between North Shore Community Bancorp, Inc.
and Anne M. Adams (incorporated by reference to Exhibit 10.6 to
Amendment No. 1 to Registrant's Form S-4 Registration Statement (No.
333-4645) filed with the Securities and Exchange Commission on July
22, 1996).
10.17 Form of Warrant Agreement relating to the right to purchase shares of
North Shore Community Bancorp, Inc. (incorporated by reference to
Exhibit 10.6 to Amendment No. 1 to Registrant's Form S-4 Registration
Statement (No. 333-4645) filed with the Securities and Exchange
Commission on July 22, 1996).
10.18 Lake Forest Bank & Trust Company Lease for drive-up facility located
at the corner of Bank Lane & Wisconsin Avenue, Lake Forest, Illinois,
dated December 11, 1992 (incorporated by reference to Exhibit 10.6 to
Amendment No. 1 to Registrant's Form S-4 Registration Statement (No.
333-4645) filed with the Securities and Exchange Commission on July
22, 1996).
10.19 Lake Forest Bank & Trust Company Lease for banking facility located at
810 South Waukegan Road, Lake Forest, Illinois (incorporated
by reference to Exhibit 10.6 to Amendment No. 1 to
Registrant's Form S-4 Registration Statement (No. 333-4645)
filed with the Securities and Exchange Commission on July 22,
1996).
10.20 Lake Forest Bank & Trust Company Lease for banking facility located at
666 North Western Avenue, Lake Forest, Illinois, dated July 19, 1991
and Amendment (incorporated by reference to Exhibit 10.6 to Amendment
No. 1 to Registrant's Form S-4 Registration Statement (No. 333-4645)
filed with the Securities and Exchange Commission on July 22, 1996).
10.21 Lake Forest Bank & Trust Company Lease for banking facility located at
103 East Scranton Avenue, Lake Bluff, Illinois, dated November 1, 1994
(incorporated by reference to Exhibit 10.6 to Amendment No. 1 to
Registrant's Form S-4 Registration Statement (No. 333-4645) filed with
the Securities and Exchange Commission on July 22, 1996).
10.22 North Shore Bank & Trust Company Lease for banking facility located at
362 Park Avenue, Glencoe, Illinois, dated July 27, 1995 (incorporated
by reference to Exhibit 10.6 to Amendment No. 1 to Registrant's Form
S-4 Registration Statement (No. 333-4645) filed with the Securities
and Exchange Commission on July 22, 1996).
10.23 North Shore Bank & Trust Company Lease for banking facility located at
794 Oak Street, Winnetka, Illinois, dated June 16, 1995 (incorporated
by reference to Exhibit 10.6 to Amendment No. 1 to
II-12
<PAGE> 126
Registrant's Form S-4 Registration Statement (No. 333-4645) filed with
the Securities and Exchange Commission on July 22, 1996).
10.24 Barrington Bank and Trust Company Lease for property located at 202A
South Cook Street, Barrington, Illinois, dated December 29, 1995.
10.25 Real Estate Contract by and between Wolfhoya Investments, Inc. and
Amoco Oil Company, dated March 25, 1996, and amended as of __________,
1996, relating to the purchase of property located at 201 South Hough,
Barrington, Illinois.
10.26 Form of Employment Agreement (entered into between the Company and
each of Howard D. Adams, Chairman and Chief Executive Officer, and
Edward J. Wehmer, President).
21.1 Subsidiaries of the Registrant.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Vedder, Price, Kaufman & Kammholz (included in Exhibit
5.1).
24.1 Powers of Attorney (set forth on Signature pages).
99.1 Subscription and Community Offering Stock Order Form and Certification
Form.
- ------------------
* To be filed by amendment.
II-13
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
WINTRUST FINANCIAL CORPORATION
Wintrust Financial Corporation (the "Corporation") was incorporated on
December 30, 1992 under the name Wintrust Investment Corporation. On March 18,
1993, the name of the Corporation was changed to Wintrust Investments, Inc. On
May 27, 1994, the name of the Corporation was changed to North Shore Community
Bancorp, Inc. The Articles of Incorporation be and the same hereby are amended
and restated to read as follows:
**ARTICLE ONE: The name of the Corporation is Wintrust Financial Corporation.
*ARTICLE TWO: The name and address of the registered agent and registered
office are:
Registered Agent - John F. Purtill, Esq.
Registered Office - 1515 East Woodfield Road
Suite 250
Schaumburg, Illinois 60173-5431
**ARTICLE THREE: Purpose or purposes for which the Corporation is organized:
The transaction of any or all lawful businesses for which corporations may be
incorporated under the Illinois Business Corporation Act of 1983, as amended
(the "BCA").
**ARTICLE FOUR, Paragraph 1: Authorized Shares, Issued Shares and
Consideration Received. The class, number of shares, and the par value, if any,
of each class of stock which the Corporation shall have authority to issue
shall be as follows:
<TABLE>
<CAPTION>
Number of
Shares Number of
Class Par Value Per Share Authorized Shares Issued
----- ------------------- ---------- -------------
<S> <C> <C> <C>
Common no par value 30,000,000 254,217
Preferred no par value 20,000,000 0
</TABLE>
The Paid-In Capital is: $12,513,980
Shares of the Corporation may be issued from time to time in such
manner, amounts and proportions and for such consideration as shall be fixed by
the Board of Directors of the Corporation.
<PAGE> 2
Paragraph 2: The preferences, qualifications, limitations,
restrictions and the special or relative rights in respect of the shares of
each class are as follows:
COMMON STOCK
(a) Dividends. Subject to any rights to receive
dividends to which the holders of the shares of the Preferred Stock
may be entitled, the holders of shares of Common Stock shall be
entitled to receive dividends, if and when declared payable from time
to time by the Board of Directors from any funds legally available
therefor.
(b) Liquidation. In the event of any dissolution,
liquidation or winding up of the Corporation, whether voluntary or
involuntary, after there shall have been paid to the holders of shares
of Preferred Stock the full amounts to which they shall be entitled,
the holders of the then outstanding shares of Common Stock shall be
entitled to receive, pro rata, all of the remaining assets of the
Corporation available for distribution to its shareholders. The Board
of Directors may distribute in kind to the holders of the shares of
Common Stock such remaining assets of the Corporation or may sell,
transfer or otherwise dispose of all or any part of such remaining
assets to any other corporation, trust or other entity and receive
payment therefor in cash, stock or obligations of such other
corporation, trust or entity, or any combination thereof, and may sell
all or any part of the consideration so received and distribute any
balance thereof in kind to holders of the shares of Common Stock. The
merger or consolidation of the Corporation into or with any other
corporation, or the merger of any other corporation into it, or any
purchase or redemption of shares of stock of the Corporation of any
class, shall not be deemed to be a dissolution, liquidation or winding
up of the Corporation for the purpose of this paragraph (b).
(c) Voting. Each outstanding share of Common Stock of
the Corporation shall entitle the holder thereof to one vote on each
matter submitted to a vote at a meeting of the shareholders.
PREFERRED STOCK
The Board of Directors is expressly authorized to adopt, from
time to time, a resolution or resolutions providing for the issuance
of Preferred Stock in one or more series, to fix the number of shares
in each such series and to fix the designations and powers,
preferences and relative, participating, optional or other special
rights, and the qualifications, limitations and restrictions thereof,
of each such series. The authority of the Board of Directors with
respect to each such series shall include a determination of the
following (which may vary as between the different series of Preferred
Stock):
-2-
<PAGE> 3
(a) The number of shares constituting the series and the
distinctive designation of the series;
(b) The dividend rate on the shares of the series, the
conditions and dates upon which dividends thereon shall be payable,
the extent, if any, to which dividends thereon shall be cumulative,
and the relative rights of preference, if any, of payment of dividends
thereon;
(c) Whether or not the shares of the series are
redeemable and, if redeemable, including the times during which they
shall be redeemable and the amount per share payable in case of
redemption, which amount may, but need not, vary according to the time
and circumstances of such action;
(d) The amount payable in respect of the shares of the
series, in the event of any liquidation, dissolution or winding up of
the Corporation, which amount may, but need not, vary according to the
time or circumstances of such action, and the relative rights of
preference, if any, of payment of such amount;
(e) Any requirement as to a sinking fund for the shares
of the series, or any requirement as to the redemption, purchase or
other retirement by the Corporation of the shares of the series;
(f) The right, if any, to exchange or convert shares of
the series into shares of any other series or class of stock of the
Corporation and the rate or basis, time, manner and condition of
exchange or conversion;
(g) The voting rights, if any, to which the holders of
shares of the series shall be entitled in addition to the voting
rights provided by law; and
(h) Any other term, condition or provision with respect
to the series not inconsistent with the provisions of this Article
Four or any resolution adopted by the Board of Directors pursuant
thereto.
**ARTICLE FIVE: No holder of any class of shares of the Corporation shall have
any cumulative voting rights in the election of directors or in any other
circumstances.
**ARTICLE SIX: No holder of any class of shares of the Corporation shall be
entitled as such as a matter of right to subscribe for or purchase any part (a)
of any shares of any class of the Corporation whether now authorized or
hereafter created, or (b) of any securities whether non- convertible, or
convertible into or evidencing the right to purchase or acquire shares of any
class of the Corporation, whether now authorized or hereafter created and
whether in either case issued or sold for cash, property, services or
otherwise.
-3-
<PAGE> 4
**ARTICLE SEVEN: Any action required or permitted to be taken by the holders
of any class of shares of the Corporation must be effected at a duly called
annual or special meeting of such holders and may not be effected by any
consent in writing by such holders.
**ARTICLE EIGHT: No director of the Corporation shall be liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director except for liability (a) for any breach of the director's
duty of loyalty to the Corporation or its shareholders, (b) for acts or
omissions not in good faith or that involve intentional misconduct of a knowing
violation of law, (c) under Section 8.65 of the BCA, as the same exists or
hereafter may be amended, or (d) for any transaction from which the director
derived an improper personal benefit.
**ARTICLE NINE, Paragraph 1: The Corporation shall indemnify, to the full
extent that it shall have power under applicable law to do so and in a manner
permitted by such law, any person made or threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was a director, officer, employee or agent of the Corporation, or who is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against liabilities and expenses reasonably incurred or paid
by such person in connection with such action, suit or proceeding. The
Corporation may indemnify, to the full extent that it shall have power under
applicable law to do so and in a manner permitted by such law, any person made
or threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
liabilities and expenses reasonably incurred or paid by such person in
connection with such action, suit or proceeding. The words "liabilities" and
"expenses" shall include, without limitation: liabilities, losses, damages,
judgments, fines, penalties, amounts paid in settlement, expenses, attorneys'
fees and costs. Expenses incurred in defending a civil, criminal,
administrative, investigative or other action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding in accordance with the provisions of Section 8.75 of the BCA.
The indemnification and advancement of expenses provided by this
Article shall not be deemed exclusive of any other rights to which any person
indemnified may be entitled under any statute, by-law, agreement, vote of
shareholders, or disinterested directors or otherwise, both as to action in his
official capacity and as to action in any other capacity while holding such
office, and shall continue as to a person who has ceased to be such director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
Paragraph 2: The Corporation may purchase and maintain insurance on
behalf of any person referred to in the preceding paragraph against any
liability asserted against him or her and incurred by him or her in any such
capacity, or arising out of his or her status as such,
-4-
<PAGE> 5
whether or not the Corporation would have the power to indemnify him or her
against such liability under the provisions of this Article or otherwise.
Paragraph 3: For purposes of this Article, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article with respect to the resulting or surviving corporation as he or she
would have with respect to such constituent corporation if its separate
existence had continued.
Paragraph 4: The provisions of this Article shall be deemed to be a
contract between the Corporation and each director or officer who serves in any
such capacity at any time while this Article and the relevant provisions of the
BCA, or other applicable law, if any, are in effect, and any repeal or
modification of any such law or of this Article shall not affect any rights or
obligations then existing with respect to any state of facts then or
theretofore existing or any action, suit or proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such state
of facts.
Paragraph 5: For purposes of this Article, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to any employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he or she reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in
a manner not opposed to the best interests of the Corporation.
**ARTICLE TEN: The number of directors of the Corporation shall be that
number set forth in the By-laws, as may be increased or decreased from time to
time; provided, however, that such number shall never be less than six (6).
Paragraph 1: The directors shall be divided into three classes, as
equal in number as possible, with respect to the times for which they shall
hold office. Directors of the first class first elected shall hold office for
one year or until the first annual election following their election, directors
of the second class first elected shall hold office for two years or until the
second annual election following their election, and directors of the third
class first elected shall hold office for three years or until the third annual
election following their election and in each case until their successors shall
be duly elected and shall qualify.
-5-
<PAGE> 6
Paragraph 2: At each annual meeting of the shareholders following
such first election of the directors of all classes, the successors to the
class of directors whose terms shall expire at such meeting shall be elected to
hold office for a term of three years, so that in each year the term of office
of one class of directors shall expire.
Paragraph 3: Directors need not be residents of Illinois or
shareholders of the Corporation.
**ARTICLE ELEVEN: The Corporation expressly elects to be governed by Section
7.85 of the BCA as may be amended from time to time.
**ARTICLE TWELVE: The Corporation expressly elects not to be governed by
Section 11.75 of the BCA.
**ARTICLE THIRTEEN: Notwithstanding any other provision of these Articles of
Incorporation or the By-laws of the Corporation (and not withstanding the fact
that a lessor percentage may be specified by law, these Articles of
Incorporation or the By-laws of the Corporation), the affirmative vote of the
holders of 85% or more of the voting power of the then-outstanding shares of
stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to amend or
repeal, or adopt any provision inconsistent with Articles Five, Six, Seven,
Eight, Nine, Ten, Eleven, Twelve and this Article Thirteen.
- --------------------------
* Restated only
** Amended and Restated
-6-
<PAGE> 1
Exhibit 10.1
LOAN AGREEMENT
This LOAN AGREEMENT (the ,"Agreement") , dated as of September 1,
1996, is entered into between WINTRUST FINANCIAL CORPORATION, an Illinois
corporation (the "Borrower") , and LASALLE NATIONAL BANK, a national banking
association ("LaSalle").
RECITALS
WHEREAS, the Borrower desires to borrow from LaSalle up to the sum of
TWENTY FIVE MILLION DOLLARS ($25,000,000) in order to refinance existing debt
and to provide for Borrower's working capital needs;
WHEREAS, as a prerequisite for making such loans, LaSalle has
requested and the Borrower has agreed to pledge to LaSalle and grant a security
interest in favor of LaSalle with respect to the capital stock of Hinsdale
Bancorp ("Hinsdale") , Lake Forest Bancorp ("Lake Forest") , North Shore
Community Bank & Trust ("North Shore") and Libertyville Bancorp
("Libertyville") (Hinsdale, Lake Forest, North Shore and Libertyville are
referred to herein individually as a "Holding Company" and collectively as the
"Holding Companies"; the capital stock of such Holding Companies shall be
collectively referred to herein as the "Holding Company Stock"), as set forth
in the Pledge and Security Agreement of the Borrower of even date herewith (the
"Borrower Pledge Agreement");
WHEREAS, the Holding Company Stock constitutes 100% of the issued and
outstanding capital stock of the Holding Companies;
WHEREAS, as a further prerequisite for making such loans, LaSalle has
requested and the Holding Companies have agreed to pledge to LaSalle and grant
a security interest in favor of LaSalle with respect to the capital stock of
each of their respective subsidiaries (individually a "Subsidiary" and
collectively, the "Subsidiaries"; the capital stock of such Subsidiaries shall
be collectively referred to herein as the "Subsidiary Stock") as set forth in
the Pledge and Security Agreement of the Holding Companies of even date
herewith (the "Holding Company Pledge Agreement" and collectively with the
Borrower Pledge Agreement, the "Pledge Agreements");
WHEREAS, the Subsidiary Stock constitutes 100% of the issued and
outstanding capital stock of the Subsidiaries; and
WHEREAS, LaSalle is willing to make a loan to the Borrower in
accordance with the terms, subject to the conditions and in reliance upon the
representations, warranties and covenants set forth herein and in the other
documents and instruments entered into or delivered in connection with or
relating to the loan contemplated in this Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements hereinafter set forth, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
<PAGE> 2
AGREEMENT:
1. Commitment of LaSalle.
LaSalle agrees to extend a loan (the "Loan") to the Borrower in the
principal amount of TWENTY FIVE MILLION, DOLLARS ($25,000,000), evidenced by a
promissory note (the "Note") and secured by the Pledge Agreements, in
accordance with terms and subject to the conditions set forth in this
Agreement, the Note and the Pledge Agreements.
2. Conditions of Borrowing.
Notwithstanding any other provision of this Agreement, LaSalle shall
not be required to extend the Loan:
(a) if, since the date of this Agreement and up to the
agreed upon date of the Loan, there has occurred, in LaSalle's sole and
complete discretion, a material adverse change in the financial condition or
affairs of the Borrower, any Holding Company or any Subsidiary;
(b) if any Default (as such term is defined below) has
occurred or any event which, with the giving of notice or lapse of time, or
both, would constitute such a Default;
(c) if any litigation or governmental proceeding has been
instituted or threatened against the Borrower, any Holding Company, any
Subsidiary or any of their respective officers or shareholders which, in the
sole discretion of LaSalle, could materially adversely affect the financial
condition or operations of the Borrower or such Holding Company or Subsidiary;
(d) if all necessary or appropriate actions and
proceedings shall not have been taken in connection with, or relating to the
transactions contemplated hereby and all documents incident thereto shall not
have been completed and tendered for delivery, in form and substance
satisfactory to LaSalle, including, but not limited to, LaSalle's failure to
have received evidence that: (i) the Borrower has received all necessary
regulatory approvals to acquire the Holding Company Stock; and (ii) the
Borrower has provided such notices to all appropriate federal banking agencies
as to satisfy the requirements of 12 U.S.C. Section 1817(j)(9)(E);
(e) if the Borrower shall not have tendered for delivery
the Note and the Borrower Pledge Agreement, together with all of the Pledged
Security (as such term is defined in the Borrower Pledge Agreement) all in form
and substance satisfactcry to LaSalle;
(f) if the Holding Companies shall not have tendered for
delivery the Holding Company Pledge Agreement, together with all of the
Pledged Security (as such term is defined in the Holding Company Pledge
Agreement) in form and substance satisfactory to LaSalle;
(g) if the Borrower shall not have tendered for delivery
a legal opinion from the Borrower's counsel in form and substance satisfactory
to LaSalle and LaSalle's legal counsel;
<PAGE> 3
or
(h) if LaSalle shall not have received, in form and
substance satisfactory to LaSalle, all certificates, affidavits, schedules,
resolutions, opinions, notes and other documents which are provided for
hereunder, or which it may reasonably request.
3. Note Evidencing Borrowing.
The Loan shall be evidenced by the Note executed by the Borrower in
the Principal amount of TWENTY FIVE MILLION DOLLARS ($25,000,000) , which Note
shall be in the form set forth as Exhibit A hereto.
(a) Interest on amounts outstanding under the Note shall
be payable quarterly, in arrears, commencing on December 1, 1996 and continuing
on the first day of each March, June, September and December thereafter. A
final payment of all outstanding amounts due under the Note; including, but not
limited to Principal, interest and any amounts owing under Subsection 10(m) of
this Agreement, if not payable earlier, shall be due and payable on September
1, 1997. The amounts outstanding under the Note from time to time shall bear
interest calculated on the actual number of days elapsed on the basis of a 360
day year, at a rate equal, at the Borrower's option, to either (a) the London
Inter- Bank Offered Rate ("LIBOR") plus 150 basis points, or (b) the Prime Rate
(whichever rate is so selected, the "Interest Rate").
For purposes of this Agreement, the term "Prime Rate" shall mean the
floating prime rate in effect from time to time as set by LaSalle, and referred
to by LaSalle as its Prime Rate. The Borrower acknowledges that the Prime Rate
is not necessarily LaSalle's lowest or most favorable rate of interest at any
one time. The effective date of any change in the Prime Rate shall for
purposes hereof be the date the rate change is publicly announced by LaSalle.
For purposes of this Agreement, "LIBOR" shall mean the per annum rate
of interest at which U.S. dollar deposits in an amount comparable to the amount
of the relevant LIBOR Loan and for a period equal to the relevant "Interest
Period" (hereinafter defined) are offered generally to LaSalle (rounded upward
if necessary, to the nearest 1/16 of 1.00%) in the London Interbank Eurodollar
market at 11:00am (London time) two banking days prior to the commencement of
each Interest Period, such rate to remain fixed for such interest period.
"Interest Period" shall mean successive one, two, three or six month periods as
selected from time to time by the Borrower by notice given to LaSalle not less
than three banking days prior to the first day of each respective Interest
Period; provided that: (i) each such one, two, three or six month period
occurring after such initial period shall commence on the day on which the next
preceding period expires; (ii) the final Interest Period shall be such that its
expiration occurs on or before the stated maturity date hereof; and (iii) if
for any reason the Borrower shall fail to select timely a period, then it shall
be deemed to have selected a one month period. Interest shall be payable on the
last banking day of each interest Period, commencing on the first such date to
occur after the date hereof, at maturity, after maturity on demand, and on the
date of any payment hereon on the amount paid. The Borrower hereby further
promises to pay to the order of LaSalle, on demand, interest on the unpaid
principal amount hereof after maturity (whether by acceleration or
<PAGE> 4
otherwise) at a rate of two per cent per annum in excess of the rate in effect
at the time of maturity.
LaSalle's determination of LIBOR as provided above shall be
conclusive, absent manifest error. Furthermore, if LaSalle determines, in good
faith (which determination shall be conclusive, absent manifest error), prior
to the commencement of any Interest Period that (a) U.S. dollar deposits of
sufficient amount and maturity for funding any LIBOR Loan are not available to
LaSalle in the London Interbank Eurodollar market in the ordinary course of
business, or (b) by reason of circumstances affecting the London Interbank
Eurodollar market, adequate and fair means do not exist for ascertaining the
rate of interest to be applicable to the relevant LIBOR Loan, LaSalle shall
promptly notify the Borrower and such LIBOR Loan shall be immediately due and
payable on the last banking day of the then existing Interest Period, without
further demand, presentment, protest or notice of any kind, all of which are
hereby waived by the Borrower.
If, after the date hereof, the introduction of, or any change in any
applicable law, treaty, rule, regulation or guideline or in the interpretation
or administration thereof by any governmental authority or any central bank or
other fiscal, monetary or other authority having jurisdiction over LaSalle or
its lending office (a "Regulatory Change"), shall, in the opinion of counsel to
LaSalle, makes it unlawful for LaSalle to make or maintain any LIBOR Loan
evidenced hereby, then LaSalle shall promptly notify the Borrower and such
LIBOR Loan shall be immediately due and payable on the last banking day of the
then existing Interest Period or on such earlier date as required by law, all
without further demand, presentment, protest or notice of any kind, all of
which are hereby waived by the Borrower.
If, for any reason, any LIBOR Loan is paid prior to the last banking
day of its then current Interest Period, the Borrower agrees to indemnify
LaSalle against any loss (including any loss on redeployment of the funds
repaid), cost or expense incurred by LaSalle as a result of such prepayment.
If any Regulatory Change (whether or not having force of law) shall
(a) impose, modify or deem applicable any assessment, reserve, special deposit
or similar requirement against assets held by, or deposits in or for the
account of or loans by, or any other acquisition of funds or disbursements by,
LaSalle; (b) subject LaSalle or any LIBOR Loan to any tax, duty, charge, stamp
tax or fee or change the basis of taxation of payments to LaSalle of principal
or interest due from the Borrower to LaSalle hereunder (other than a change in
the taxation of the overall net income of LaSalle) ; or (c) impose on LaSalle
any other condition regarding such LIBOR Loan or LaSalle's funding thereof, and
LaSalle shall determine (which determination shall be conclusive, absent
manifest error) that the result of the foregoing is to increase the cost to
LaSalle of making or maintaining such LIBOR Loan or to reduce the amount of
principal or interest received by LaSalle hereunder, then the Borrower shall
pay to LaSalle, on demand, such additional amounts as LaSalle shall, from time
to time, determine are sufficient to compensate and indemnify LaSalle for such
increased cost or reduced amount.
(b) Any amount of principal or interest on the Note which
is not paid when due, whether at stated maturity, by acceleration or otherwise
shall bear interest payable on
<PAGE> 5
demand at an interest rate equal at all times to two percent (2%) above the
Interest Rate.
(c) Each Loan shall be made available to the Borrower
upon its written or verbal request, from any person whose authority to so act
has not been revoked by the Borrower in writing previously received by LaSalle.
Such request must be received by no later than 11:00 a.m. Chicago, Illinois
time, on the day it is to be funded. The Proceeds of each Revolving Loan shall
be made available at the office of LaSalle by credit to the account of the
Borrower or by other means requested by the Borrower and acceptable to LaSalle.
LaSalle is authorized to rely on the telephonic, telecopy or telegraphic loan
requests which LaSalle believes in its good faith judgment to emanate from a
properly authorized representative of the Borrower, whether or not that is in
fact the case. The Borrower does hereby irrevocably confirm, ratify and approve
all such advances by LaSalle and does hereby indemnify LaSalle against losses
and expenses (including court costs, attorneys' and Paralegals fees) and shall
hold LaSalle harmless with respect thereto.
(d) If any payment to be made by the Borrower hereunder
shall become due on a Saturday, Sunday or bank holiday under the laws of the
State of Illinois, such payment shall be made on the next succeeding business
day and such extension of time shall be included in computing any interest in
respect of such payment.
4. Principal Prepayments.
Prepayments of Prime Rate Loans are permitted at any time, and shall
be applied to the next succeeding principal payment due. Any prepayments of
LIBOR Loans shall be subject to the terms of Section 3(a), above.
5. Representations and Warranties.
To induce LaSalle to make the Loan provided for herein, the Borrower
represents and warrants as follows:
(a) The Borrower: (i) is a corporation duly organized and
validly existing and in good standing under the laws of the State of Illinois;
(ii) is duly qualified as a foreign corporation and is in good standing in all
states in which it is doing business except where the failure to so qualify
would not have a material adverse effect on the Borrower or its business; and
(iii) has all requisite power and authority, corporate or otherwise, to own,
operate and lease its property and to carry on its business as now being
conducted. Each Holding Company is an Illinois corporation (except for Lake
Forest, which is a Delaware corporation) , and has all requisite power and
authority, corporate or otherwise, to own, operate and lease its property and
to carry on its business as now being conducted. Each Subsidiary is an
Illinois banking corporation, and has all requisite Dower a-id authority,
corporate or otherwise, to own, operate and lease its property and to carry on
its business as now being conducted. The Borrower, the Holding Companies and
the Subsidiaries have made payment of all franchise and similar taxes in the
State of Illinois and in all of the respective jurisdictions in which they are
incorporated or qualified, insofar as such taxes are due and payable at the
date of this Agreement, except for any
<PAGE> 6
such taxes the validity of which is being contested in good faith and for which
proper reserves have been set aside on the books of the Borrower or such
Holding Company or Subsidiary, as the case may be.
(b) The Borrower is the owner of 100%; of the issued and
outstanding capital stock of the Holding Companies.
(c) The Holding Company Stock has been duly authorized,
legally and validly issued, fully paid and nonassessable, and is owned by the
Borrower free and clear of all pledges, liens, security interests, charges or
encumbrances, except, upon consummation of the transactions contemplated
herein, for the security interest granted by the Borrower to LaSalle. There
are, as of the date hereof, no outstanding options, rights or warrants
obligating the Borrower to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock of any Holding
Company or obligating the Borrower to grant, extend or enter into any such
agreement or commitment, except for such agreements or commandments existing as
of the date of this Agreement and disclosed to LaSalle.
(d) The Holding Companies are the owners of 100% of the
issued and outstanding capital stock of the Subsidiaries.
(e) The Subsidiary Stock has been duly authorized,
legally and validly issued, fully paid and nonassessable, and is owned by the
Holding Companies free and clear of all pledges, liens, security interests,
charges or encumbrances, except, upon consummation of the transactions
contemplated herein, for the security interest granted by the Holding Companies
to LaSalle. There are, as of the date hereof, no outstanding options, rights
or warrants obligating any Holding Company to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of the Capital stock of any
Subsidiary or obligating any Holding Company to grant, extend or enter into any
such agreement or commitment, except for such agreements or commitments
existing as of the date of this Agreement and disclosed to LaSalle.
(f) The financial statements of:
(i) the Borrower, all of which have heretofore
been furnished to LaSalle, have been prepared in accordance with generally
accepted accounting principles consistently applied ("GAAP") and maintained by
the Borrower throughout the periods involved, and fairly present the financial
condition of the Borrower individually and on a consolidated basis at such
dates specified therein and the results of its operations for the periods then
ended; and
(ii) each Holding Company and Subsidiary, all of
which have heretofore been furnished to LaSalle, to the best knowledge of the
Borrower have been prepared in accordance with GAAP and maintained by such
Holding Company or Subsidiary throughout the periods involved, and fairly
present the financial condition of such Holding Company or Subsidiary at such
dates specified therein and the results of its operations for the periods then
entered.
<PAGE> 7
(g) To the best knowledge of the Borrower, since the
latest date of the financial statements referred to in Section 5(f) above,
there have been no material changes in the assets, liabilities, or condition,
financial or otherwise, of the Borrower, any Holding Company or any subsidiary
other than changes arising from transactions in the ordinary course of
business, and no such changes have been materially adverse, whether in the
ordinary course of business or otherwise. To the best knowledge of the
Borrower, neither the business nor the properties of the Borrower , any Holding
Company or Subsidiary have been materially and or adversely affected in any
way, including, without limitation, as a result of any fire, explosion,
accident, strike, lockout, labor dispute, flood, drought, embargo, imposition
of governmental restrictions, confiscation by a governmental agency or acts of
God.
(h) There are no actions, suits, proceedings or written
agreements pending, nor to the best of the knowledge of the Borrower threatened
or proposed, against the Borrower or, to the best knowledge of the Borrower,
any Holding Company or Subsidiary, at law or in equity or before or by any
federal, state, municipal or other governmental department, commission, board
or other administrative agency, domestic or foreign, which are of a material
nature. Neither of the Borrower nor, to the best knowledge of the Borrower,
any Holding Company or Subsidiary is in default with respect to any order,
writ, injunction or decree of, or any written agreement with, any court,
commission, board or agency, domestic or foreign.
(i) All tax returns and reports of the Borrower and, to
the best knowledge of the Borrower, each Holding Company and Subsidiary,
required by law to be filed have been duly filed, and all taxes, assessments,
fees and other governmental charges upon the Borrower and the Holding Companies
and Subsidiaries or upon any of their properties or assets which are due and
payable have been paid, and the Borrower knows of no additional assessment of a
material nature against the Borrower, the Holding Companies or the Subsidiaries
for taxes, or, except as disclosed on the final statements referred to in
Section 5(f) above, of any basis for any such additional assessment.
(j) The Borrower's primary business is that of a
financial holding company. All necessary regulatory approvals have been
obtained for the Borrower to conduct its business.
(k) The deposit accounts of the Subsidiaries are insured
by the Federal Deposit Insurance Corporation ("FDIC").
(l) None of the Pledged Security constitutes margin
stock, as defined in Regulation U of the Board of Governors of the Federal
Reserve System ("FRS").
The foregoing representations and warranties shall survive the making
of this Agreement, and execution and delivery of the Note and the Pledge
Agreements, and shall be deemed to be continuing representations and warranties
until such time as the Borrower has satisfied all of its obligations to
LaSalle; including, but not limited to the obligation to pay in full all
principal, interest and other amounts in accordance with the terms of this
Agreement, the Note and the Pledge Agreements.
<PAGE> 8
6. Negative Covenants
The Borrower agrees that until the Borrower satisfies all of its
obligations to LaSalle, including, but not limited to its obligations to pay in
full all principal, interest and other amounts owing in accordance with the
terms of this Agreement, the Note and the Pledge Agreements, the Borrower shall
not, nor shall the Borrower cause, Permit or allow any, Holding Company or
Subsidiary to:
(a) create, assume, incur, have outstanding, or in any
manner become liable in respect of any indebtedness for borrowed money, except
in the case of Borrower, secured indebtedness under Section 6 (b)(vi) and, in
the case of the Subsidiaries, indebtedness incurred in the ordinary course of
the business of banking and in accordance with applicable laws and regulations
and safe and sound banking practices. For purposes of this Agreement , the
phrase "indebtedness" shall mean and include:
(i) all items arising from the borrowing of
money, which according to generally accepted accounting principles now in
effect, would be included in determining total liabilities as shown on the
balance sheet;
(ii) all indebtedness secured by any lien in
property owned by the Borrower whether or not such indebtedness shall have been
assumed;
(iii) all guarantees and similar contingent
liabilities in respect to indebtedness of others; and
(iv) all other interest-bearing obligations
evidencing indebtedness in others;
(b) create, assume, incur, suffer or permit to exist any
mortgage, pledge, deed of trust, encumbrance (including the lien or retained
security title of a conditional vendor.), security interest, assignment, lien
or charge of any kind or character upon or with respect to property whether
owned at the date hereof or hereafter acquired by the Borrower or a Subsidiary,
or assign or otherwise convey any right to receive income, except:
(i) liens for taxes, assessments or other
Governmental charges for the then current year or which are not yet due or
delinquent;
(ii) liens for taxes, assessments or other
governmental charges already due, but the validity of which is being contested
in good faith in such a manner as not to make the property forfeitable;
(iii) liens and charges incidental to current
operations which are not due or delinquent;
(iv) liens for workmen's compensation awards not
due or delinquent;
<PAGE> 9
(v) pledges or deposits to secure obligations
under workmen's compensation laws or similar legislation;
(vi) purchase money mortgages or other liens on
real property including those incurred for the construction of a banking
facility, and bank furniture and fixtures acquired or held in the ordinary
course of business to secure the purchase price of such property or to secure
the indebtedness incurred solely for the purpose of financing the acquisition,
construction or improvement of any such property to be subject: to such
mortgages or other 'liens, or mortgages or other liens existing on any such
property at the time of acquisition, or extensions, renewals, or replacements
of any of the foregoing for the same or a lesser amount; provided that no such
mortgage or other !liens shall extend to or cover any property other than the
property being acquired, constructed or improved, and no such extension,
renewal or replacement shall extend to or cover any property not theretofore
subject to the mortgage or lien being extended, renewed or replaced, and
provided further that no such mortgage or lien shall exceed 75% of the price of
acquisition, construction or improvement at the time of acquisition,
construction or improvement; and provided further that the aggregate principal
amount of consolidated indebtedness at any one time outstanding and secured by
mortgages, liens, conditional sale agreements and other security interests
permitted by this clause (vi) shall not exceed 10% of the consolidated capital
of the Borrower or a Subsidiary, as the case may be;
(vii) liens existing on the date hereof as shown on
the financial statements; and
(viii) in the case of a Subsidiary, liens incurred
in the ordinary course of the business of banking and in accordance with
applicable laws and regulations and safe and sound banking practices;
(c) dispose by sale, assignment, lease or otherwise
property or assets now owned or hereinafter acquired, outside the ordinary
course of business in excess of 10% of its consolidated assets in any fiscal
year;
(d) merge into or consolidate with or into any other
person, firm or corporation, except for such corporations or banks as set forth
in Exhibit B hereto;
(e) make any loans or advances whether secured or
unsecured to any person, firm or corporation, other than loans or advances made
by a Subsidiary in the ordinary course of its banking business and in
accordance with applicable laws and regulations and safe and sound banking
practices or such loans and advances made by a Subsidiary to First Premium, a
subsidiary of Crabtree Capital Corporation;
(f) engage in any business or activity not permitted by
all applicable laws and regulations, including without limitation, the Bank
Holding Company Act of 1954, the Illinois Banking Act, the Federal Deposit
Insurance Act and any regulations promulgated thereunder;
(g) make any loan or advance secured by the capital stock
of another bank or depository institution (except for loans made in the
ordinary course of business) , or acquire the
<PAGE> 10
capital stock, assets or obligations of or any interest in another bank or
depository institution, without prior written approval of LaSalle, except or
such banks or deposit institutions as provided in Exhibit B hereto;
(h) directly or indirectly create, assume, incur, suffer
or permit to exist any pledge, encumbrance, security interest, assignment,
lien or charge of any kind or character on the Holding Company Stock or any
other capital stock owned by the Borrower, nor permit the Holding Companies, to
directly or indirectly create, assume, incur, suffer or permit to exist any
pledge, encumbrance, security interest, assignment, lien or charge of any kind
or character on the Subsidiary Stock;
(i) cause or allow the percent of Holding Company Stock
to diminish as a percentage of the outstanding capital stock of the Holding
Companies, nor permit the Holding Companies to cause or allow the percent of
Subsidiary Stock to diminish as a percentage of the outstanding capital stock
of the Subsidiaries;
(j) sell, transfer, issue, re-issue, exchange or grant
any option with respect to the Holding Company Stock, nor permit the Holding
Companies to sell, transfer, issue, reissue, exchange or grant any option with
respect to the Subsidiary Stock, except pursuant to such agreements or
commitments therefor existing as of the date of this Agreement and disclosed to
LaSalle;
(k) redeem any of its capital stock, declare a stock
dividend or split or otherwise change the capital structure of Borrower, any
Holding Company or any Subsidiary without prior written approval of the Bank,
if such redemption, dividend, split or other action would result in any change
in the identity of the individuals or entities previously in control of the
Borrower, any Holding Company or any Subsidiary or grant a security interest in
any ownership interest of any individual or entity, directly or indirectly
controlling the Borrower, any Holding Company or any Subsidiary, which could
result in a change in the identity of the individuals or entities previously in
control of the Borrower, any Holding Company or any Subsidiary. For the purpose
hereof, the terms "control" or "controlling" shall mean the possession of the
power to direct, or cause the direction of, the management and policies of the
Borrower, a Holding Company or a Subsidiary, as applicable, by contract or
voting of securities;
(l) breach or fail to perform or observe any of the terms and
conditions of the Note, the Pledge Agreements or any other document or
agreement entered into or delivered in connection with, or relating to, the
Loan;
(m) engage in any unsafe or unsound banking practices; or
(n) violate any law or regulation, or any condition
imposed by or undertaking provided to the FRS, the FDIC or the Illinois
Commissioner of Banks and Trust Companies in connection with the Borrower's
ownership of the Holding Company Stock or the ownership by the Holding
Companies of the Subsidiary Stock.
<PAGE> 11
7. Affirmative Covenants.
The Borrower agrees that until the Borrower satisfies all of its
obligations to LaSalle; including, but not limited to its obligations to pay in
full all principal, interest and other amounts in accordance with the terms of
the Agreement, the Note and the Pledge Agreements, it shall:
(a) furnish and deliver to LaSalle:
(i) as soon as practicable, and in no event later
than forty-five (45) days after the end of each of the first three calendar
quarters of the Borrower and each Holding Company and Subsidiary, a copy of:
(1) the balance sheet, profit and loss statement, surplus statement and any
supporting schedules prepared in accordance with GAAP and signed by the
presidents and chief financial officers of the Borrower, the Holding Companies
and the Subsidiaries; and (2) all financial statements, including, but not
limited to, all call reports, filed with any state or federal bank regulatory
authority;
(ii) as soon as practicable, and in no event later
than one hundred twenty (120) days after the end of each calendar year, a copy
of: (1) the consolidated balance sheets as of -the end of such year and the
consolidated profit and loss and surplus statements for the Borrower, the
Holding Companies and each Subsidiary for such year, audited by independent
certified public accountants satisfactory to LaSalle and accompanied by an
unqualified opinion; and (2) all financial statements and reports, including,
but not limited to call reports and annual reports filed annually with any
state or federal regulatory authority;
(iii) as soon as practicable, and in no event later
than forty-five (45) days after the end of each calendar quarter, copies of the
then current loan/asset watch list, the substandard loan/asset list, the
nonperforming loan/asset list and other real estate owned list of the
Subsidiaries;
(iv) immediately after receiving knowledge
thereof, notice in writing of all charges, assessment, actions, suits and
proceedings that are proposed or initiated by, or brought before, any court or
governmental department, commission, board or other administrative agency, in
connection with the Borrower, any Holding Company or any Subsidiary (other than
litigation in the ordinary course of business not involving the FRS, the FDIC
or the Illinois Commissioner of Banks and Trust Companies, which, if adversely
decided, would not have a material effect on the financial condition or
operations of the Borrower or such Holding Company or Subsidiary); and
(v) promptly after the occurrence thereof, notice
of any other matter which has resulted in a materially adverse change in the
financial condition or operations of the Borrower, any Holding Company or any
Subsidiary;
(b) contemporaneously with the furnishing of a copy of
each annual report and of each quarterly statement provided Pursuant to Section
7(a)(I) and (ii) above, deliver to LaSalle, a certificate signed by the
President and the Treasurer of the Borrower, containing a
<PAGE> 12
computation of the then current financial ratios specified in Subsections 7(d)
through (h) of this Agreement, and stating that no Default or unmatured Default
has occurred cr is continuing, or, if such event exists, describing such event
and the steps, if any, that are being taken to cure it, and the time within
,which such cure will occur;
(c) maintain such capital as is necessary to cause the
Borrower to have adequate capital in accordance with the regulations of the FRS
and any requirements or conditions that the FRS has or may impose on the
Borrower;
(d) maintain such capital as is necessary to cause each
Subsidiary to be classified as a "well capitalized" institution in accordance
with the regulations of the FDIC, currently measured on the basis of
information filed by Borrower in its quarterly Consolidated Report of Income
and Condition (the "Call Report"l) as follows:
(i) Total Capital to Risk Weighted Assets of not
less than 10%;
(ii) Tier I Capital to Risk-Weighted Assets of not
less than 6%; and
(iii) Tier 1 Capital to average Total Assets of not
less than 5% (For the purposes of this subsection (d)(iii), the average Total
Assets shall be determined on the basis of information contained in the
preceding four (4) Call Reports);
(e) cause the Borrower, on a consolidated basis, to
maintain tangible equity capital of no less than $37,000,000. For the purposes
of this Section 7(e), "tangible equity capital", shall mean the sum of the
common stock, surplus and retained earning accounts of the Borrower, reduced by
the amount of any goodwill;
(f) cause the ratio of nonperforming loans to the primary
capital of the Subsidiaries, on a consolidated basis, to be not more than
twenty percent (20%) at all times. For purposes of this Section 7(f), "primary
capital", shall mean the sum of he common stock, surplus and retained earning
accounts plus the reserve for loan and lease losses, and "non-performing loans"
shall mean the sum of all non-accrual loans and loans on which any payment is
ninety (90) or more days past. due;
(g) cause the ratios of the loan and lease loss reserve
to the total loans of the Subsidiaries, on a consolidated basis, to be not less
than one half of one percent (.50%) at all times;
(h) cause the Borrower's return on assets, determined on
the basis of information filed in the Borrower's Call Report to be at least
zero (0) during 1997 and one quarter of one percent (.25%) during 1998;
(i) promptly pay and discharge all taxes, assessments and
other governmental charges imposed upon the Borrower, the Holding Companies or
the Subsidiaries or upon the income, profits, or property of the Borrower, the
Holding Companies or the Subsidiaries and all
<PAGE> 13
claims for labor, material or supplies which, if unpaid, may by law become a
lien or charge upon the property of the Borrower, the Holding Companies or the
Subsidiaries. Neither the Borrower, the Holding Companies nor the Subsidiaries
shall he required to pay any such tax, assessment, charge or claim, so long as
the validity thereof shall be contested in good faith by appropriate
Proceedings, and reserves therefor shall be maintained on the book's of the
Borrower or any such Holding Company or Subsidiary as are deemed reasonably
adequate by LaSalle;
(j) maintain bonds and insurance and cause each Holding
Company or Subsidiary to maintain bonds and insurance with responsible and
reputable insurance companies or associations in such amounts and covering such
risk as is usually carried by owners of similar businesses and Properties in
the same general area in which the Borrower or such Holding Company or
Subsidiary respectively operate, and such additional bonds and insurance as may
be reasonably required by LaSalle;
(k) permit and cause the Holding Companies and
Subsidiaries to permit LaSalle, through its employees, attorneys, accountants
or other agents, to inspect any of the properties, corporate books and
financial books and records of the Borrower, the Holding Companies and the
Subsidiaries at such times and as often as LaSalle reasonably may request; and
(l) promptly provide and cause the Holding Companies and
the Subsidiaries promptly to provide LaSalle with such other information
concerning the business, operations, financial condition and regulatory status
of the Borrower, the Holding companies and the Subsidiaries as LaSalle may from
time to time reasonably request.
8. Collateral.
Pursuant to the Borrower Pledge Agreement, the Borrower has
concurrently herewith assigned, transferred, pledged and delivered to LaSalle
as collateral for all of the Borrower's obligations from time to time to
LaSalle the Holding Company Stock and any other Pledged Security (as defined in
the Borrower Pledge Agreement) whether not or hereafter pledged. Pursuant to
the Holding Company Pledge Agreement, the Holding Companies have concurrently
herewith assigned, transferred, pledged and delivered to LaSalle as collateral
for all of the Borrower's obligations from time to time the Subsidiary Stock
and any other Pledged Security (as defined in the Holding Company Pledge
Agreement) whether now or hereafter pledged.
9. Events of Default; Default; Rights Upon Default.
The happening or occurrence of any of the following events or acts
shall each constitute a default hereunder (each, a "Default") , and any such
default shall also constitute a Default under the Note, the Pledge Agreements
and any other loan document, without right to notice or time to cure in favor
of the Borrower except as indicated below:
(a) if the Borrower fails to make any payment, as
provided for herein;
<PAGE> 14
(b) if there continues to exist any breach under any
obligation of any other documents executed pursuant to this Agreement
including, without limitation, the Note and the Pledge Agreements and such
breach remains uncured beyond the applicable time period, if any, specifically
provided therefor;
(c) if any representation or warranty made in this
Agreement shall be false when made or be false at any time during the term of
this Agreement or any extension hereof, or if the Borrower fails to perform or
observe any covenant or agreement contained in this agreement within thirty
(30) days after notice thereof by LaSalle;
(d) if the Borrower fails to perform or observe any
covenant or agreement contained in any other agreement between the Borrower or
any Holding Company or Subsidiary and LaSalle, or if any condition contained in
any agreement between the Borrower or any Holding Company or Subsidiary and
LaSalle is not fulfilled and such failure remains uncured beyond the cure
period, if any, specifically provided therefor;
(e) if the Borrower shall continue to fail to perform and
observe, or cause or permit any Holding Company or Subsidiary to fail to
perform and observe any covenants under this Agreement, without limitation, all
affirmative and negative covenants set forth in Sections 6 and 7 of this
Agreement for fifteen (15) days after notice thereof by LaSalle;
(f) if the FRS, the FDIC, the Illinois Commissioner of
Banks and Trust Companies or other governmental agency charged with the
regulation of bank holding companies or depository institutions: (i) issues to
the Borrower, any Holding Company or Subsidiary, or initiates any action, suit
or proceeding to obtain against, impose on or require from the Borrower, any
Holding Company or any Subsidiary, a cease and desist order or similar
regulatory order, the assessment of Civil Monetary Penalties, articles of
agreement, a memorandum of understanding, a capital directive, a capital
restoration plan, restrictions that prevent or as a practical matter impair the
payment of dividends by any Holding Company or Subsidiary or the payments of
any debt by the Borrower, restrictions that make the payment of dividends by
any Holding Company or Subsidiary or the payment of debt by the Borrower
subject to prior regulatory approval, a notice or finding under Section 51 or
Section 52 of the Illinois Banking Act or Section 8(a) of the Federal Deposit
Insurance Act, or any similar enforcement action, measure or proceeding; or
(ii) issues to any officer or director of the Borrower, any Holding Company or
any Subsidiary, or initiates any action, suit or proceeding to obtain against,
impose on or require from any such officer or director, a cease and desist
order or similar regulatory order, a removal order, a suspension order, or the
assessment of civil monetary penalties;
(g) if any Subsidiary is notified that it is considered
an institution in "troubled condition" within the meaning of 12 U.S.C. Section
1831i and the regulations promulgated thereunder, or if a conservator or
receiver is appointed for any Subsidiary;
(h) if the Borrower, any Holding Company or any
Subsidiary (i) becomes insolvent or is unable to pay its debts as they mature;
(ii) makes an assignment for the benefit of creditors or admits in writing its
inability to pay its debts as they mature; (iii) suspends
<PAGE> 15
transaction of its usual business; or (iv) if a trustee of any substantial part
of the assets of the Borrower, any Holding Company or any Subsidiary is applied
for or appointed, and if appointed in a proceeding brought against the
Borrower, the Borrower by any action or failure to act indicates its approval
of, consent to, or acquiescence in such appointment, or within thirty (30) days
such appointment is not vacated or stayed on appeal or otherwise, or shall not
otherwise have ceased to continue in effect;
(i) if any proceedings involving the Borrower, any
Holding Company or any Subsidiary are commenced by or against the Borrower, any
Holding Company or any Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law
or statute of the federal government or any state government and if such
proceedings are instituted against the Borrower, the Borrower by any action or
failure to act indicates its approval of, consent to or acquiescence therein,
or an order shall be entered approving the petition in such proceedings and
within thirty (30) days after the entry thereof such order is not vacated or
stayed on appeal or otherwise, or shall not otherwise have ceased to continue
in effect; or
(j) if the Borrower, any Holding Company or any
Subsidiary continues to be in default in any payment of principal or interest
for any other obligation or in the performance of any other term, condition or
covenant contained in any agreement including, but not limited to, an agreement
in connection with the acquisition of capital equipment on a title retention or
net lease basis), under which any such obligation is created, the effect of
which default is to cause or permit the holder of such obligation to cause such
obligation to become due prior to its stated maturity.
Upon the occurrence of a Default, LaSalle shall have all rights and
remedies provided by applicable law and, without limiting the generality of the
foregoing, may, at its option, declare its commitments to be terminated and the
Note shall thereupon be and become forthwith, due and payable, without any
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower, anything contained herein, in the Note
or the Pledge Agreements to the contrary notwithstanding, and may, also
without limitation, appropriate and apply toward the payment of the Note any
indebtedness of LaSalle to the Borrower however created or arising, and may,
also without limitation exercise any and all rights in and to the Pledged
Security referred to in Section 8 above and in the Pledge Agreements. There
shall be no obligation to liquidate the Pledged Security nor any other
collateral pledged hereunder in any order or with any priority or to exercise
any remedy available to LaSalle in any order.
10. Miscellaneous.
(a) No -failure or delay on the part of LaSalle in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof. No single or partial exercise of any such right, power or remedy
shall preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law. Time is of the
essence in the performance of the covenants, agreements and obligations of the
Borrower, the Holding Companies and the
<PAGE> 16
Subsidiaries.
(b) This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements between LaSalle and the
Borrower with respect to the subject matter hereof. No amendment,
modification, termination or waiver of any provision of this Agreement, the
Pledge Agreements or the Note, or consent to any departure by the Borrower
therefrom, shall be effective unless in writing and signed by LaSalle, and then
such waiver or consent shall be effective only for the specific purpose for
which given. No notice to or demand on the Borrower in any case shall entitle
the Borrower to any other or further notice or demand in similar or other
circumstances.
(c) All notices, requests, demands and other
communications provided or hereunder shall be: (i) in writing, (ii) made in one
of the following manners, and (iii) shall be deemed given (A) if and when
personally delivered; (B) on the next business day if sent by nationally
recognized overflight courier addressed to the appropriate party as set forth
below; or (C) on the second business day after being deposited in United States
certified or registered mail, and addressed as follows:
If to Borrower: Wintrust Financial Corporation
727 Bank Lane
Lake Forest, Illinois 60645
Attention: Edward J. Wehmer
If to LaSalle: LaSalle National Bank
135 South LaSalle Street
Chicago, Illinois 60674
Attention: Jeffery J. Bowden
or, as to each party, at such other address as shall be designated by such
party in a written notice to each other party complying as to delivery with the
terms of this subsection.
(d) This Agreement may be executed in any number of
counterparts and by different Parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute but one and the same instrument.
(e) This Agreement shall become effective when it shall
have been executed by the Borrower and LaSalle and hereafter shall be binding
upon and inure to the benefit of the Borrower, LaSalle and their respective
successors and assigns; provided, that the Borrower shall not assign its rights
hereunder or any interest herein without the prior written consent of LaSalle.
(f) This Agreement and the Note shall be governed by the
internal laws of the State of Illinois, and for all purposes shall be construed
in accordance with the laws of said State without giving effect to the choice
of law provisions of such State.
(g) Any provision of this Agreement which is prohibited
or unenforceable in
<PAGE> 17
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or lack of enforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction. Wherever possible, each Provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law.
(h) All covenants, agreements, representations and
warranties made by the Borrower herein shall, notwithstanding any investigation
by or knowledge on the part of LaSalle, be deemed material and relied on by
LaSalle and shall survive the execution and delivery to LaSalle of this
Agreement and the Note.
(i) This Agreement shall govern the terms of any
extensions or renewals of the Note, subject to any additional terms and
conditions imposed by LaSalle in connection with any such extension or renewal.
(j) The Borrower hereby represents that the indebtedness
evidenced hereby constitutes a loan made by LaSalle to enable the Borrower to
carry on a commercial enterprise for the purpose of investment or profit; and
that such loan is a loan for business purposes under the intent and purview of
Ill. Rev. Stat. Ch. 17, Section 6404(c).
(k) LASALLE AND THE BORROWER, AFTER CONSULTING OR HAVING
HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE IRREVOCABLY THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY
LEGAL PROCEEDING BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT, THE NOTE, THE COLLATERAL, OR ANY OTHER AGREEMENT EXECUTED OR
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION WITH THIS AGREEMENT, OR ANY COURSE
OF CONDUCT OR COURSE OF DEALING IN WHICH LASALLE AND THE BORROWER ARE ADVERSE
PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LASALLE GRANTING ANY
FINANCIAL ACCOMMODATION TO THE BORROWER.
(l) INDUCE LASALLE TO MAKE THE LOAN, THE BORROWER
IRREVOCABLY AGREES THAT ALL ACTIONS ARISING DIRECTLY OR INDIRECTLY AS A
RESULT OR CONSEQUENCE OF THIS AGREEMENT, THE NOTE, THE PLEDGE AGREEMENTS OR ANY
OTHER AGREEMENT WITH LASALLE SHALL BE INSTITUTED AND LITIGATED ONLY IN COURTS
HAVING SITUS IN THE CITY OF CHICAGO, ILLINOIS. THE BORROWER HEREBY CONSENTS TO
THE EXCLUSIVE AND VENUE OF ANY STATE OR FEDERAL COURT HAVING ITS SITUS IN
CHICAGO, AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS. THE BORROWER
HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS MAY BE MADE BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, DIRECTED TO THE BORROWER AS SET FORTH HEREIN IN THE MANNER PROVIDED
BY APPLICABLE STATUTE, LAW, RULE OF COURT OR OTHERWISE.
<PAGE> 18
(m) The Borrower will pay all reasonable costs and
expenses (including, without limitation, reasonable attorneys' fees) in
connection with the preparation, negotiation, documentation, execution and
delivery of this Agreement; provided, that such costs and expenses shall not
exceed $2,500, and shall have all reasonable costs and expenses (including,
without limitation, reasonable attorneys, fees) for the administration,
amendment, modification, collection and enforcement of this Agreement, the
Note, the Pledge Agreements and the other instruments and documents to be
delivered hereunder. In addition, the Borrower shall pay, and save LaSalle
harmless from any liability for, any and all stamp and other taxes determined
to be payable in connection with the execution and delivery of this Agreement,
the borrowings hereunder, or the Note and the other instruments and documents
to be delivered hereunder, and agrees to save LaSalle harmless from and against
any and all liabilities with respect to or resulting from any delay in paying
or emitting to pay such taxes. The foregoing obligations shall survive any
termination of this Agreement, the Note or the Pledge Agreements. Any of the
foregoing amounts incurred by LaSalle and not paid by the Borrower upon demand
shall bear interest from the date incurred at the Interest Rate plus two
percent (2%) per annum and shall be deemed part of the indebtedness hereunder.
(n) Any accounting term not specifically defined herein
shall be construed in accordance with generally accepted accounting principles
and all financial data submitted pursuant to this Agreement shall be prepared
in accordance with such principles,
(o) LaSalle reserves the right to sell participations in
this Loan or otherwise assign, transfer or hypothecate all or any part of this
Loan.
(p) All covenants, agreements, warranties and
representations of the Borrower herein shall be deemed to have been made
jointly and severally by the Borrower, the Holding Companies and the
Subsidiaries.
(q) The Borrower agrees to do such further acts and
things and to execute and deliver to LaSalle such additional assignments,
agreements, powers and instruments as LaSalle may reasonably require or deem
advisable to carry into effect the purpose of this Agreement, the Note, the
Pledge Agreements or any agreement or instrument in connection herewith, or to
better assure and confirm unto the LaSalle its rights, powers and remedies
hereunder or under such other loan documents.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
WINTRUST FINANCIAL CORPORATION
By: /s/David A. Dykstra
------------------------------------
Its: Executive Vice President
-----------------------------------
<PAGE> 19
LASALLE NATIONAL BANK
By:______________________________________________
Its:______________________________________________
September 17, 1996
51567.1
<PAGE> 20
Exhibit A
REVOLVING NOTE
$25,000,000 Dated: September 1, 1996
FOR VALUE RECEIVED, WINTRUST FINANCIAL CORPORATION, an Illinois corporation
(the "Maker") promises to pay to the order of LASALLE NATIONAL BANK, a national
banking association (the "Bank") the lesser of: the principal sum of TWENTY
FIVE MILLION DOLLARS ($25,000,000) , or the aggregate unpaid principal amount
outstanding under the Loan Agreement dated September 1, 1996 (as amended from
time to time, the "Loan Agreement") between the Bank and the Maker at the
maturity or maturities and in the amount or amounts as stated on the records of
the Bank together with interest (computed on actual days elapsed on the basis
of a 360 day year) on any and all principal amounts outstanding hereunder from
time to time from the date hereof until maturity. Interest shall be parable at
the rates of interest and the times set forth in the Loan Agreement. In no
event shall any principal amount have a maturity later than September 1, 1997.
This Note shall be available for direct advances.
Principal and interest shall be paid to the Bank at its office at 135
South LaSalle Street, Chicago, Illinois 60674, or at such other place as the
holder of this Note may designate in writing to the Maker. This Note may be
prepaid in whole or in part as provided for in the Loan Agreement.
This Note evidences indebtedness incurred under the Loan Agreement,
to which reference is hereby made for a statement of the terms and conditions
under which the due date of the Note or any payment thereon may be accelerated.
The holder of this Note is entitled to all of the benefits provided for in the
Loan Agreement.
The Maker agrees that in action or proceeding instituted to collect
or enforce collection of this Note, the amount on the Bank's records shall be
conclusive and binding evidence, absent demonstrable error, of the unpaid
principal balance of this Note.
WINTRUST FINANCIAL CORPORATION
By: /s/ David A. Dykstra
----------------------------------
Its: Executive Vice President
---------------------------------
September 17, 1996
51567.3
<PAGE> 21
Exhibit B
The acquisition of Wolflhoya Investments, Inc.
<PAGE> 22
REVOLVING NOTE
$25,000,000 Dated: September 1, 1996
FOR VALUE RECEIVED, WINTRUST FINANCIAL CORPORATION, an Illinois
corporation (the "Maker") promises to pay to the order of LASALLE NATIONAL
BANK, a national banking association (the "Bank") the lesser of: the principal
sum of TWENTY FIVE MILLION DOLLARS ($25,000,000) , or the aggregate unpaid
principal amount outstanding under the Loan Agreement dated September 1, 1996
(as amended from time to time, the "Loan Agreement") between the Bank and the
Maker at the maturity or maturities and in the amount or amounts as stated on
the records of the Bank together with interest (computed on actual days elapsed
on the basis of a 360 day year) on any and all principal amounts outstanding
hereunder from time to time from the date hereof until maturity. Interest
shall be payable at the rates of interest and the times set forth in the Loan
Agreement. In no event shall any principal amount have a maturity later than
September. 1, 1997.
This Note shall be available for direct advances.
Principal and interest shall be paid to the Bank at its office at 135
South LaSalle Street, Chicago, Illinois 60674, or at such other place as the
holder of this Note may designate in writing to the Maker. This Note may be
prepaid in whole or in part as provided for in the Loan Agreement.
This Note evidences indebtedness incurred under the Loan Agreement, to
which reference is hereby made for a statement of the terms and conditions
under which the due date of the Note or any payment thereon may be accelerated.
The holder of this Note is entitled to all of the benefits provided for in the
Loan Agreement.
The Maker agrees that in action or proceeding instituted to collect or
enforce collection of this Note, the amount on the records shall be conclusive
and binding evidence, absent Bank's demonstrable error, of the unpaid principal
balance of this Note.
WINTRUST FINANCIAL CORPORATION
By: /s/ David A. Dykstra
--------------------------------
Its: Executive Vice President
-------------------------------
<PAGE> 23
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT (the "Pledge Agreement") dated as
of September 1, 1996, is made by WINTRUST FINANCIAL CORPORATION, an Illinois
corporation (the "Pledgor") , whose address is 727 Bank Lane, Lake Forest,
Illinois 60045, for the benefit of LASALLE NATIONAL BANK, a national banking
association (the "Bank") whose address is 135 South LaSalle Street, Chicago,
Illinois 60674.
RECITALS:
WHEREAS, the Pledgor is the owner of the capital stock of each
subsidiary listed on Exhibit A hereto (each is referred to herein as a
"Subsidiary" and collectively as the "Subsidiaries");
WHEREAS, the capital stock of the Subsidiaries owned by the Pledgor
constitutes 100% of the issued and outstanding capital stock of the
Subsidiaries;
WHEREAS, the Pledgor desires to borrow from the Bank the sum of TWENTY
FIVE MILLION DOLLARS ($25,000,000);
WHEREAS, the Bank is willing to lend to the Pledgor TWENTY FIVE
MILLION DOLLARS ($25,000,000) in accordance with the terms, subject to the
conditions and in reliance on the representations, warranties and covenants set
forth in the Loan Agreement dated the date hereof between the Pledgor and the
Bank (the "Loan Agreement") and in all of the other documents and instruments
entered into or delivered in connection with or relating to the loan
contemplated in the Loan Agreement; and
WHEREAS, the Pledgor has agreed to provide security for the loan
contemplated in the Loan Agreement in accordance with the terms of this Pledge
Agreement;
NOW, THEREFORE, in order to induce the Bank to make the loan
contemplated in the Loan Agreement and in consideration of the mutual
representations, warranties, covenants and agreements hereinafter set forth,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereto hereby agree as follows:
AGREEMENT
1. Grant of Security Interest. To secure the Obligations (as defined
below), the Pledgor hereby pledges and grants to the Bank a security interest
in and transfers and delivers to the Bank the following: (a) the number of
shares of capital stock of each of the Subsidiaries set forth on Schedule A
hereto, which constitute one hundred percent (100%) of the issued and
outstanding capital stock of the Subsidiaries, and any and all shares of the
capital stock of any Subsidiary that Pledgor subsequently acquires, directly or
indirectly, including all substitutions of, and
<PAGE> 24
additions to, such stock; (b) executed and undated stock powers for the capital
stock described in (a) above, in form and content satisfactory to the Bank duly
executed in blank, containing all requisite federal and state stock transfer
tax stamps, if any (the items described in (a) and (b) above may collectively
be referred to as the "Pledged Stock"); (c) all income and profits therefrom,
all distributions thereon, all other proceeds therefrom and all rights,
benefits and privileges pertaining to or arising from the Pledged Stock; and
(d) such other collateral that may be provided after the date hereof to secure
the Obligations. All property at any time pledged to the Bank hereunder or in
which the Bank is granted a security interest hereunder (whether described
herein or not, subject to the provisions of Paragraph 3 (c) below) , all income
therefrom and proceeds therefrom, may be referred to collectively as the
"Pledged Security."
2. Obligations. The obligations secured by this Pledge Agreement are the
following (referred to collectively hereafter as the "Obligations",):
(a) all obligations and agreements of Pledgor contained in
(including, without limitation, the payment of all indebtedness of the Pledgor
in respect of) the Loan Agreement, and any and all amendments, modifications or
renewals thereof;
(b) all amounts due to the Bank under that certain promissory note
of even date herewith in the principal amount of TWENTY FIVE MILLION DOLLARS
($25,000,000) from the Pledgor to the Bank and any and all modifications,
extensions, renewals or refinancings thereof (the "Note"), including, but not
limited to, all Principal, interest and other amounts due under the Note;
(c) all sums advanced by, or on behalf of, the Bank in connection
with, or relating to, the Loan Agreement, the Note or the Pledged Security
including, but not limited to, any and all sums advanced to preserve the
Pledged Security, or to perfect the Bank's security interest in the Pledged
Security;
(d) in the event of any proceeding to enforce the satisfaction of
the Obligations, or any of them, or to preserve and protect the Bank's rights
under the Loan Agreement, the Note, this Pledge Agreement or any other
agreement, document or instrument relating to the transactions contemplated in
the Loan Agreement, the reasonable expenses of retaking, holding, preparing for
sale, selling or otherwise disposing of or realizing on the Pledged Security,
or of any exercise by the Bank of its rights, together with reasonable
attorney's fees, expenses and court costs; and
(e) any indebtedness, obligation or liability of the Pledgor or
the Subsidiaries to the Bank, weather direct or indirect, joint or several,
absolute or contingent, now or
hereafter existing, however created or arising and however evidenced.
3. Additional Terms.
(a) The Pledgor agrees that the Bank shall have full and
irrevocable right, power and authority, to collect, withdraw or receipt for all
amounts due or to become due and payable upon, in connection with, or relating
to, the Pledged Security, to execute any withdrawal receipts
<PAGE> 25
respecting the Pledged Security, and to endorse the name of the Pledgor on any
or all documents, instruments or commercial paper given in payment thereof, and
at the Bank's discretion to take any other action, including, without
limitation, the transfer of any Pledged Security into the Bank's own name or
the name of any nominee for the Bank, which the Bank may deem necessary or
appropriate to preserve or protect the Bank's interest in any of the Pledged
Security.
(b) Unless a Default (as hereinafter defined) shall have occurred,
the Pledgor shall be entitled to vote any and all shares of the Pledged Stock
and to give consents, waivers and ratifications in respect thereof, provided
that no vote shall be cast, no consent, waiver or ratification shall be given
and no action shall be taken by the Pledgor which would violate or be
inconsistent with any of the terns of the Loan Agreement, the Note or this
Pledge Agreement, or which would have the effect of impairing the position or
interests of the Pledgor or any holder of the Note. All such rights of the
Pledgor to vote and to give consents, waivers and ratifications shall cease
upon the occurrence of a Default.
(c) unless a Default shall have occurred, all dividends and other
distributions payable in respect of the Pledged Security shall be paid to the
Pledgor. Upon the occurrence of a Default, all such dividends and other
distributions and payments shall be paid to the Bank. After a Default shall
have occurred, all such amounts paid in respect of the Pledged Security shall,
until paid or delivered to the Bank, be held in trust for the benefit of the
Bank as additional Pledged Security to secure the Obligations.
4. Representations, Warranties and Covenants. The Pledgor further
represents, warrants and agrees that:
(a) The Pledgor is the legal, record and beneficial owner of, and
has good and marketable title to, the Pledged Security, subject to no lien,
claim, security interest or other encumbrance, except the security interest
created by this Pledge Agreement.
(b) without the prior written consent of the Bank, the Pledgor
will not sell, assign, transfer, exchange, or otherwise dispose of, or grant
any option with respect to, the Pledged Security, nor will it create, incur or
permit to exist any lien, claim, security interest or other encumbrance with
respect to any of the Pledged Security, or any interest therein, or any
proceeds thereof, except for the security interest provided for by this Pledge
Agreement. Without the prior written consent of the Bank, the Pledgor agrees
that it will not, and it will not permit any Subsidiary to. (i) issue or
reissue any capital stock or other securities (or warrants therefor or other
rights with respect thereto) in addition to or issue other securities of any
nature in exchange or substitution for any of the Pledged Security; (ii) redeem
any of the Pledged Security, or (iii) declare any stock dividend or split or
otherwise change the capital structure of any Subsidiary.
(c) The Pledged Security is genuine and in all respects represents
what it purports to be and all the shares of the Pledged Stock have been duly
and validly issued, and are fully paid and non-assessable.
<PAGE> 26
(d) The pledge, assignment and delivery of the Pledged Security
pursuant to this Pledge Agreement creates a valid perfected security interest
in the Pledged Security, and the proceeds thereof, subject to no prior lien,
claim, security interest or other encumbrance or to any agreement purporting to
grant to any third party a perfected security interest in the assets of the
Pledgor which would include any of the Pledged Security. The Pledgor will at
all times defend the Bank's right, title and security interest in and to the
Pledged Security and the proceeds thereof against any and all claims and
demands of any person adverse to the claims of the Bank.
(e) The Pledgor will take, and will cause the subsidiaries to
take, such action and to execute such documents as the Bank may from time to
time reasonably request relating to the Pledged Security or the proceeds
thereof.
(f) The Pledgor has full right, power and authority to enter into,
to execute and to deliver this Pledge Agreement and this Pledge Agreement is
binding upon, and enforceable against the Pledgor in accordance with its terms.
(g) The Pledgor shall pay any fees, assessments, charges or taxes
arising with respect to the Pledged Security. In case of failure by the Pledgor
to pay any such fees, assessments, charges or taxes, the Bank shall have the
right, but shall not be obligated, to any such fees, assessments, charges or
taxes, as the case may be, and, in that event, the cost thereof shall be
payable by the Pledgor to the Bank immediately upon demand together with
interest at the rate equal to the Prime Rate (or, after the occurrence of a
Default, the Prime Rate plus 2%) (Prime Rate shall have the meaning provided in
the Note) from the date of disbursement by the Bank to the date of payment by
the Pledgor.
(h) None of the Pledged Stock constitutes margin stock, as defined
in Regulation U of the Board of Governors of the Federal Reserve System.
5. Events of Default. The Pledgor shall be in default under this Pledge
Agreement upon the occurrence of any one or more of the following events or
conditions (each, a "Default"):
(a) nonpayment of any of the obligations, whether by acceleration
or otherwise;
(b) the nonperformance of any obligation or any breach of any
warranty, representation or covenant made by the Pledgor in this Pledge
Agreement, and the same is not cured within fifteen(15)days after notice
thereof by the Bank;
(c) the nonperformance of any obligation in any other instrument,
document or agreement relating to the Obligations, including, without
limitation, the Loan Agreement and the Note, which nonperformance continues
beyond the applicable cure period, if any, specifically provided therefor;
(d) any breach of any warranty, representation or covenant made by
the Pledgor in any other instrument, document or agreement between the Pledgor
and Bank which breach remains uncured beyond any applicable time period, if
any, specifically provided therefor;
<PAGE> 27
(e) any oral or written misrepresentation is made by the Pledgor
in this Pledge Agreement or in any document furnished by the Pledgor, or on the
Pledgor's behalf, to the Bank in connection with this Pledge Agreement or the
Pledged Security;
(f) the claim or creation of any lien, claim, security interest or
other encumbrance upon any of the Pledged Security or the making of any levy,
judicial seizure, or attachment thereof; or
(g) the dissolution, bankruptcy, insolvency or failure of the
Pledgor or any Subsidiary.
6. Rights of, Parties upon Default.
(a) Upon the occurrence of a Default, in addition to all the
rights, power and remedies the Bank shall be entitled to exercise, whether
vested in the Bank by the terms of this Pledge Agreement, the terms of the Loan
Agreement, the terms of the Note, by law, in equity, by statute (including,
without limitation, Article 9 of the Illinois Uniform Commercial Code) or
otherwise, for the protection and enforcement of the Bank's rights in. respect
of the Pledged Security, the Bank may be entitled to, without limitation (but
is under no obligation to the Pledgor so to do)
(i) transfer all or any part of the Pledged Security into
the Bank's name or the name of its nominee or nominees;
(ii) after first obtaining all necessary regulatory
approvals, vote all or any part of the Pledged Security (whether or not
transferred into the name of the Bank or any nominee) and give all consents,
waivers and ratifications in respect of the Pledged Security and otherwise act
with respect thereto as though it were the outright owner thereof;
(iii) at any time or from time to time to sell, assign and
deliver, or grant options to purchase, all or any part of the Pledged Security,
or any interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell or of the time or
place of sale or adjournment thereof or to redeem or otherwise (all of which
are hereby waived by the Pledgor), for cash, on credit or for other property,
for immediate or future delivery without any assumption of credit risk and for
such price or prices and on such terms as the Bank in its absolute discretion
may determine, provided that unless, in the sole discretion of the Bank, any of
the Pledged Security threatens to decline in value or is or becomes a type sold
on a recognized market, the Bank will give the Pledgor reasonable notice of the
time and place of any public sale thereof, or of the time after which any
private sale or other intended disposition is to be made. Any requirements of
reasonable notice shall be met if such notice is mailed to the Pledgor as
Provided in Paragraph 14 below, at least fifteen (15) days before the time of
the sale or disposition. Any sale of any of the Pledged Security conducted in
conformity with customary practices of banks, insurance companies or other
financial institutions disposing of property similar to the Pledged Security
shall be deemed to be commercially reasonable. Any remaining Pledged Security
shall remain subject to the terms of this Pledge Agreement; and
(iv) collect any and all money due or to become due and
enforce in the Pledgor's name all rights with respect to the Pledged Security.
<PAGE> 28
(b) Pledgor agrees to cause each Subsidiary to give the Bank, any
prospective purchaser of the Pledged Security (pursuant to Section 6(a)(iii))
and their respective representatives, reasonable access to further information
(including, but not limited to, records, files, correspondence, tax work papers
and audit work papers) relating to or concerning the Pledgor or such
Subsidiary.
7. Remedies Cumulative. Each right, power and remedy of the Bank
provided in this Pledge Agreement or now or hereafter existing at law or in
equity or by statute or otherwise shall be cumulative and concurrent and shall
be in addition to every other right, power or remedy provided for in this
Pledge Agreement or now or hereafter existing at law or in equity or by statute
or otherwise. The exercise or partial exercise by the Bank of any one or more
of such rights, powers or remedies shall not preclude the simultaneous or later
exercise by the Bank of all such other rights, powers or remedies, and no
failure or delay on the part of the Bank to exercise any such right, power or
remedy shall operate as a waiver thereof.
8. Waiver of Defenses. No renewal or extension of the time of payment of
the Obligations, nor any release, surrender of, or failure to perfect or
enforce any security interest for the Obligations; no release of any person
primarily or secondarily liable on the Obligations (including any maker,
endorser, or guarantor); no delay in enforcement of payment of the obligations;
and no delay or omission in exercising any right or power with respect of the
Obligations or any security agreement securing the Obligations shall affect the
rights of the Bank in the Pledged Security.
9. Waiver. Waiver by the Bank of any Default hereunder, or of any breach
of the provisions of this Pledge Agreement by the Pledgor, or any right of the
Bank hereunder, shall not constitute a waiver of any other Default or breach or
right, nor the same Default or breach or right on a future occasion.
10. Law Governing. This Pledge Agreement and the rights and obligations
of the parties hereunder shall be construed and interpreted in accordance with
the law of the State of Illinois applicable to agreements made and to be wholly
Performed in such state. Whenever possible, each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law; provided, if any provision of this Pledge Agreement shall
be held to be prohibited or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining Provisions of
this Pledge Agreement.
11. The Pledgor's Obligations Absolute. The Obligations of the Pledgor
under this Pledge Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
discharged or in any way impaired by any circumstance whatsoever, including
without limitation: (a) any amendment or modification of the Note, the Loan
Agreement or any other document or instrument provided for herein or therein or
related thereto, cr any assignment, transfer or other disposition of any
thereof; (b) any waiver, consent, extension, indulgence or other action or
inaction under or in respect of any such document or instrument or any exercise
or on exercise of any right, remedy, power or privilege under or in respect of
any such document or instrument or this Pledge Agreement; (c) any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition,
liquidation, or similar proceeding with respect to the
<PAGE> 29
Pledgor or any of its properties or creditors; or (d) any limitation on the
Pledgor's liabilities or obligations under any such instrument or any
invalidity or lack of enforceability, in whole or in part, of any such document
or instrument or any term thereof; whether or not the Pledgor shall have notice
or knowledge of the foregoing.
12. Termination. This Pledge Agreement shall terminate upon the receipt
by the Bank of evidence satisfactory to the Bank, in the Bank's sole and
absolute discretion, of the payment in full of the obligations. At the time of
such termination the Bank, at the request and expense of the Pledgor, will
execute and deliver to the Pledgor a proper instrument or instruments
acknowledging the satisfaction and termination of this Pledge Agreement, and
will duly assign, transfer and deliver to the Pledgor such of the Pledged
Security as has not yet theretofore been sold or otherwise applied or released
pursuant to this Pledge Agreement.
13. Further Assurances. The Pledgor shall, at its expense, duly execute,
acknowledge and deliver all such instruments and take all such action as the
Bank from time to time may request in order to further effectuate the Purposes
of this Pledge Agreement and to carry out the terms hereof. The Pledgor, at its
expense, at all times cause this Pledge Agreement (or a proper notice or
statement, in respect hereof) to be duly recorded, published and filed and
rerecorded, republished and refiled in such manner and in such places, if any,
and shall pay or cause to be paid all such recording, filing and other taxes,
fees and charges, if any, and will comply with all such statutes and
regulations, if any, as may be required by law in order to establish, perfect,
preserve and protect the rights and security interests of the Bank hereunder.
14. Notices. All communications provided for or related hereto shall be
given in accordance with Paragraph 10(c) of the Loan Agreement.
15. Amendments. Any term of this Pledge Agreement may be amended only
with the written consent of the Pledgor and the Bank. Any amendment effected
in accordance with this Paragraph 15 shall be binding upon (i) each holder of
the Note at the time outstanding; (ii) each future holder of the Note; and
(iii) the Pledgor.
16. Assigns. This Pledge Agreement and all rights and liabilities
hereunder and in and to any and all Pledged Security shall inure to the benefit
of the Bank and its successors and assigns, and shall be binding on the
Pledgor. and the Pledgor's successors and assigns; provided, however, the
Pledgor may not assign its rights or liabilities hereunder or to any of the
Pledged Security without the written consent of the Bank.
17. Miscellaneous. This Pledge Agreement embodies the entire agreement
and understanding between the Bank and the Pledgor and supersedes all prior
agreements and understandings relating to the subject matter hereof. The
headings in this Pledge Agreement are for purposes of reference only and shall
not limit or otherwise affect the meaning hereof.
<PAGE> 30
The Pledgor acknowledges that this Pledge Agreement is and shall be
effective upon execution by the Pledgor and delivery to and acceptance hereof
by the Bank, and it shall not be necessary for the Bank to execute any
acceptance hereof or otherwise to signify or express its acceptance hereof to
the Pledgor.
WINTRUST FINANCIAL CORPORATION
By: /S/David A. Dykstra
--------------------------------
Its: Executive Vice President
--------------------------------
<PAGE> 31
SCHEDULE A
Subsidiary Number Of Shares Owned
- ---------- ----------------------
Hinsdale Bancorp 198,295
Lake Forest Bancorp 164,009
Libertyville Bancorp 210,851
North Shore Community Bank Trust Co. 142,500
<PAGE> 32
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT (the "Pledge Agreement") dated as
of September 1, 1996, is made by HINSDALE BANCORP, an Illinois corporation,
LAKE FOREST BANCORP, a Delaware corporation and LIBERTYVILLE BANCORP, an
Illinois corporation (each a "Pledgor" and collectively, the "Pledgors") ,
whose address is 727 Bank Lane, Lake Forest, Illinois 60045, for the benefit of
LASALLE NATIONAL BANK, a national banking association (the "Bank") whose
address is 135 South LaSalle Street, Chicago, Illinois 60674.
RECITALS:
WHEREAS, each Pledgor is the owner of the capital stock of the bank
set forth opposite its name on Exhibit A hereto (each is referred to herein as
a "Subsidiary" and collectively as the "Subsidiaries");
WHEREAS, the capital stock of the Subsidiaries owned by the Pledgors
constitutes 100% of the issued and outstanding capital stock of the
Subsidiaries;
WHEREAS, the Wintrust Financial Corporation (the "Borrower"), the
owner of 100% of the issued and outstanding capital stock of Pledgors, desires
to borrow from the Bank the sum of TWENTY FIVE MILLION DOLLARS ($25,000,000);
WHEREAS, the Bank is willing to lend to the Borrower TWENTY FIVE
MILLION DOLLARS ($25,000,000) in accordance with the terms, subject to the
conditions and in reliance on the representations, warranties and covenants set
forth in the Loan Agreement dated the date hereof between the Borrower and the
Bank (the "Loan Agreement") and in all of the other documents and instruments
entered into or delivered in connection with or relating to the loan
contemplated in the Loan Agreement; and
WHEREAS, the Pledgors have agreed to provide security for the loan
contemplated in the Loan Agreement in accordance with the terms of this Pledge
Agreement;
NOW, THEREFORE, in order to induce the Bank to make the loan
contemplated in the Loan Agreement and in consideration of the mutual
representations, warranties, covenants and agreements hereinafter set forth,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereto hereby agree as follows:
AGREEMENT
1. Grant of Security Interest. To secure the Obligations (as defined
below), the Pledgors hereby pledge and grant to the Bank a security interest in
and transfer and deliver to the Bank the following: (a) the number of shares of
capital stock of each of the Subsidiaries set forth on Schedule A hereto, which
constitute one hundred percent (100%) of the issued and outstanding capital
stock of the Subsidiaries, and any and all shares of the capital stock of any
Subsidiary that Pledgors subsequently
<PAGE> 33
acquire, directly or indirectly, including all substitutions of, and additions
to, such stock; (b) executed and undated stock powers for the capital stock
described in (a) above, in form and content satisfactory to the Bank duly
executed in blank, containing all requisite federal and state stock transfer
tax stamps, if any (the items described in (a) and (b) above may collectively
be referred to as the "Pledged Stock"); (c) all income and profits therefrom,
all distributions thereon, all other proceeds therefrom and all rights,
benefits and privileges pertaining to or arising from the Pledged Stock; and
(d) such other collateral that may be provided after the date hereof to secure
the Obligations. All property at any time pledged to the Bank hereunder or in
which the Bank is granted a security interest hereunder (whether described
herein or not, subject to the provisions of Paragraph 3 (c) below) , all income
therefrom and proceeds therefrom, may be referred to collectively as the
"Pledged Security."
2. Obligations. The obligations secured by this Pledge Agreement are the
following (referred to collectively hereafter as the "Obligations",):
(a) all obligations and agreements of Borrower contained in
(including, without limitation, the payment of all indebtedness of the Borrower
in respect of) the Loan Agreement, and any and all amendments, modifications or
renewals thereof;
(b) all amounts due to the Bank under that certain promissory note
of even date herewith in the principal amount of TWENTY FIVE MILLION DOLLARS
($25,000,000) from the Borrower to the Bank and any and all modifications,
extensions, renewals or refinancings thereof (the "Note"), including, but not
limited to, all Principal, interest and other amounts due under the Note;
(c) all sums advanced by, or on behalf of, the Bank in connection
with, or relating to, the Loan Agreement, the Note or the Pledged Security
including, but not limited to, any and all sums advanced to preserve the
Pledged Security, or to perfect the Bank's security interest in the Pledged
Security;
(d) in the event of any proceeding to enforce the satisfaction of
the Obligations, or any of them, or to preserve and protect the Bank's rights
under the Loan Agreement, the Note, this Pledge Agreement or any other
agreement, document or instrument relating to the transactions contemplated in
the Loan Agreement, the reasonable expenses of retaking, holding, preparing for
sale, selling or otherwise disposing of or realizing on the Pledged Security,
or of any exercise by the Bank of its rights, together with reasonable
attorney's fees, expenses and court costs; and
(e) any indebtedness, obligation or liability of the Borrower,
Pledgors or the Subsidiaries to the Bank, weather direct or indirect, joint or
several, absolute or contingent, now or hereafter existing, however created or
arising and however evidenced.
3. Additional Terms.
(a) The Pledgors agree that the Bank shall have full and
irrevocable right, power and authority, to collect, withdraw or receipt for all
amounts due or to become due and payable upon, in connection with, or relating
to, the Pledged Security, to execute any withdrawal receipts
<PAGE> 34
respecting the Pledged Security, and to endorse the name of the Pledgors on any
or all documents, instruments or commercial paper given in payment thereof, and
at the Bank's discretion to take any other action, including, without
limitation, the transfer of any Pledged Security into the Bank's own name or
the name of any nominee for the Bank, which the Bank may deem necessary or
appropriate to preserve or protect the Bank's interest in any of the Pledged
Security.
(b) Unless a Default (as hereinafter defined) shall have occurred,
the Pledgors shall be entitled to vote any and all shares of the Pledged Stock
and to give consents, waivers and ratifications in respect thereof, provided
that no vote shall be cast, no consent, waiver or ratification shall be given
and no action shall be taken by the Pledgors which would violate or be
inconsistent with any of the terns of the Loan Agreement, the Note or this
Pledge Agreement, or which would have the effect of impairing the position or
interests of the Pledgors or any holder of the Note. All such rights of the
Pledgors to vote and to give consents, waivers and ratifications shall cease
upon the occurrence of a Default.
(c) unless a Default shall have occurred, all dividends and other
distributions payable in respect of the Pledged Security shall be paid to the
Pledgors. Upon the occurrence of a Default, all such dividends and other
distributions and payments shall be paid to the Bank. After a Default shall
have occurred, all such amounts paid in respect of the Pledged Security shall,
until paid or delivered to the Bank, be held in trust for the benefit of the
Bank as additional Pledged Security to secure the Obligations.
4. Representations, Warranties and Covenants. The Pledgors further
represent, warrant and agree that:
(a) The Pledgors are the legal, record and beneficial owner of,
and has good and marketable title to, the Pledged Security, subject to no lien,
claim, security interest or other encumbrance, except the security interest
created by this Pledge Agreement.
(b) without the prior written consent of the Bank, the Pledgors
will not sell, assign, transfer, exchange, or otherwise dispose of, or grant
any option with respect to, the Pledged Security, nor will it create, incur or
permit to exist any lien, claim, security interest or other encumbrance with
respect to any of the Pledged Security, or any interest therein, or any
proceeds thereof, except for the security interest provided for by this Pledge
Agreement. Without the prior written consent of the Bank, the Pledgors agrees
that it will not, and it will not permit any Subsidiary to. (i) issue or
reissue any capital stock or other securities (or warrants therefor or other
rights with respect thereto) in addition to or issue other securities of any
nature in exchange or substitution for any of the Pledged Security; (ii) redeem
any of the Pledged Security, or (iii) declare any stock dividend or split or
otherwise change the capital structure of any Subsidiary.
(c) The Pledged Security is genuine and in all respects represents
what it purports to be and all the shares of the Pledged Stock have been duly
and validly issued, and are fully paid and non-assessable.
<PAGE> 35
(d) The pledge, assignment and delivery of the Pledged Security
pursuant to this Pledge Agreement creates a valid perfected security interest
in the Pledged Security, and the proceeds thereof, subject to no prior lien,
claim, security interest or other encumbrance or to any agreement purporting to
grant to any third party a perfected security interest in the assets of the
Pledgors which would include any of the Pledged Security. The Pledgors will at
all times defend the Bank's right, title and security interest in and to the
Pledged Security and the proceeds thereof against any and all claims and
demands of any person adverse to the claims of the Bank.
(e) The Pledgors will take, and will cause the subsidiaries to
take, such action and to execute such documents as the Bank may from time to
time reasonably request relating to the Pledged Security or the proceeds
thereof.
(f) The Pledgors have full right, power and authority to enter
into, to execute and to deliver this Pledge Agreement and this Pledge Agreement
is binding upon, and enforceable against the Pledgors in accordance with its
terms.
(g) The Pledgors shall pay any fees, assessments, charges or taxes
arising with respect to the Pledged Security. In case of failure by the
Pledgors to pay any such fees, assessments, charges or taxes, the Bank shall
have the right, but shall not be obligated, to any such fees, assessments,
charges or taxes, as the case may be, and, in that event, the cost thereof
shall be payable by the Pledgors to the Bank immediately upon demand together
with interest at the rate equal to the Prime Rate (or, after the occurrence of
a Default, the Prime Rate plus 2%) (Prime Rate shall have the meaning provided
in the Note) from the date of disbursement by the Bank to the date of payment
by the Pledgors.
(h) None of the Pledged Stock constitutes margin stock, as defined
in Regulation U of the Board of Governors of the Federal Reserve System.
5. Events of Default. The Pledgors shall be in default under this Pledge
Agreement upon the occurrence of any one or more of the following events or
conditions (each, a "Default"):
(a) nonpayment of any of the obligations, whether by acceleration
or otherwise;
(b) the nonperformance of any obligation or any breach of any
warranty, representation or covenant made by the Pledgors in this Pledge
Agreement, and the same is not cured within fifteen(15)days after notice
thereof by the Bank;
(c) the nonperformance of any obligation in any other instrument,
document or agreement relating to the Obligations, including, without
limitation, the Loan Agreement and the Note, which nonperformance continues
beyond the applicable cure period, if any, specifically provided therefor;
(d) any breach of any warranty, representation or covenant made by
any Pledgor in any other instrument, document or agreement between such Pledgor
and Bank which breach remains uncured beyond any applicable time period, if
any, specifically provided therefor;
<PAGE> 36
(e) any oral or written misrepresentation is made by any Pledgor
in this Pledge Agreement or in any document furnished by the Pledgor, or on the
Pledgor's behalf, to the Bank in connection with this Pledge Agreement or the
Pledged Security;
(f) the claim or creation of any lien, claim, security interest or
other encumbrance upon any of the Pledged Security or the making of any levy,
judicial seizure, or attachment thereof; or
(g) the dissolution, bankruptcy, insolvency or failure of the
Pledgor or any Subsidiary.
6. Rights of, Parties upon Default.
(a) Upon the occurrence of a Default, in addition to all the
rights, power and remedies the Bank shall be entitled to exercise, whether
vested in the Bank by the terms of this Pledge Agreement, the terms of the Loan
Agreement, the terms of the Note, by law, in equity, by statute (including,
without limitation, Article 9 of the Illinois Uniform Commercial Code) or
otherwise, for the protection and enforcement of the Bank's rights in. respect
of the Pledged Security, the Bank may be entitled to, without limitation (but
is under no obligation to the Pledgors so to do)
(i) transfer all or any part of the Pledged Security into
the Bank's name or the name of its nominee or nominees;
(ii) after first obtaining all necessary regulatory
approvals, vote all or any part of the Pledged Security (whether or not
transferred into the name of the Bank or any nominee) and give all consents,
waivers and ratifications in respect of the Pledged Security and otherwise act
with respect thereto as though it were the outright owner thereof;
(iii) at any time or from time to time to sell, assign and
deliver, or grant options to purchase, all or any part of the Pledged Security,
or any interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell or of the time or
place of sale or adjournment thereof or to redeem or otherwise (all of which
are hereby waived by the Pledgors), for cash, on credit or for other property,
for immediate or future delivery without any assumption of credit risk and for
such price or prices and on such terms as the Bank in its absolute discretion
may determine, provided that unless, in the sole discretion of the Bank, any of
the Pledged Security threatens to decline in value or is or becomes a type sold
on a recognized market, the Bank will give the Pledgors reasonable notice of
the time and place of any public sale thereof, or of the time after which any
private sale or other intended disposition is to be made. Any requirements of
reasonable notice shall be met if such notice is mailed to the Pledgors as
Provided in Paragraph 14 below, at least fifteen (15) days before the time of
the sale or disposition. Any sale of any of the Pledged Security conducted in
conformity with customary practices of banks, insurance companies or other
financial institutions disposing of property similar to the Pledged Security
shall be deemed to be commercially reasonable. Any remaining Pledged Security
shall remain subject to the terms of this Pledge Agreement; and
(iv) collect any and all money due or to become due and
enforce in the Pledgor's name all rights with respect to the Pledged Security.
<PAGE> 37
(b) Pledgors agrees to cause each Subsidiary to give the Bank, any
prospective purchaser of the Pledged Security (pursuant to Section 6(a)(iii))
and their respective representatives, reasonable access to further information
(including, but not limited to, records, files, correspondence, tax work papers
and audit work papers) relating to or concerning the Pledgors or such
Subsidiary.
7. Remedies Cumulative. Each right, power and remedy of the Bank
provided in this Pledge Agreement or now or hereafter existing at law or in
equity or by statute or otherwise shall be cumulative and concurrent and shall
be in addition to every other right, power or remedy provided for in this
Pledge Agreement or now or hereafter existing at law or in equity or by statute
or otherwise. The exercise or partial exercise by the Bank of any one or more
of such rights, powers or remedies shall not preclude the simultaneous or later
exercise by the Bank of all such other rights, powers or remedies, and no
failure or delay on the part of the Bank to exercise any such right, power or
remedy shall operate as a waiver thereof.
8. Waiver of Defenses. No renewal or extension of the time of payment of
the Obligations, nor any release, surrender of, or failure to perfect or
enforce any security interest for the Obligations; no release of any person
primarily or secondarily liable on the Obligations (including any maker,
endorser, or guarantor); no delay in enforcement of payment of the obligations;
and no delay or omission in exercising any right or power with respect of the
Obligations or any security agreement securing the Obligations shall affect the
rights of the Bank in the Pledged Security.
9. Waiver. Waiver by the Bank of any Default hereunder, or of any breach
of the provisions of this Pledge Agreement by the Pledgors, or any right of the
Bank hereunder, shall not constitute a waiver of any other Default or breach or
right, nor the same Default or breach or right on a future occasion.
10. Law Governing. This Pledge Agreement and the rights and obligations
of the parties hereunder shall be construed and interpreted in accordance with
the law of the State of Illinois applicable to agreements made and to be wholly
Performed in such state. Whenever possible, each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law; provided, if any provision of this Pledge Agreement shall
be held to be prohibited or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining Provisions of
this Pledge Agreement.
11. Each Pledgor's Obligations Absolute. The Obligations of each Pledgor
under this Pledge Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
discharged or in any way impaired by any circumstance whatsoever, including
without limitation: (a) any amendment or modification of the Note, the Loan
Agreement or any other document or instrument provided for herein or therein or
related thereto, cr any assignment, transfer or other disposition of any
thereof; (b) any waiver, consent, extension, indulgence or other action or
inaction under or in respect of any such document or instrument or any exercise
or on exercise of any right, remedy, power or privilege under or in respect of
any such document or instrument or this Pledge Agreement; (c) any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition,
liquidation, or similar proceeding with respect to any
<PAGE> 38
Pledgor or any of its properties or creditors; or (d) any limitation on the
Pledgor's liabilities or obligations under any such instrument or any
invalidity or lack of enforceability, in whole or in part, of any such document
or instrument or any term thereof; whether or not the Pledgor shall have notice
or knowledge of the foregoing.
12. Termination. This Pledge Agreement shall terminate upon the receipt
by the Bank of evidence satisfactory to the Bank, in the Bank's sole and
absolute discretion, of the payment in full of the obligations. At the time of
such termination the Bank, at the request and expense of the Pledgors, will
execute and deliver to the Pledgors a proper instrument or instruments
acknowledging the satisfaction and termination of this Pledge Agreement, and
will duly assign, transfer and deliver to the Pledgors such of the Pledged
Security as has not yet theretofore been sold or otherwise applied or released
pursuant to this Pledge Agreement.
13. Further Assurances. The Pledgors shall, at its expense, duly execute,
acknowledge and deliver all such instruments and take all such action as the
Bank from time to time may request in order to further effectuate the Purposes
of this Pledge Agreement and to carry out the terms hereof. The Pledgors, at
its expense, at all times cause this Pledge Agreement (or a proper notice or
statement, in respect hereof) to be duly recorded, published and filed and
rerecorded, republished and refiled in such manner and in such places, if any,
and shall pay or cause to be paid all such recording, filing and other taxes,
fees and charges, if any, and will comply with all such statutes and
regulations, if any, as may be required by law in order to establish, perfect,
preserve and protect the rights and security interests of the Bank hereunder.
14. Notices. All communications provided for or related hereto shall be
given in accordance with Paragraph 10(c) of the Loan Agreement.
15. Amendments. Any term of this Pledge Agreement may be amended only
with the written consent of the Pledgors and the Bank. Any amendment effected
in accordance with this Paragraph 15 shall be binding upon (i) each holder of
the Note at the time outstanding; (ii) each future holder of the Note; and
(iii) the Pledgors.
16. Assigns. This Pledge Agreement and all rights and liabilities
hereunder and in and to any and all Pledged Security shall inure to the benefit
of the Bank and its successors and assigns, and shall be binding on the
Pledgors and the Pledgor's successors and assigns; provided, however, the
Pledgor may not assign its rights or liabilities hereunder or to any of the
Pledged Security without the written consent of the Bank.
17. Miscellaneous. This Pledge Agreement embodies the entire agreement
and understanding between the Bank and the Pledgors and supersedes all prior
agreements and understandings relating to the subject matter hereof. The
headings in this Pledge Agreement are for purposes of reference only and shall
not limit or otherwise affect the meaning hereof.
<PAGE> 39
The Pledgors acknowledges that this Pledge Agreement is and shall be
effective upon execution by the Pledgors and delivery to and acceptance hereof
by the Bank, and it shall not be necessary for the Bank to execute any
acceptance hereof or otherwise to signify or express its acceptance hereof to
the Pledgors.
HINSDALE BANCORP
By: /s/David A. Dykstra
Its: Executive Vice President & CFO
LAKE FOREST BANCORP
By: /s/David A. Dykstra
Its: Executive Vice President & CFO
LIBERTYVILLE BANCORP
By: /s/David A. Dykstra
Its: Executive Vice President & CFO
<PAGE> 40
SCHEDULE A
<TABLE>
<CAPTION>
Pledgor Subsidiary Number Of Shares Owned
- ------- ---------- ----------------------
<S> <C> <C>
Hinsdale Bancorp Hinsdale Bank & Trust 107,500
Lake Forest Bancorp Lake Forest Bank & Trust 210,780
Libertyville Bancorp Libertyville Bank & Trust 125,000
</TABLE>
<PAGE> 1
Exhibit 10.11
(EXHIBIT A)
WOLFHOYA INVESTMENTS, INC.
1995 STOCK OPTION PLAN
<PAGE> 2
WOLFHOYA INVESTMENTS, INC.
1995 STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Section Page
- ------- ------- ----
<S> <C> <C>
1 ESTABLISHMENT, PURPOSE, AND EFFECTIVE DATE OF PLAN
--------------------------------------------------
1.1 Establishment of the Plan 6
1.2 Purpose of the Plan 6
1.3 Duration of the Plan 6
2 DEFINITIONS AND CONSTRUCTION
----------------------------
2.1 Definitions 7
2.2 Gender and Number 10
2.3 Severability 10
3 ADMINISTRATION
--------------
3.1 The Committee 11
3.2 Authority of the Committee 11
3.3 Selection of Participants 11
3.4 Decisions Binding 11
3.5 Delegation of Certain Responsibilities 11
3.6 Procedures of the Committee 12
3.7 Award Agreements 12
4 STOCK SUBJECT TO THE PLAN
-------------------------
4.1 Number of Shares 13
4.2 Lapsed Awards 13
4.3 Adjustments in Authorized Shares 13
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
Article Section Page
- ------- ------- ----
<S> <C> <C>
5 ELIGIBILITY AND PARTICIPATION
-----------------------------
5.1 Eligibility 14
5.2 Actual Participation 14
6 STOCK OPTIONS
-------------
6.1 Grant of Options 14
6.2 Option Agreement 15
6.3 Option Price 15
6.4 Duration of Options 15
6.5 Exercise of Options 15
6.6 Payment 15
6.7 Restrictions on Stock Transferability 16
6.8 Termination of Employment Due to
Death, Disability, or Retirement 16
6.9 Termination of Employment for Other Reasons 17
6.10 Nontransferability of Options 17
7 RESTRICTED STOCK
----------------
7.1 Grant of Restricted Stock 17
7.2 Restricted Stock Agreement 17
7.3 Transferability 17
7.4 Other Restrictions 18
7.5 Certificate Legend 18
7.6 Removal of Restrictions 18
7.7 Voting Rights 18
7.8 Dividend and Other Distributions 18
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
Article Section Page
- ------- ------- ----
<S> <C> <C>
7.9 Termination of Employment Due to Retirement 19
7.10 Termination of Employment Due to Death or Disability 19
7.11 Termination of Employment for Other Reasons 19
7.12 Nontransferability of Restricted Stock 19
8 BENEFICIARY DESIGNATION
-----------------------
8.1 Beneficiary Designation 20
9 RIGHTS OF EMPLOYEES
-------------------
9.1 Employment 20
9.2 Participation 20
10 CHANGE IN CONTROL
-----------------
10.1 In General 20
11 AMENDMENT, MODIFICATION, AND TERMINATION
----------------------------------------
11.1 Amendment, Modification, and Termination 20
11.2 Awards Previously Granted 21
12 WITHHOLDING
-----------
12.1 Tax Withholding 21
12.2 Stock Withholding Elections 21
12.3 Special Insider Stock Withholding Restrictions 22
12.4 Stock Withholding Delivery Requirements 22
13 INDEMNIFICATION
---------------
13.1 Indemnification 23
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
Article Section Page
- ------- ------- ----
<S> <C> <C>
14 SUCCESSORS
----------
14.1 Successors 23
15 REQUIREMENTS OF LAW
-------------------
15.1 Requirements of Law 23
15.2 Governing Law 23
16 RIGHTS OF FIRST REFUSAL
-----------------------
16.1 Rights of First Refusal 24
</TABLE>
5
<PAGE> 6
WOLFHOYA INVESTMENTS, INC.
1995 STOCK OPTION PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND EFFECTIVE DATE OF PLAN
1.1 Establishment of the Plan. Wolfhoya Investments, Inc.
(hereinafter referred to as the "Company"), hereby establishes an incentive
compensation plan to be known as the "1995 Stock Option Plan" (hereinafter
referred to as the "Plan"), as set forth in this document. The Plan permits
the grant of incentive stock options, nonqualified stock options, and
restricted stock. Subject to ratification by a majority of the shareholders of
the Company within twelve (12) months, the Plan shall become effective as of
December 1, 1995 (the "Effective Date"), and shall remain in effect as provided
in Section 1.3 herein. Awards may be granted hereunder on or after the
Effective Date but in no event be exercisable or payable to a participant prior
to such stockholder approval; and, if such approval is not obtained within
twelve (12) months after the Effective Date, such awards shall be of no force
and effect.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the
success of the Company by providing incentives to Key Employees that will link
their personal interests to the long-term financial success of the Company and
to the growth in shareholder value. The Plan is intended to provide
flexibility to the Company in its ability to motivate, attract, and retain the
services of Key Employees upon whose judgement, interest, and special effort
the successful conduct of its operation is largely dependent.
1.3 Duration of the Plan. The Plan shall commence on the Effective
Date, as described in Article 1.1. herein, and shall remain in effect, subject
to the right of the Board of Directors to terminate the Plan at any time
pursuant to Article 11, until all Stock subject to it shall have been purchased
or acquired according to the provisions herein. However, in no event may an
Award be
6
<PAGE> 7
granted under the Plan on or after the tenth (10th) anniversary of the Plan's
Effective Date. ARTICLE 2. DEFINITIONS AND CONSTRUCTION
2.1 Definitions. Whenever used in the Plan, the following terms
shall have the meanings set forth below and, when the meaning is intended, the
initial letter of the word is capitalized:
(a) "Award" means, individually or collectively, a grant under
this Plan of Incentive Stock Options, Nonqualified Stock
Options, or Restricted Stock.
(b) "Beneficial Owner" shall have the meaning ascribed to such
terms in Rule 13d-3 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(c) "Board" or "Board of Directors" means the Board of Directors
of the Company.
(d) "Change in Control" shall be deemed to have
occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied:
(i) A change in the ownership of sixty-six and two thirds
percent (66.67%) or more of the Corporation's
outstanding common stock, within a twelve month
period; or,
(ii) The stockholders of the Company approve a merger or
consolidation of the Company with any other
corporation, other than: a) a merger or consolidation
involving affiliated companies ("Affiliates"). For
purposes of this Plan, the term Affiliates shall have
the same definition as in Federal reserve Regulation
L (Section 212.2) or, b) a merger or consolidation
which would result in the voting Stock outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or being converted
into voting securities of the surviving entity) at
least 80% of the total voting power represented by
the voting Stock or the voting securities of such
surviving entity outstanding
7
<PAGE> 8
immediately after such merger or consolidation; or
(iii) The stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or
substantially all of the Company's assets.
However, in no event shall a Change in Control be deemed to have
occurred, with respect to the Participant, if the Participant is part of a
purchasing group which consummates the Change in Control transaction. The
Participant shall be deemed "part of a purchasing group..." for purposes of the
preceding sentence if the Participant is an equity participant or has agreed to
become an equity participant in the purchasing company or group (except for (a)
passive ownership of less than 5% of the Stock of the purchasing company or (b)
ownership of equity participation in the purchasing company or group which is
otherwise not deemed to be significant, as determined prior to the Change in
Control by a majority of the nonemployee continuing directors). The Board has
final authority to determine the exact date on which a change in control has
been deemed to have occurred under (i), (ii), and (iii) above.
(e) "Cause" means:
(i) misappropriation of any funds or property of the
Corporation; or
(ii) attempting to obtain any personal
profit from any transaction in which the Participant
has a personal financial interest, unless the
Participant shall have first obtained the consent of
the Board of Directors; or
(iii) material neglect or refusal to perform the duties
reasonably assigned to the Participant; or
(iv) participating in a course of conduct which is
injurious to the Corporation or its subsidiaries, as
interpreted by the Board of Directors; or
(v) being convicted of a felony; or
8
<PAGE> 9
(vi) being adjudicated a bankrupt; or
(vii) suspension due to the direction of any authorized
bank regulatory agency.
(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(g) "Committee" means the Stock Option Committee of the Board, or
any other committee appointed by the Board to administer the
Plan pursuant to Article 3 herein.
(h) "Company" means Wolfhoya Investments, Inc., a bank holding
corporation or any successor thereto as provided in Article 14
herein.
(i) "Disability" means a permanent and total disability as
determined by the Committee in good faith, upon receipt of
sufficient competent medical advice.
(j) "Fair Market Value" means the average of the highest and
lowest price at which the Stock was traded on the twenty
trading days prior to the relevant date, as reported by the
established market in which the shares are traded. If the
shares are not really tradable, a determination of Fair Market
Value shall be made by the Board of Directors of the Company.
(k) "Incentive Stock Option" or "ISO" means an option to purchase
Stock, granted under Article 6 herein, which is designated as
an Incentive Stock Option and is intended to meet the
requirements of Section 422A of the Code.
(l) "Key Employee" means an employee of the Company, including an
employee who is an officer or a director of the Company, who,
in the opinion of members of the Committee, can contribute
significantly to the growth and profitability of the Company.
"Key Employee" also may include those employees, identified by
the Committee, in situations concerning extraordinary
performance, promotion, retention, or recruitment. The
granting of an Award under this Plan shall be deemed a
determination by the Committee that such employee is a Key
Employee.
9
<PAGE> 10
(m) "Nonqualified Stock Option" or "NSO" means an option to
purchase Stock, granted under Article 6 herein, which is not
intended to be an Incentive Stock Option.
(n) "Option" means an Incentive Stock Option or a Nonqualified
Stock Option.
(o) "Outstanding Option" means any Option awarded to a
Participant under the Plan for which and conditions and/or
restrictions on exercisability have been met.
(p) "Participant" means a Key Employee of the Company who has been
granted an Award under the Plan.
(q) "Period of Restriction" means the period during which
the transfer of Shares of Restricted Stock is restricted,
during which the Participant is subject to a substantial risk
of forfeiture, pursuant to Article 8 herein.
(r) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d)
and 14(d) thereof, including a group as defined in Section
13(d).
(s) "Plan" means the Libertyville Bancorp 1995 Stock Option
Plan, as herein described.
(t) "Restricted Stock" means a Stock Award granted to a
Participant pursuant to Article 8 herein.
(u) "Stock" or "Shares" means the common Stock of the Company.
2.2 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
2.3 Severability. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
10
<PAGE> 11
ARTICLE 3. ADMINISTRATION
3.1 The Committee. The Plan shall be administered by a committee
(the "Committee") consisting of not less than three directors who shall be
appointed from time to time by, and shall serve at the discretion of, the Board
of Directors.
3.2 Authority of the Committee. Subject to the provisions of the
Plan and subject to ratification by the Board, the Committee shall have full
power to construe and interpret the Plan; to establish, amend or waive rules
and regulations for its administration to accelerate the exercisability of any
Award or the end of a Period of Restriction or the termination of any Award
Agreement, or any other instrument relating to an Award under the Plan; and
(subject to the provisions of Article 12 herein) to amend the terms and
conditions of any outstanding Option, or Restricted Stock Award to the extent
such terms and conditions are within the discretion of the Committee as
provided in the Plan. Notwithstanding the foregoing, no action of the
Committee may, without the consent of the person or persons entitled to
exercise any outstanding Option or to receive payment of any other outstanding
Award, adversely affect the rights of such person or persons.
3.3 Selection of Participants. The Committee shall have the
authority to grant Awards under the Plan, from time to time, to such Key
Employees of the Company (including officers and directors who are employees)
as may be selected by it. The committee shall select Participants from among
those who they have identified as being Key Employees.
3.4 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders or
resolutions of the Board of Directors shall be final, conclusive and binding on
all persons, including the Company, its stockholders, Employees, Participants
and their estates and beneficiaries.
3.5 Delegation of Certain Responsibilities. The Committee may, in
its sole discretion, delegate to appropriate officers of the Company the
administration of the Plan under this Article 3;
11
<PAGE> 12
provided, however, that no such delegation by the Committee shall be made
with respect to the administration of the Plan as it affects officers or
directors of the Company and provided further that the Committee may not
delegate its authority to correct errors, omissions or inconsistencies in the
Plan. All authority delegated by the Committee under this Section 3.5 shall be
exercised in accordance with the provisions of the Plan and any guidelines for
the exercise of such authority that may from time to time be established by the
Committee.
3.6 Procedures of the Committee. All determinations of the Committee
shall be made by not less than a majority of its members present at the meeting
(in person or otherwise) at which a quorum is present. A majority of the
entire Committee shall constitute a quorum for the transaction of business.
Any action required or permitted to be taken at a meeting of the Committee may
be taken without a meeting if a unanimous written consent, which sets for the
action, is signed by each member of the Committee and filed with the minutes
for proceedings of the Committee. No member of the Committee shall be liable,
in the absence of bad faith, for any act or omission with respect to his or her
other services on the committee. Service on the Committee shall constitute
service as a director of the Company so that members of the committee shall be
entitled to indemnification (as provided in Article 14 herein), and limitation
of liability and reimbursement with respect to their services as members of the
Committee to the same extent as for services as directors of the Company.
3.7 Award Agreements. Each Award under the Plan shall be evidenced by
an Award Agreement which shall be signed by an officer of the Company and by
the Participant, and shall contain such terms and conditions as may be approved
by the Committee, which need not be the same in all cases. Any Award Agreement
may be supplemented or amended in writing from time to time as approved by the
Committee, provided the terms of such agreements as amended or supplemented, as
well as the terms of the original award agreement, are not inconsistent with
the
12
<PAGE> 13
provisions of the Plan.
Nothing contained in the Plan or any resolutions adopted or to be
adopted by the Board of Directors or by the stockholders of the Company shall
constitute the granting of an Award under the Plan. An Employee who receives
an Award under the Plan will not, with respect to such Award, be deemed to have
become a Participant, or to have any rights with respect to such Award, unless
and until such Employee has executed an Award Agreement or other instrument
evidencing the Award and shall have delivered an executed copy thereof to the
Company, and has otherwise complied with the applicable terms and conditions of
the Award.
ARTICLE 4. STOCK SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Article
4.3 herein, the aggregate number of Shares of Stock subject to Awards under the
Plan shall not exceed 32,000. Stock delivered under the Plan may consist, in
whole or in part, of authorized and unissued Shares or treasury Shares.
4.2 Lapsed Awards. If any Award granted under this Plan terminates,
expires or lapses for any reason any Stock subject to such Award again shall be
available for the grant of an Award under the Plan.
4.3 Adjustments in Authorized Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, Stock
divided, split-up, share combination, or other change in the corporate
structure of the Company affecting the Stock, such adjustment shall be made in
the number and class of Shares which may be delivered under the Plan, and in
the number and class of and/or price of Shares subject to outstanding Options,
and Restricted Stock Awards granted under the Plan, as may be determined to be
appropriate and equitable by the Committee, in its sole discretion, to prevent
dilution or enlargement of rights; and provided that the
13
<PAGE> 14
number of Shares subject to any Award shall always be a whole number. Any
adjustment of an Incentive Stock Option under this paragraph shall be made in
such a manner so as not to constitute a "modification" within the meaning of
Section 425(h)(3) of the Code.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 Eligibility. Persons eligible to participate in this Plan
include all employees of the Company who, in the opinion of the members of the
Committee, are Key Employees. "Key Employees" may include employees who are
members of the Board, but may not include directors who are not full-time
employees.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may from time to time select from Key Employees, those of whom Awards
shall be granted and determine the nature and amount of each Award. No
employee shall have any rights to be granted an Award under this Plan.
ARTICLE 6. STOCK OPTIONS
6.1 Grant of Options. Subject to the terms and provisions of the
Plan, Options may be granted to Key Employees at anytime and from time to time
as shall be determined by the Committee. The Committee shall have complete
discretion in determining the number of Shares of Stock subject to Options
granted to each Participant. The Committee may grant any type of option to
purchase Stock that is permitted by law at the time of grant including, but not
limited to, ISOs and NSOs. However, no employee may receive an Award of
Incentive Stock Options that are first exercisable during any calendar year to
the extent that the aggregate Fair Market Value of the Stock (determined at the
time the options are granted) exceeds $100,000. Nothing in this Article 6
shall be deemed to prevent the grant of NSOs in excess of the maximum
established by Section 422A of the Code. Unless otherwise expressly provided
at the time of grant, options granted under the Plan will be NSOs.
14
<PAGE> 15
6.2 Option Agreement. Each Option grant shall be evidenced by an
option agreement that shall specify the type of option granted, the option
price, the vesting period and conditions of the options granted, the duration
of the option, the number of Shares of Stock to which the option pertains, and
such other provisions as the Committee shall determine. The option agreement
shall specify whether the option is intended to be an Incentive Stock Option
within the meaning of Section 422A of the Code, or a Nonqualified Stock Option
whose grant is intended not to fall under the Code provisions of Section 422A.
6.3 Option Price. The purchase price per share of Stock covered by
an Option shall not be less than 100% of the Fair Market Value of such Stock on
the date the option is granted.
An Incentive Stock Option granted to an Employee who, at the time of
grant owns (within the meaning of Section 425(d) of the Code) Stock possessing
more than 10% of the total combined voting power of all classes of Stock of the
Company, shall have an exercise price which is at least 110% of the Fair Market
Value of the Stock subject to the Option.
6.4 Duration of Options. Each Option shall expire at such time as
the Committee shall determine at the time of grant provided, however, that no
ISO shall be exercisable later than the tenth (10th) anniversary date of its
grant.
6.5 Exercise of Options. Options granted under the Plan shall be
exercisable at such time and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
all Participants.
6.6 Payment. Options shall be exercised by the delivery of a written
notice to the Company setting forth the number of Shares of Stock with respect
to which the Option is to be exercised, accompanied by full payment for the
Shares. The Option price upon exercise of any Option shall be payable to the
Company in full either (a) in cash or its equivalent, or (b) by tendering
Shares of previously acquired stock having a Fair Market Value at the time of
exercise equal to the total
15
<PAGE> 16
Option price, or (c) by combination of (a) and (b). The proceeds from such a
payment shall be added to the general funds of the Company and shall be used
for general corporate purposes. As soon as practicable, after receipt of
written notification and payment, the Company shall deliver to the participant,
Stock certificates in an appropriate amount based upon the number of Option
exercised, issued in the Participant's name.
6.7 Restrictions on Stock Transferability. The Committee shall
impose such restrictions on any Shares of Stock acquired pursuant to the
exercise of an Option under the Plan as it may deem advisable, including, with
limitation, restrictions under applicable Federal securities law, under the
requirements of any stock exchange upon which such Shares of Stock are then
listed and under any blue sky or state securities laws applicable to such
shares.
6.8 Termination of Employment Due to Death, Disability, or
Retirement. In the event the employment of a Participant is terminated by
reasons of death, any Outstanding Option shall be exercisable at any time prior
to the expiration date of the Options or within 90 days after such date of
termination of employment, whichever period is shorter, by such person or
persons as shall have acquired the Participant's rights under the Option by
will or by the laws of descent and distribution. In the event the employment
of Participant is terminated by reason of Disability, any Outstanding Options
shall be exercisable at any time prior to the expiration date of the Options or
within 90 days after such date of termination of employment, whichever period
is shorter. In the event the employment of a Participant is terminated by
reason of retirement (as defined under the then established rules of the
Company), any Outstanding Options shall be exercisable at any time prior to the
expiration date of the Options or within one year after such date of
termination of employment, whichever period is shorter. In the case of
Incentive Stock Options, the favorable tax treatment prescribed under Section
422A of the Internal Revenue Code of 1986, as amended may not be available if
the options are not exercised within the Section 422A prescribed time period
after
16
<PAGE> 17
termination of employment for death, disability, or retirement.
6.9 Termination of Employment for Other Reasons. If the employment
of the Participant shall terminate for any reason other than death, disability,
retirement, or for Cause, all Outstanding Options shall terminate one month
after such date of termination. In its sole discretion, the Committee may
extend the exercisability of Outstanding Option for up to 180 days but,
however, in no event beyond the expiration date of the Option.
If the employment of the Participant shall terminate for Cause, rights
under all outstanding Options shall be immediately terminated upon termination
of employment.
6.10 Nontransferability of Options. No Option granted under the Plan
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of decent and distribution.
Further, all options granted to a Participant under the Plan shall be
exercisable during his lifetime only by such Participant.
ARTICLE 7. RESTRICTED STOCK
7.1 Grant of Restricted Stock. Subject to the terms and provisions
of the Plan, the Committee, at any time and from time to time, may grant Shares
of Restricted Stock under the Plan to such Participants and in such amounts as
it shall determine.
7.2 Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Agreement that shall specify the Period of
Restriction, or periods, the number of Restricted Stock Shares granted, and
such other provisions as the Committee shall determine.
7.3 Transferability. Except as provided in this Article 7, the
Shares of Restricted Stock granted hereunder may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated until the termination
of the applicable Period of Restriction or for such period of time as shall be
established by the Committee and as shall be specified in the Restricted Stock
Agreement, or upon earlier satisfaction of other conditions as specified by the
Committee in its sole discretion
17
<PAGE> 18
and set forth in the Restricted Stock Agreement. All rights with respect to
the Restricted Stock granted to a Participant under the Plan shall be
exercisable during his lifetime only by such Participant.
7.4 Other Restrictions. The Committee shall impose such other
restrictions on any Shares of Restricted Stock granted pursuant to the Plan as
it may deem advisable including, without limitation, restrictions under
applicable Federal or state securities laws, and may legend the certifications
representing Restricted Stock to give appropriate notice of such restrictions.
7.5 Certificate Legend. In addition to any legends placed on
certificates pursuant to Section 7.4 herein, each certificate representing
Shares of Restricted Stock granted pursuant to the Plan shall bear the
following legend:
"The sale or other transfer of the Shares of Stock represented by this
certificate, whether voluntary, involuntary, or by operation of law,
is subject to certain restrictions on transfer set forth in the 1995
Stock Option Plan of Wolfhoya Investments, Inc., in the rules and
administrative procedures adopted pursuant to such Plan, and in a
Restricted Stock Agreement dated ______. A copy of the Plan, such
rules and procedures, and such Restricted Stock Agreement may be
obtained from the Secretary of Wolfhoya Investments, Inc."
7.6 Removal of Restrictions. Except as otherwise provided in this
Article, Shares of Restricted Stock covered by each Restricted Stock
grant made under the Plan shall become freely transferable by the Participant
after the last day of the Period of Restriction. Once the Shares are released
from the restrictions, the Participant shall be entitled to have the legend
required by Article 7.5 removed from his Stock certificate.
7.7 Voting Rights. During the Period of Restriction, Participants
holding Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares.
7.8 Dividends and Other Distributions. During the Period of
Restriction, participants
18
<PAGE> 19
holding Shares of Restricted Stock granted hereunder shall be entitled to
receive all dividends and other distributions paid with respect to those Shares
while they are so held. If any such dividends or distributions are paid in
Shares of Stock, the Shares shall be subject to the same restrictions on
transferability as the Shares of Restricted Stock with respect to which they
were paid.
7.9 Termination of Employment Due to Retirement. In the event that a
Participant terminates his employment with the Company because of normal
retirement (as defined under the then established rules of the Company), any
remaining Period of Restriction applicable to the Restricted Stock pursuant to
Article 7.3 hereof shall automatically terminate and, except as otherwise
provided in Article 7.4, the Shares of Restricted Stock shall thereby be free
of restrictions and freely transferable. In the event that a Participant
terminates his employment with the Company because of early retirement (as
defined under the then established rules of the Company), the Committee, in its
sole discretion, may waive the restrictions remaining on any or all Shares of
Restricted Stock pursuant to Article 7.3 herein and add such new restrictions
to those Shares of Restricted Stock as it deems appropriate.
7.10 Termination of Employment Due to Death or Disability. In the
event a Participant's employment is terminated because of death or Disability
during the Period of Restriction, any remaining Period of Restriction
applicable to the Restricted Stock pursuant to Article 7.3 herein shall
automatically terminate and, except as otherwise provided in Article 7.4, the
Shares of Restricted Stock shall thereby be free of restrictions and fully
transferable.
7.11 Termination of Employment for Other Reasons. In the event that
a Participant terminates his employment with the Company for any reason other
than for Death, Disability, or Retirement, as set forth in Articles 7.9 and
7.10 herein, during the Period of Restriction, then any Shares of Restricted
Stock still subject to restrictions as of the date of such termination shall
automatically be forfeited and returned to the Company; provided, however,
that, in the event of an
19
<PAGE> 20
involuntary termination of employment of a Participant by the Company other
than for Cause, the Committee, in its sole discretion, may waive the automatic
forfeiture of any or all such Shares and may add such new restrictions to such
Shares of Restricted Stock as it deems appropriate.
7.12 Nontransferability of Restricted Stock. No shares of Restricted
Stock granted under the Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, otherwise than by will or by the laws of
descent and distribution until the termination of the applicable Period of
Restriction. All rights with respect to Restricted Stock granted to a
Participant under the Plan shall be exercisable during his lifetime only by
such Participant.
ARTICLE 8. BENEFICIARY DESIGNATION
8.1 Beneficiary Designation. Each Participant under the Plan may,
from time to time, name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
in case of his death before he receives any or all of such benefit. Each
designation will revoke all prior designations by the same Participant, shall
be in a form prescribed by the Committee, and will be effective only when filed
by the Participant in writing with the Committee during his lifetime. In the
absence of any such designation, benefits remaining unpaid at the Participant's
death shall be paid to the Participant's estate.
ARTICLE 9. RIGHTS OF EMPLOYEES
9.1 Employment. Nothing in the Plan shall interfere with or limit in
any way the right of the Company to terminate any Participant's employment at
any time, nor confer upon any Participant any right to continue in the employ
of the Company.
9.2 Participation. No employee shall have a right to be selected as
a Participant, or, having been so selected, to be selected again as a
Participant.
ARTICLE 10. CHANGE IN CONTROL
10.1 In General. In the event of a Change in Control of the Company
as defined, all awards
20
<PAGE> 21
under the Plan shall vest 100%, whereupon all Options shall become exercisable
in full, and the restrictions applicable to Restricted Stock shall terminate.
ARTICLE 11. AMENDMENT, MODIFICATION, AND TERMINATION
11.1 Amendment, Modification, and Termination. With the
approval of the Board, at any time and from time to time, the Committee
may terminate, amend, or modify the Plan. However, without the approval of the
stockholders of the Company (as may be required by the Code, by the insider
trading rules of Section 16 of the Exchange Act, by any national securities
exchange or system on which the Stock is then listed or reported, or by a
regulatory body having jurisdiction with respect hereto) no such termination,
amendment or modification may:
(a) Increase the total amount of Stock which may be issued under
this plan, except as provided in Article 4.3 herein; or
(b) Change the class of Employees eligible to participate in the
Plan; or
(c) Materially increase the cost of the Plan or materially
increase the benefits to Participants; or
(d) Extend the maximum period after the date of grant during
which Options may be exercised; or
(e) Change the provisions of the Plan regarding Option price.
11.2 Awards, Previously Granted. No termination, amendment or
modification of the Plan shall in any manner adversely affect any Award
theretofore granted under the Plan, without the written consent of the
Participant.
ARTICLE 12. WITHHOLDING
12.1 Tax Withholding. The Company shall have the power and the right
to deduct or withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy Federal, State and local taxes (including the
participant's FICA obligation) required by law to be withheld
21
<PAGE> 22
with respect to any grant, exercise, or payment made under or as a result of
this Plan.
12.2 Stock Withholding Elections. Subject to the consent of the
Committee, due to the exercise of a (a) Nonstatutory (Nonqualified) Stock
Option, (b) lapse of restrictions on Restricted Stock, or (c) the issuance of
any other Stock Award under the Plan, a Participant may make an irrevocable
election to (i) have shares of Stock otherwise issuable under (a) withheld, or
(ii) tender back to the Company shares of Stock received pursuant to (a), (b),
or (c), or (iii) deliver back to the Company pursuant to (a), (b), or (c)
previously-acquired shares of Stock having a Fair Market Value sufficient to
satisfy all or part of the Participant's estimated total federal, state, and
local tax obligations associated with the transaction. Such elections must be
made by a Participant on or prior to the Tax Date. The Committee may
disapprove of any election, may suspend or terminate the right to make
elections, or may provide with respect to any Award under the Plan that the
right to make elections shall not apply to such Awards.
12.3 Special Insider Stock Withholding Restrictions. Elections by
Participants who are subject to the short swing profit restrictions of Section
16(b) of the Securities Exchange Act of 1934 are subject to the following
additional restrictions: (a) the election may not be made within six months
after the grant of a Nonstatutory (nonqualified) Stock Option or Restricted
Stock Award (except that this limitation does not apply if the Participant dies
or becomes disabled prior tot he expiration of the six-month period), and (b)
the election must be made either (i) at least six months prior to the Tax Date
or (ii) on or prior to the Tax Date and during the period beginning on the
third business day and ending on the twelfth business day following the date on
which the Company has released for publication its regular quarterly (or, in
the case of the fourth quarter of its fiscal year, annual) summary financial
information. For purposes of the preceding sentence, "business day" shall mean
any calendar day other than Saturday, Sunday, or a national holiday.
12.4 Stock Withholding Delivery Requirements. Pursuant to rules
adopted by the Committee, when the Tax Date of a Participant is deferred
pursuant to Code Section 83(c)(3) until
22
<PAGE> 23
six months after the exercise of a Nonstatutory (Nonqualified) Stock Option the
participant does not make an election under Code Section 13.3 above, the full
number of shares of Stock shall be issued or transferred to the Participant
upon the exercise of the Nonstatutory (nonqualified) Stock Option, but the
Participant shall be unconditionally obligated to tender back or deliver to the
Company the proper number of shares on the Tax Date. When the Tax Date occurs
in connection with the lapse of restrictions on Restricted Stock and the
Participant elects share withholding, the Participant shall be unconditionally
obligated to tender back or deliver to the Company a sufficient number of
shares of Stock of the Company to satisfy the tax obligations on the Tax Date.
ARTICLE 13. INDEMNIFICATION
13.1 Indemnification. Each person who is or shall have been a member
of the Committee, or of the Board, shall be indemnified and held harmless by
the Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him in connection with or resulting from
any claim, action, suit, or proceeding to which he may be a party or in which
he may be involved by reason of any action taken or failure to act under the
Plan and against and from any and all amounts paid by him in settlement
thereof, with the Company's approval, or paid by him in satisfaction of any
judgement in any such action, suite, or proceeding against him, provided he
shall give the Company an opportunity, at its own expense, to handle and defend
the same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights
of indemnification to which such persons may be entitled under the Company's
Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or
any power that the Company may have to indemnify them or hold them harmless.
ARTICLE 14. SUCCESSORS
14.1 Successors. All obligations of the Company under the Plan, with
respect to Awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such
23
<PAGE> 24
successor is the result of a direct or indirect purchase, merger, consolidation
or otherwise, of all or substantially all of the business and/or assets of the
Company.
ARTICLE 15. REQUIREMENTS OF LAW
15.1 Requirements of Law. The granting of Awards and the issuance of
Shares of Stock under this Plan shall be subject to all applicable laws, rules,
and regulations, and to such approvals by an governmental agencies or national
securities exchanges as may be required.
15.2 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Illinois.
24
<PAGE> 25
ARTICLE 16. RIGHTS OF FIRST REFUSAL
16.1 Rights of First Refusal. If any Shares issued under the Plan
are not readily tradable on an established market on the date an employee or
his successor intends to sell such Shares, the employee or his successor may
offer such Shares to the Company for purchase at a price and the Company shall
have thirty days to exercise its right to purchase such Shares. Payment may be
in a lump sum or in substantially equal annual or more frequent installments
over a period not exceeding five years in the discretion of the Board. If the
Board selects a method of deferred payments, the unpaid balance shall earn
interest at a rate which is substantially equal to the rate at which the
Company could borrow the amount due and shall be secured by a pledge of the
Shares purchased or such other adequate security as agreed to by the Company
and the employee or his successor. For purposes of this Paragraph, Shares
shall be considered not readily tradable on an established market if such
Shares are not publicly tradable or because such Shares are subject to a
trading limitation under any Federal or state securities law or regulation
which would make such Shares less freely tradable than stock not so restricted.
25
<PAGE> 1
EXHIBIT 10.24
STORE LEASE
<TABLE>
<CAPTION>
TERM OF LEASE
DATE OF LEASE BEGINNING ENDING
<S> <C> <C>
12-29-95 4-1-96 4-30-96 = Abated rent
5-1-96 3-31-97 = $3330.00 per month
</TABLE>
MONTHLY RENT
Rider/letter of 12-28-95 attached to lease
$3300.00 per month
LOCATION OF PREMISES
202A So. Cook St., Barrington, Il. 60010
PURPOSE
<TABLE>
<CAPTION>
LESSEE LESSOR
<S> <C> <C> <C>
NAME - Wolf Hoya Investments Inc. NAME - Seger Enterprises Inc.
ADDRESS - 9029 Lincolnwood Dr. ADDRESS - 358 Old Sutton Rd.
CITY - Evanston, Il. 60203-1824 CITY - Barrington, Il. 60010
</TABLE>
In consideration of the mutual covenants and agreements herein stated,
Lessor hereby leases to Lessee and Lessee hereby leases from Lessor solely for
the above purpose the premises designated above (the "Premises"), together with
the appurtenances thereto, for the above Term.
LEASE COVENANTS AND AGREEMENTS
1. RENT. Lessee shall pay Lessor or Lessor's agent as rent for
the Premises the sum stated above, monthly in advance, until termination of
this lease, at Lessor's address stated above or such other address as Lessor
may designate in writing.
2. WATER, GAS AND ELECTRIC CHARGES. Lessee will pay, in addition
to the rent above specified, all water rents, gas and electric light and power
bills taxed, levied or charged on the Premises, for and during the time for
which this lease is granted, and in case said
<PAGE> 2
water rents and bills for gas, electric light and power shall not be paid when
due, Lessor shall have the right to pay the same, which amounts so paid,
together with any sums paid by Lessor to keep the Premises in a clean and
health condition, as herein specified, are declared to be so much additional
rent and payable with the installment of rent next due thereafter.
3. SUBLETTING; ASSIGNMENT. The Premises shall not be sublet in
whole or in part to any person other than Lessee, and Lessee shall not assign
this lease without, in each case, the consent in writing of Lessor first had
and obtained; nor permit to take place by any act or default of himself or any
person within his control any transfer by operation of law of Lessee's interest
created hereby; nor offer for lease or sublease the Premises, nor any portion
thereof, by placing notices or signs of "To Let," or any other similar sign or
notice in any place, nor by advertising the same in any newspaper or place or
manner whatsoever without, in each case, the consent in writing of Lessor first
had and obtained. If Lessee, or any one or more of the Lessees, if there be
more than one, shall make an assignment for the benefit of creditors, or shall
be adjudged a bankrupt, Lessor may terminate this lease, and in such event
Lessee shall at once pay Lessor a sum of money equal to the entire amount of
rent reserved by this lease for the then unexpired portion of the term hereby
created, as liquidated damages.
4. LESSEE NOT TO MISUSE. Lessee will not permit any unlawful or
immoral practice, with or without his knowledge or consent, to be committed or
carried on in the Premises by himself or by any other person. Lessee will not
allow the Premises to be used for any purpose that will increase the rate of
insurance thereon, nor for any purpose other than that hereinbefore specified.
Lessee will not keep or use or permit to be kept or used in or on the Premises
or any place contiguous thereto any flammable fluids or explosives, without the
written permission of Lessor first had and obtained. Lessee will not load
floors beyond the floor load rating prescribed by applicable municipal
ordinances. Lessee will not use or allow the use of the Premises for any
purpose whatsoever that will injure the reputation of the Premises or of the
building of which they are a part.
5. CONDITION ON POSSESSION. Lessee has examined and knows the
condition of the Premises and has received the same in good order and repair,
and acknowledges that no representations as to the condition and repair
thereof, and no agreements or promises to decorate, alter, repair or improve
the Premises, have been made by Lessor or his agent prior to or at the
execution of this lease that are not herein expressed.
6. REPAIRS AND MAINTENANCE. Lessee shall keep the Premises and
appurtenances thereto in a clean, sightly and healthy condition, and in good
repair, all according to the statutes and ordinances in such cases made and
provided, and the directions of public officers thereunto duly authorized, all
at his own expense, and shall yield the same back to Lessor upon the
termination of this lease, whether such termination shall occur by expiration
of the term, or in any other manner whatsoever, in the same condition of
cleanliness, repair and sightliness as at the date of the execution hereof,
loss by fire and reasonable wear and tear excepted. Lessee shall make all
necessary repairs and renewals upon Premises and replace broken globes, glass
and fixtures with material of the same size and quality as that broken and
2
<PAGE> 3
shall insure all glass in windows and doors of the Premises at his own expense.
If, however, the Premises shall not thus be kept in good repair and in a clean,
sightly and healthy condition by Lessee, as aforesaid, Lessor may enter the
same, himself or by his agents, servants or employees, without such entering
causing or constituting a termination of this lease or an interference with the
possession of the Premises by Lessee, and Lessor may replace the same in the
same condition of repair, sightliness, healthiness and cleanliness as existed
at the date of execution hereof, and Lessee agrees to pay Lessor, in addition
to the rent hereby reserved, the expenses of Lessor in thus replacing the
Premises in that condition. Lessee shall not cause or permit any waste, misuse
or neglect of the water, or of the water, gas or electric fixtures.
7. ACCESS TO PREMISES. Lessee shall allow Lessor or any person
authorized by Lessor free access to the Premises for the purpose of examining
or exhibiting the same, or to make any repairs or alterations thereof which
Lessor may see fit to make, and Lessee will allow Lessor to have placed upon
the Premises at all times notices of "For Sale" and "For Rent", and Lessee will
not interfere with the same.
8. NON-LIABILITY OF LESSOR. Except as provided by Illinois
statute, Lessor shall not be liable to Lessee for any damage or injury to him
or his property occasioned by the failure of Lessor to keep the Premises in
repair, and shall not be liable for any injury done or occasioned by wind or by
or from any defect of plumbing, electric wiring or of insulation thereof, gas
pipes, water pipes or steam pipes, or from broken stairs, porches, railings or
walks, or from the backing up of any sewer pipe or down-spout, or from the
bursting, leaking or running of any tank, tub, washstand, water closet or waste
pipe, drain, or any other pipe or tank in, upon or about the Premises or the
building of which they are a part nor from the escape of steam or hot water
from any radiator, it being agreed that said radiators are under the control of
Lessee, nor for any such damage or injury occasioned by water, snow or ice
being upon or coming through the roof, skylight, trap-door, stairs, walks or
any other place upon or near the Premises, or otherwise, nor for any such
damage or injury done or occasioned by the falling of any fixture, plaster or
stucco, nor for any damage or injury arising from any act, omission or
negligence of co-tenants or of other persons, occupants of the same building or
of adjoining or contiguous buildings or of owners of adjacent or contiguous
property, or of Lessor's agents or Lessor himself, all claims for any such
damage or injury being hereby expressly waived by Lessee.
9. RESTRICTIONS (SIGNS, ALTERATIONS, FIXTURES). Lessee shall not
attach, affix or exhibit or permit to be attached, affixed or exhibited, except
by Lessor or his agent, any articles of permanent character or any sign,
attached or detached, with any writing or printing thereon, to any window,
floor, ceiling, door or wall in any place in or about the Premises, or upon any
of the appurtenances thereto, without in each case the written consent of
Lessor first had and obtained; and shall not commit or suffer any waste in or
about said premises; and shall make no changes or alterations in the Premises
by the erection of partitions or the papering of walls, or otherwise, without
the consent in writing of Lessor; and in case Lessee shall affix additional
locks or bolts on doors or window, or shall place in the Premises lighting
fixtures or any fixtures of any kind, without the consent of Lessor first had
and
3
<PAGE> 4
obtained, such locks, bolts and fixtures shall remain for the benefit of
Lessor, and without expense of removal or maintenance to Lessor. Lessor shall
have the privilege of retaining the same if he desires. If he does not desire
to retain the same, he may remove and store the same, and Lessee agrees to pay
the expense of removal and storage thereof. The provisions of this paragraph
shall not however apply to Lessee's trade fixtures, equipment and movable
furniture.
10. HEAT. Where building is equipped for the purpose, Lessor
shall furnish to Lessee a reasonable amount of heat, from October 1st to May
1st, whenever in Lessor's judgment necessary for comfortable use of the
Premises, during customary business hours (excluding Sundays and holidays), but
not earlier than 8 a.m. nor later than 6 p.m. unless specifically stated
herein. Lessor does not warrant that heating service will be free from
interruptions caused by strike, accident or other cause beyond the reasonable
control of Lessor, or by renewal or repair of the heating apparatus in the
building. Any such interruption shall not be deemed an eviction or disturbance
of Lessee's use and possession of Premises, nor render Lessor liable to Lessee
in damages. All claims against Lessor for injury or damage arising from
failure to furnish heat are hereby expressly waived by Lessee.
11. FIRE AND CASUALTY. In case the Premises shall be rendered
untenantable by fire, explosion or other casualty, Lessor may, at his option,
terminate this lease or repair the Premises within sixty days. If Lessor does
not repair the Premises within said time, or the building containing the
Premises shall have been wholly destroyed, the term hereby created shall cease
and terminate.
12. TERMINATION; HOLDING OVER. At the termination of the term of
this lease, by lapse of time or otherwise, Lessee will yield up immediate
possession of the Premises to Lessor, in good condition and repair, loss by
fire and ordinary wear excepted, and will return the keys therefor to Lessor at
the place of payment of rent. If Lessee retains possession of the Premises or
any part thereof after the termination of the term by lapse of time or
otherwise, then Lessor may at its option within thirty days after termination
of the term serve written notice upon Lessee that such holding over constitutes
either (a) renewal of this lease for one year, and from year to year
thereafter, at double the rental (computed on an annual basis) specified in
Section 1, or (b) creation of a month to month tenancy, upon the terms of this
lease except at double the monthly rental specified in Section 1, or (c)
creation of a tenancy at sufferance, at a rental of $150.00 dollars per day,
for the time Lessee remains in possession. If no such written notice is served
then a tenancy at sufferance with rental as stated at (c) shall have been
created. Lessee shall also pay to Lessor all damages sustained by Lessor
resulting from retention of possession by Lessee. The provisions of this
paragraph shall not constitute a waiver by Lessor of any right of re-entry as
hereinafter set forth; nor shall receipt of any rent or any other act in
apparent affirmance of tenancy operate as a waiver of the right to terminate
this lease for a breach of any of the covenants herein.
13. LESSOR'S REMEDIES. If Lessee shall vacate or abandon the
Premises or permit the same to remain vacant or unoccupied for a period of ten
days, or in case of the non-payment of the rent reserved hereby, or any part
thereof, or of the breach of any covenant in
4
<PAGE> 5
this lease contained Lessee's right to the possession of the Premises thereupon
shall terminate with or (to the extent permitted by law) without any notice or
demand whatsoever, and the mere retention of possession thereafter by Lessee
shall constitute a forcible detainer of the Premises; and if the Lessor so
elects, but not otherwise, and with or without notice of such election or any
notice or demand whatsoever, this lease shall thereupon terminate, and upon the
termination or Lessee's right of possession, as aforesaid, whether this lease
be terminated or not, Lessee agrees to surrender possession of the Premises
immediately, without the receipt of any demand for rent, notice to quit or
demand for possession of the Premises whatsoever, and hereby grants to Lessor
full and free license to enter into and upon the Premises or any part thereof,
to take possession thereof with or (to the extent permitted by law) without
process of law, and to expel and to remove Lessee or any other person who may
be occupying the Premises or any part thereof, and Lessor may use such force in
and about expelling and removing Lessee and other persons as may reasonably be
necessary, and Lessor may re-possess himself of the Premises as of his former
estate, but such entry of the Premises shall not constitute a trespass or
forcible entry or detainer, nor shall it cause a forfeiture of rents due by
virtue thereof, nor a waiver of any covenant, agreement or promise in this
lease contained, to be performed by Lessee. Lessee hereby waives all notice of
any election made by Lessor hereunder, demand for rent, notice to quit, demand
for possession, and any and all notices and demand whatsoever, of any and every
nature, which may or shall be required by any statute of this state relating to
forcible entry and detainer, or to landlord and tenant, or any other statute,
or by the common law, during the term of this lease or any extension thereof.
The acceptance of rent, whether in a single instance or repeatedly, after it
falls due, or after knowledge of any breach hereof by Lessee, or the giving or
making of any notice or demand, whether according to any statutory provision or
not, or any act or series of acts except an express written waiver, shall not
be construed as a waiver of Lessor's rights to act without notice or demand or
of any other right hereby given Lessor, or as an election not to proceed under
the provisions of this lease.
14. RIGHT TO RELET. If Lessee's right to the possession of the
Premises shall be terminated in any way, the Premises, or any part thereof,
may, but need not (except as provided by Illinois statute), be relet by Lessor,
for the account and benefit of Lessee, for such rent and upon such terms and to
such person or persons and for such period or periods as may seem fit to the
Lessor, but Lessor shall not be required to accept or receive any tenant
offered by Lessee, nor to do any act whatsoever or exercise any diligence
whatsoever, in or about the procuring of any care or diligence by Lessor in the
reletting thereof; and if a sufficient sum shall not be received from such
reletting to satisfy the rent hereby reserved, after paying the expenses of
reletting and collection, including commissions to agents, and including also
expenses of redecorating. Lessee agrees to pay and satisfy all deficiency; but
the acceptance of a tenant by Lessor, in place of Lessee, shall not operate as
a cancellation hereof, nor to release Lessee from the performance of any
covenant, promise or agreement herein contained, and performance by any
substituted tenant by the payment of rent, or otherwise, shall constitute only
satisfaction pro tanto of the obligations of Lessee arising hereunder.
15. COSTS AND FEES. Lessee shall pay upon demand all Lessor's
costs, charges and expenses, including fees of attorneys, agents and others
retained by Lessor, incurred in
5
<PAGE> 6
enforcing any of the obligations of Lessee under this lease or in any
litigation, negotiation or transaction in which Lessor shall, without Lessor's
fault, become involved through or on account of this lease.
16. CONFESSION OF JUDGMENT. Lessee hereby irrevocably constitutes
and appoints any attorney of any court of record in this State, to be his true
and lawful attorney for him and in his name and stead, to enter his appearance
in any suit or suits that may be brought in any court in this State at any time
when any money is due hereunder for rent or otherwise, to waive the issuing of
process and service thereof and trial by jury or otherwise, and to confess a
judgment or judgments for such money so due and for costs of suit and for
reasonable attorney's fees in favor of Lessor, and to release all errors that
may occur or intervene in such proceedings, including the issuance of execution
upon any such judgment, and to stipulate that no writ of error or appeal shall
be prosecuted from such judgment or judgments, nor any bill in equity filed,
nor any proceedings of any kind taken in law or equity to interfere in any way
with the operation of such judgment or judgments or of execution issued thereon
and to consent that execution may immediately issue thereon.
17. LESSOR'S LIEN. Lessor shall have a first lien upon the
interest of Lessee under this lease, to secure the payment of all moneys due
under this lease, which lien may be foreclosed in equity at any time when money
is overdue under this lease; and the Lessor shall be entitled to name a
receiver of said leasehold interest, to be appointed in any such foreclosure
proceeding, who shall take possession of said Premises who may relet the same
under the orders of the court appointing him.
18. REMOVAL OF OTHER LIENS. In event any lien upon Lessor's title
results from any act or neglect of Lessee, and Lessee fails to remove said lien
within ten days after Lessor's notice to do so, Lessor may remove the lien by
paying the full amount thereof or otherwise and without any investigation or
contest of the validity thereof, and Lessee shall pay Lessor upon request the
amount paid out by Lessor in such behalf, including Lessor's costs, expenses
and counsel fees.
19. REMEDIES NOT EXCLUSIVE. The obligation of Lessee to pay the
rent reserved hereby during the balance of the term hereof, or during any
extension hereof, shall not be deemed to be waived, released or terminated, nor
shall the right and power to confess judgment given in paragraph 16 hereof be
deemed to be waived or terminated by the service of any five-day notice, other
notice to collect, demand for possession, or notice that the tenancy hereby
created will be terminated on the date therein named, the institution of any
action of forcible detainer or ejectment or any judgment for possession that
may be rendered in such action, or any other act or acts resulting in the
termination of Lessee's right to possession of the Premises. The Lessor may
collect and receive any rent due from Lessee, and payment or receipt thereof
shall not waive or affect any such notice, demand, suit or judgment, or in any
manner whatsoever waive, affect, change, modify or alter any rights or remedies
which Lessor may have by virtue hereof.
6
<PAGE> 7
20. NOTICES. Notices may be served on either party, at the
respective addresses given at the beginning of this lease, either (a) by
delivering or causing to be delivered a written copy thereof, or (b) by sending
a written copy thereof by United States certified or registered mail, postage
prepaid, addressed to Lessor or Lessee at said respective addressees in which
event the notice shall be deemed to have been served at the time the copy is
mailed.
21. MISCELLANEOUS. (a) Provisions typed on this lease and all
riders attached to this lease and signed by Lessor and Lessee are hereby made a
part of this lease.
(b) Lessor shall keep and observe such reasonable rules
and regulations now or hereafter required by Lessor, which may be necessary for
the proper and orderly care of the building of which the Premises are a part.
(c) All covenants, promises, representations and
agreements herein contained shall be binding upon, apply and inure to the
benefit of Lessor and Lessee and their respective heirs, legal representatives,
successors and assigns.
(d) The rights and remedies hereby created are cumulative
and the use of one remedy shall not be taken to exclude or waive the right to
the use of another.
(e) The words "Lessor" and "Lessee" wherever used in this
lease shall be construed to mean Lessors or Lessees in all cases where there is
more than one Lessor or Lessee, and to apply to individuals, male or female, or
to firms or corporations, as the same may be described as Lessor or Lessee
herein, and the necessary grammatical changes shall be assumed in each case as
though fully expressed. If there is more than one Lessee the warrant of
attorney in paragraph 16 is given jointly and severally and shall authorize the
entry of appearance of, and waiver of issuance of process and trial by jury by,
and confession of judgment against any one or more of such Lessees, and shall
authorize the performance of every other act in the name of and on behalf of
any one or more of such Lessees.
22. SEVERABILITY. If any clause, phrase, provision or portion of
this lease or the application thereof to any person or circumstance shall be
invalid, or unenforceable under applicable law, such event shall not affect,
impair or render invalid or unenforceable the
7
<PAGE> 8
remainder of this lease nor any other clause, phrase, provision or portion
hereof, nor shall it affect the application of any clause, phrase, provision or
portion hereof to other persons or circumstances.
WITNESS the hands and seals of the parties hereto, as of the Date of
Lease stated above.
<TABLE>
<S> <C> <C> <C>
LESSEE: LESSOR:
(SEAL) (SEAL)
--------------------------------------------- --------------------------------------------
Lemuel H. Tate, Vice President
Wolfhoya Investments, Inc.
(SEAL) (SEAL)
--------------------------------------------- --------------------------------------------
</TABLE>
ASSIGNMENT BY LESSOR
On this ________________, 19___, for value received, Lessor hereby
transfers, assigns and sets over to __________________________, all right,
title and interest in and to the above Lease and the rent thereby reserved,
except rent due and payable prior to _______________, 19___.
<TABLE>
<S> <C>
(SEAL) (SEAL)
--------------------------------------------- --------------------------------------------
(SEAL) (SEAL)
--------------------------------------------- --------------------------------------------
</TABLE>
GUARANTEE
On this __________________, 19___, in consideration of Ten Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the undersigned Guarantor hereby guarantees
the payment of rent and performance by Lessee, Lessee's heirs, executors,
administrators, successors or assigns of all covenants and agreements of the
above Lease.
<TABLE>
<S> <C>
(SEAL) (SEAL)
--------------------------------------------- --------------------------------------------
(SEAL) (SEAL)
--------------------------------------------- --------------------------------------------
</TABLE>
8
<PAGE> 9
LEMUEL H. TATE
-
9029 LINCOLNWOOD DRIVE - EVANSTON, ILLINOIS 60203
December 28, 1995
ATTACHED TO AND PART OF
LEASE DATED 12-29-95.
Mrs. Raynette Seger
Seger Enterprises, Inc.
Real Estate Management
358 Old Sutton Road
Barrington Hills, Illinois 60010
Subject: Proposed lease on Commercial Premises at 202A South Cook Street,
Barrington, Illinois 60010 -- approximately 2860 square feet on
first floor and approximately 2145 square feet in basement
Dear Mrs. Seger:
We are pleased to provide you with the proposed "Rider" conditions for the
above property. We understand that a "Cole" standard commercial lease will
include the following "Rider" conditions:
$3,300.00 security deposit payable upon acceptance and non-refundable if lease
is not consummated within one year.
If we give written notice to the lessor, the lessor will give a 30 day written
notice to the current tenant to vacate the premises. At that point the rent of
$3,300.00 per month would begin for a period of one year. If we vacate early,
best efforts must be used to find a new tenant to cancel our remaining balance
of the one year lease.
We would require, as an option, a second year lease at an annual increase not
to exceed the Chicago Area Consumer Price Index as published.
The lease will not be executed until we receive the necessary approval of all
local, state and federal agencies for a financial institution. This
contingency may be waived by the lessee at their own discretion.
Remodeling expenses to meet our specifications would be at the expense of the
lessee. Lessor shall not withhold approval with undue restraints to complete
work.
Lessor will provide access and schematics of space for use of lessee in
preparing architectural and construction drawings.
If you should have any further questions, please contact me at 708-675-5445.
Sincerely,
Lemuel H. Tate
<PAGE> 1
[AMOCO LOGO] Exhibit 10.25
SS#
15093
-------------------------
201 S. Hough Barrington,IL
Real Estate Contract
(Surplus Property)
26-884-SP9(3-94) E
THIS CONTRACT, made this 25 day of March, 1996, between Amoco Oil Company, a
Maryland corporation, with offices at 200 East Randolph, Mail Code 1408B,
Chicago, IL 60601, hereinafter called Seller, and Wolfhoya Investments, Inc.,
whose address is 9029 Lincolnwood Drive, Evanston, IL 60203 hereinafter called
Purchaser.
WITNESSETH:
That in consideration of the mutual covenants and agreements herein
contained, Seller hereby agrees to sell, and Purchaser hereby agrees to buy,
for the price of FOUR HUNDRED TWENTY FIVE THOUSAND AND NO/100 Dollars
($425,000.00 ), and upon the terms and conditions hereinafter set forth, the
real estate described in Attachment #1 annexed hereto and made a part hereof,
together with all improvements located thereon (the "Property", and the
personal property and equipment, if any, set forth in Bill of Sale labelled
Exhibit "A" annexed hereto and made a part hereof; all other trade fixtures and
equipment are excepted.
Seller hereby agrees, subject to the conditions hereinafter set forth, to
convey title to the Property to Purchaser by Special Warranty Deed, subject
to:
(1) Existing leases, easements, sidetrack and license agreements, if any,
whether of record or not.
(2) Covenants and conditions of record, if any.
(3) Taxes and special assessments against the Property, if any.
(4) Zoning laws and municipal regulations, if any; environmental laws
and regulations, if any; building line restrictions, use
restrictions and building restrictions of record, if any; and any
party wall agreements of record.
(5) Encroachments, overlaps and other matters which would be disclosed by an
accurate current survey.
(6) The Release and Right-of-Entry as hereinafter set forth.
(7) The following covenants and agreements of the Purchaser:
"The Grantee(s) herein and hereby covenant(s) and agree(s) for
Them, selves, and Their, heirs, executors and assigns, that no part of the
real estate herein conveyed shall be used by said grantee(s) heirs,
executors, grantees or assigns, for the purpose of conducting or carrying
on the business of selling, handling or dealing in gasoline, diesel fuel,
kerosene, benzol, naphtha, greases, lubricating oils, or any fuel used
for internal combustion engines, or lubricants in any form."
"The foregoing restriction shall terminate and be of no further force
and effect upon the expiration of a period of 10 years from the date
hereof."
"The foregoing covenants shall run with the land and be binding on said
Grantee(s) Their , heirs, executors, grantees and assigns, and inure to
the benefit of the Grantor herein, its successors and assigns."
It is further agreed between Seller and Purchaser that:
1. Purchaser has deposited with Seller the sum of
FIVE THOUSAND AND NO/100 TO BE INCREASED TO $21,250 AND NO/100
Dollars ($5000.00), as earnest money to be applied against the
purchase price. On the date of closing as set forth in Paragraph 13 (the
"Closing Date"), Purchaser agrees to pay to Seller the balance of the purchase
price in the amount of FOUR HUNDRED THREE THOUSAND SEVEN HUNDRED FIFTY AND
NO/100 Dollars ($403,750.00).
<PAGE> 2
2. Seller agrees to furnish to Purchaser within thirty (30) days from the
date hereof a preliminary title report or commitment to insure title to the
Property issued by a responsible title insurance company, or the equivalent
under the Torrens Act in the event that the Property is registered under the
Torrens System, showing title in Seller subject only to the exceptions above
specified and the usual exclusions and exceptions contained in standard title
insurance policies.
3. Purchaser shall, within thirty (30) days after receiving said title report
or commitment, deliver to Seller a written statement of any objection to the
title or a written statement to the effect that the title is satisfactory. In
the event Seller does not receive Purchaser's written statement of objections
within such thirty (30) day period, it shall be conclusively presumed that
Purchaser has waived all objections to title. In the event there are
objections to the title, Seller shall be allowed thirty (30) days or until
the Closing Date, whichever is longer, to cure the same, and should such
objections be not cured or waived within such period, then Seller agrees to
refund the earnest money deposit, this agreement shall thereafter be
inoperative and void and neither Seller nor Purchaser shall have further
liability hereunder.
4. Purchaser's obligation to close hereunder shall be subject to Purchaser, at
Purchaser's sole cost and expense, inspecting or causing an inspection to be
made by qualified professionals on Purchaser's behalf of the Property and
other assets described herein, including at Purchaser's option, environmental
inspections or tests for hydrocarbons or for any toxic or hazardous
substances. Purchaser, his agents or employees may enter upon the Property for
the purpose of making such inspections and tests; provided, however, that
Purchaser shall schedule such inspections and tests with Seller, who shall
have the right to have a representative present at all times during
inspections and tests performed by Purchaser; that Purchaser shall provide to
Seller complete copies of the results of all such inspections and tests; that
the results of such tests shall be confidential and shall not be reproduced or
disclosed by Purchaser to anyone without written consent of Seller; that
Purchaser shall promptly repair any and all damages to the Property caused by
that such activities, and shall restore the property to the same condition as
before the inspections or tests to the satisfaction of Seller; that such
inspections and tests shall not be conducted in such a manner as to interfere
with business operations conducted on the Property; and that Purchaser shall
indemnify and hold Seller harmless from and against any and all claims arising
from or by reason of Purchaser's entry upon the Property. In the event such
inspections disclose conditions unsatisfactory to Purchaser in
Purchaser's sole discretion, and Purchaser so notifies Seller in
writing on or before August 17, 1996, then this Contract shall become null and
void, and Seller shall return the earnest money deposit to Purchaser. In the
event Seller does not receive Purchaser's written notice by such date, it shall
be conclusively presumed that Purchaser has satisfied or has waived this
contingency.
5. Purchaser expressly acknowledges and agrees (i) that the Property has been
used as a retail gasoline station; (ii) that Purchaser is relying on the
results of his own investigation of the physical and environmental condition
of the Property; (iii) that Purchaser is relying solely on his own judgment in
completing the purchase of the Property, and (iv) that Purchaser is acquiring
the Property "as is" with all faults on the date of conveyance, except as set
forth in this Contract. Seller makes no representations or warranties
whatsoever regarding the condition of the real estate or improvements,
including but not limited to the environmental condition of the Property and
warranties of merchantability or fitness for a particular purpose.
6. Seller agrees to remove the underground tanks and product lines now on the
Property and to backfill the tank hole(s) within thirty (30) days after the
Closing Date, subject to the availability of labor, weather conditions, and
other factors beyond Seller's control. Purchaser hereby grants to Seller the
right to enter on the Property, agrees to cooperate with Seller in the removal
of the existing tanks and lines, and hereby releases Seller from all claims of
loss of profits or interference with Purchaser's business resulting therefrom.
Purchaser hereby expressly assumes all responsibility for grading, compacting
and resurfacing the Property.
7. Purchaser acknowledges receipt of copies of the assessments, reports and/or
correspondence regarding the Property, copies of which are labelled Exhibit
'B' annexed hereto and made a part hereof. Purchaser further acknowledges that
additional assessments or diagnostic measures may be required to be performed
upon the Property to determine and to design and implement a reasonable and
cost effective plan for remediation of hydrocarbon contamination, and that
such assessments and remediation activities may be disruptive of Purchaser's
use and occupancy of the Property and may continue for an indefinite period of
time. Notwithstanding the foregoing, Purchaser desires to complete the
purchase of the Property and agrees to cooperate with Seller in the
performance of assessment and remediation activities after the Closing Date.
8. Seller agrees to perform reasonable and cost effective assessment
and remediation measures to address hydrocarbon contamination on the Property
caused by Seller prior to the Closing Date as deemed necessary or advisable by
Seller, in its sole discretion, or as Seller is required to perform by the
ILLINOIS ENVIRONMENTAL PROTECTION AGENCY (the 'Department'), for a period of
time ending upon expiration of the petroleum restriction set forth in (7)
above, or sooner as hereinafter provided (the 'Ending Date'); provided,
however, at such sooner time as (i) no further remediation activities are
required from Seller by the Department, or (ii) any gasoline, diesel fuel,
kerosene, benzol, naphtha or any fuel used for internal combustion engine is
sold, handled or stored on the Property; or (iii) Purchaser shall materially
default in compliance with any applicable environmental law or regulation, or
shall otherwise default in the performance of any material covenant of this
Contract relating to environmental contamination, assessment or remediation,
including but not limited to Paragraph 10 hereafter, or (iv) a material spill,
leak, or other release of hydrocarbons or other contamination occurs following
the Closing Date which makes Seller's remedial work significantly more
difficult, or significantly increases the cost or extends the time to complete
the remedial work, then Seller shall thereafter have no further responsibility
to Purchaser, or to Purchaser's heirs, personal representatives, grantees,
successors and assigns, or to anyone claiming by, through or under Purchaser,
for remediation of any contamination on the Property and all indemnity
obligations of Seller shall end.
9. For the period of time commencing on the Closing Date, and ending on the
Ending Date, Seller agrees to indemnify and hold harmless Purchaser and
Purchaser's heirs, legal representatives and successors (collectively the
"Indemnified Purchaser Parties"), from and against all claims, demands,
damages, losses, judgments, penalties and liabilities which arise as a result
of any enforcement action resulting from the presence of hydrocarbon
contamination on the Property caused by Seller's use thereof prior to the
Closing Date; provided, however, that (i) Seller's indemnity shall be limited
to remediation costs actually incurred by or imposed upon Indemnified
Purchaser Parties as a result of such enforcement action, (ii) Indemnified
Purchaser Parties shall promptly notify Seller and provide to Seller copies of
all notices received by Indemnified Purchaser Parties pertaining to any such
enforcement action, and (iii) Indemnified Purchaser Parties shall incur no
costs or expenses for remediation without the prior written consent of Seller.
Page 2 - REAL ESTATE CONTRACT For Purchaser...Dated
(Surplus Property) Wolfhoya Investments, Inc., 25 March, 1996
<PAGE> 3
10. As of the Closing Date, Purchaser hereby expressly assumes all
responsibility and liability for compliance with all environmental laws and
regulations and for any environmental assessment, inspection, monitoring and
remediation relating to or resulting from Purchaser's use of the Property.
Purchaser shall, at Seller's request, provide to Seller assurance of
compliance with all environmental laws and regulations, including but not
limited to the results of all future environmental tests, product inventory
data, tank gauging data, tank leak detection data and sampling data; shall
promptly notify Seller of all leaks, spills or releases of hydrocarbons or
other regulated substances which occur or of which Purchaser becomes aware;
and shall, at Seller's request, permit Seller to perform product tracing and
other reasonable tests and procedures during the period of any assessment or
remediation activities by Seller, it being the intent of the parties that
Purchaser shall be responsible and liable for any and all spills, leaks and
releases which occur subsequent to the Closing Date. Commencing on the Closing
Date, Purchaser agrees, collectively, and jointly and severally, for
themselves and on behalf of their agents, employees, heirs, personal
representatives, grantees, successors and assigns (collectively "Purchaser
Indemnifying Parties"), to indemnify and hold harmless Seller, its parent,
affiliates, and each of their respective agents, employees, officers,
directors, shareholders, successors and assigns (collectively the "Indemnified
Seller Parties") from and against all claims, demands, damages, losses,
liabilities, judgments, penalties, suits, actions, costs and expenses
(including consultants' and attorneys' fees) arising from the presence of
hydrocarbon or other contamination occurring after the Closing Date; provided,
however, that from and after the Ending Date, Purchaser Indemnifying Parties
shall indemnify and hold harmless the Indemnified Seller Parties from and
against all claims, demands, damages, losses, judgments, penalties, suits,
actions, costs and expenses (including consultants' and attorneys' fees)
arising from all contamination of the Property.
11. Seller reserves the right, for itself, its agents, employees, successors
and assigns, to enter upon the Property, both before and after the Closing
Date, for the purpose of (i) engaging in environmental assessment, inspection,
monitoring and remediation, including but not limited to the installation of
such facilities and the conduct of such activities as deemed necessary or
advisable by Seller, in its sole discretion, or as are required by
governmental authorities having jurisdiction, for a period of time required to
comply with any applicable environmental laws or regulations affecting the
Property, and (ii) removing from the Property any property and equipment not
sold hereunder. Seller shall not be liable for any damages to Purchaser,
direct or indirect, resulting from contamination of the Property existing on
the Closing Date or for any interruption or interference with any business or
activities being conducted on the Property, or loss of opportunity, or any
other loss, damage, cost or expense of any kind whatsoever, caused by or
resulting from the condition of the Property or the performance of any
activities authorized herein; provided, however, Seller shall use reasonable
efforts to minimize such interruption or interference. Purchaser agrees to
cooperate fully with Seller in the performance of the activities authorized
herein so as to minimize the time and expense to Seller, including the
granting of access to on-site utilities (e.g., electricity, sewer, and water),
if required for such activities, and further agrees that, during the period of
any assessment or remediation activities by Seller, (i) no construction or
improvements shall be made upon the Property which would impede or restrict
access to monitoring wells, remediation or monitoring equipment, or to the
hydrocarbon plume, or which would modify or affect the size, location or
nature of the plume without the prior written consent of Seller, which consent
shall not be unreasonably withheld; and (ii) no gasoline, diesel fuel or other
motor fuels shall be sold, handled or stored on the Property.
12. As further consideration without which Seller would not have entered
into this Contract, Purchaser agrees to execute and deliver to Seller at
closing the following documents: (i) the Bill of Sale in the form set forth
in Exhibit "A" annexed hereto and made a part hereof, and (ii) the Release
and Right-of-Entry in the form set forth in Exhibit "C" attached hereto and
made a part hereof, each of said documents to be effective as of the Closing
Date.
13. The Closing Date shall be fifteen (15) days after all conditions
have been satisfied or waived, but not later than August 27, 1996.
Closing shall be effected through escrow with the title insurance company
acting as escrow agent for both parties. Seller shall deliver to the escrow
agent its Special Warranty Deed, any other documents required hereunder, and
all customary documents required by the title company not inconsistent with
this Contract. Purchaser shall deliver to the escrow agent the balance of the
purchase price in cash or certified funds, the Release and Right-of-Entry, any
other documents required hereunder, and all customary documents required by the
title company not inconsistent with this Contract. The escrow agent shall
record the Special Warranty Deed and the Release and Right-of-Entry; shall
deliver to Seller its Settlement Statement, a cashier's check for the purchase
price less Seller's expenses, and the recorded Release and Right-of-Entry; and
shall deliver to Purchaser its Settlement Statement, the recorded Special
Warranty Deed and the owner's title insurance policy. Seller shall pay the fees
for recording the Release and Right-of-Entry and the title insurance premium.
Purchaser shall pay the fees for recording the Special Warranty Deed. Seller
and Purchaser each agree to pay 50% of the escrow fee.
14. Rents and other current charges, if any, shall be adjusted pro rata as of
date of delivery of deed. General taxes for the year of closing shall be
prorated from January 1st to date of delivery of deed. If the amount of such
taxes is not then ascertainable, prorating shall be on the basis of the amount
of the most recent ascertainable taxes. Purchaser agrees to pay any and all
Federal, State, and local real estate transfer taxes and documentary stamp
taxes applicable to this transaction, and a present or future retailer's
occupation tax, sales, use, excise or similar tax applicable to the sale of
goods, equipment or other personal property covered by this Contract.
15. If, after the date of execution of this Contract and prior to closing, a
casualty loss occurs that results in damage or destruction such that greater
than five (5) percent of the value of improvements and equipment are damaged
or destroyed, then either party shall have the right to terminate this
Contract by notice to the other, in which case this Contract shall be deemed
null and void, the earnest money shall be returned to Purchaser, and neither
Seller nor Purchaser shall have any further liability under this Contract.
Seller shall have no duty whatsoever to restore any improvements or equipment
on the Property.
16. Seller and Purchaser each represent and warrant to the other that no
brokers or finders have been involved in this transaction, except
HIFFMAN SHAFFER ASSOCIATES & BRADBURY ROMEY EGAN & ("Realtor"), and that no
commissions or fees are due to any broker or to any other party with regard to
this transaction, except as set forth in the Commission Agreement labelled
Exhibit "D" annexed hereto and made a part hereof. Seller and Purchaser each
agree to indemnify, defend and hold the other harmless from any claims, loss,
damage, costs and expense arising from any breach hereof by the indemnifying
party.
Page 3 - REAL ESTATE CONTRACT For Purchaser...Dated
(Surplus Property) Wolfhoya Investments, Inc.- 25 March 1996
<PAGE> 4
17. (a) In the event of default hereunder by Purchaser prior to closing,
Seller's remedies shall include, in addition to specific performance and other
remedies available at law or in equity, terminating this Contract upon written
notice to Purchaser, in which event Seller may retain the earnest money at its
option as liquidated damages, and Seller or Purchaser shall thereafter have no
further claim against or liability to the other and this Contract shall be
inoperative and void.
(b) In the event of default hereunder by Seller prior to closing,
Purchaser's remedies shall include, in addition to specific performance and
other remedies available at law or in equity, terminating this Contract upon
written notice to Seller, in which event Seller expressly agrees to refund
to Purchaser the earnest money deposit, and Seller or Purchaser shall
thereafter have no further claim or liability against the other and this
Contract shall be inoperative and void.
18. All notices required or sent hereunder shall be in writing and delivered
in person, by messenger or other express delivery service, or by U.S. Mail
Certified, Return Receipt Requested, to the address of the other party as set
forth in the first paragraph of this Contract, or to such other address as the
parties may from time to time designate. A copy of any notice to Seller shall
also be sent to Amoco Oil Company 200 East Randolph Drive, Chicago, Illinois
60601, Attention: West Zone Real Estate. Each such notice shall be deemed
served and effective on the date of delivery or refusal, if delivered
personally, on the date of the delivery receipt, if delivered by messenger or
express service, or the date of mailing shown on the certified mail receipt,
if delivered by certified mail.
19. Purchaser acknowledges that Seller has made no representations or
warranties to Purchaser regarding (i) the economic viability, profitability
or business potential of the Property; (ii) the condition or suitability of
any assets sold to Purchaser for operating Purchaser's business or for any
other use; or (iii) the environmental condition or status of the Property.
20. This Contract and Exhibits "A" through "D" annexed hereto contain the
entire understanding and agreement between the parties hereto relative
to the subject matter hereof. No representations or statements, other than
those expressly set forth herein, were relied upon by the parties in entering
into this Contract. No modification, waiver of, addition to, or deletion from
the terms of this Contract shall be effective unless reduced to writing and
signed by Seller and Purchaser, each of whom expressly waives, releases and
forever forswears any right under ILLINOIS law which permits a contract, by its
terms amendable only in writing, to be orally amended.
21. Any covenant or provision hereof which by its nature requires observance
or performance after the Closing Date shall survive delivery of the deed and
shall continue in full force and effect.
22. The provisions hereof shall inure to the benefit of and bind the parties
hereto, their respective heirs, personal representatives, successors and
assigns. Purchaser shall not assign his rights under this Contract without
the prior written approval of Seller.
23. It is expressly understood and agreed that this Contract shall not be
binding on Seller unless and until it is executed on behalf of Seller by an
authorized representative and a signed copy thereof is delivered to
Purchaser.
In Witness Whereof, the parties hereto have duly signed these presents
the day and year first above written.
Witness: AMOCO OIL COMPANY, Seller
- ------------------------------ By /s/ Thomas J. Buehler
----------------------------------
THOMAS J. BUEHLER,
REAL ESTATE MANAGER
Taxpayer I.D. No. 36-2440313
------------------
Witness: PURCHASER
/s/ Wolfhoya Investments, Inc.
- ----------------------------- -------------------------------------
/s/ L.H. Tate, Vice President
- ----------------------------- -------------------------------------
L.H. TATE, VICE PRESIDENT
Taxpayer I.D. No. 36-4044480
-------------------
Page 4 - REAL ESTATE CONTRACT For Purchaser....Dated
(Surplus Property) Wolffhoya Investments, Inc. - 25 March 1996
<PAGE> 5
SS #15093
201 S. Hough & Station
Barrington, IL
ATTACHMENT #1
Property Description:
Lots 7 and 8 in Block 2 in "Village of Barrington", in the East
one-half of the Northwest quarter of Section 1, Township 42 North,
Range 9, East of the Third Principal Meridian, in Cook County,
Illinois.
<PAGE> 6
SS #15093
201 S. Hough & Station
Barrington, IL
ADDENDUM TO
REAL ESTATE CONTRACT
THIS ADDENDUM, attached to and made a part of that certain Real Estate
Contract dated the 25th day of March, 1996,is made and given as further
consideration for Seller's agreement to sell and Purchaser's agreement to buy
the Property.
WITNESSETH: It is further agreed as follows:
1. SURVEY ALLOWANCE. Seller shall give Purchaser a credit at closing up to the
amount of $2,000 upon presentation of an invoice for a current survey of the
property. Purchaser shall be totally responsible for obtaining the survey.
2. CONTINGENCIES.
APPROVALS. This sales agreement is wholly subject to Purchaser
securing State, FDIC and Federal Reserve Banking approvals for a
financial institution on the property within 145 days hereof. In the
event Purchaser is unable to secure such approvals within said 145
days, then the earnest money deposit made by Purchaser shall be
refunded by Seller and this agreement shall be declared null and void.
SPECIAL ASSESSMENTS. This sales ageement is contingent upon
Purchaser's verification that there are no special assessments against
the property and that none are planned. In the event Purchaser is
unable to satisfy this contingency then this agreement shall become
null and void at Purchaser's election and any and all earnest money
deposited by Purchaser shall be refunded by Seller.
IN WITNESS WHEREOF, the parties hereto have duly signed these presents all this
25th day of March, 1996.
WITNESS: AMOCO OIL COMPANY - Seller
By: /s/ Thomas Buehler
- ---------------------------------- ------------------------------------
Thomas Buehler, Real Estate Manager
WITNESS: WOLFHOYA INVESTMENTS, INC. - Purchaser
By: /s/ Lemuel H. Tate
- ---------------------------------- ------------------------------------
Lemuel H. Tate, Vice President
<PAGE> 7
SS # 15093
------------------------------
201 S. Hough, Barrington, IL
------------------------------
AMENDMENT OF REAL ESTATE CONTRACT
THIS AMENDMENT is hereby made a part of the annexed Real Estate
Contract, dated the 25th day of March, 1996, between AMOCO OIL COMPANY, a
Maryland corporation, therein and herein called Seller, and Wolfhoya
Investments, Inc., therein and herein called Purchaser (the "Contract").
WITNESSETH, that the Contract is further subject to the following
terms and conditions, to-wit:
1. Paragraph 8 of the Contract is hereby amended by adding
thereto the following:
A. For the purpose of this Paragraph 8, a material
spill, leak or other release of hydrocarbons or other contamination
which occurs at the Property following closing (a "subsequent
release") and is not caused by Seller shall be designated as either a
"Superseding Release" or a "Proportionate Release."
B. A "Superseding Release" shall mean a spill, leak or
other release of hydrocarbons or other contamination occurring after
Closing at the Property, which is not due to any negligence or other
wrongful conduct by Seller in performing remediation, and which
renders superfluous any continuing corrective action or remediation
efforts by Seller. For the purpose of this Paragraph 8, the
corrective action or remediation efforts of Seller shall be deemed to
have been rendered superfluous in circumstances which include, but are
not limited to the following: (i) if a subsequent release
significantly increases the cost to Seller or significantly extends
the time required to perform the corrective action or remediation
work, or (ii) if Seller has attained levels of residual contamination
approved by or meeting the criteria of the governmental agency having
jurisdiction for a "monitor only" course of remedial action before the
occurrence of a subsequent release. Upon the occurrence of a
Superseding Release, (i) Seller shall have no further responsibility
to Purchaser for corrective action or remediation of any contamination
of property impacted by the Superseding Release; (ii) any indemnity
obligation of Seller with regard to contamination of property impacted
by the Superseding Release shall end; and (iii) Purchaser Indemnifying
Parties shall thereafter indemnify and hold Indemnified Seller Parties
harmless from and against all claims, demands, damages, losses,
liabilities, judgments, penalties, suits, actions, cost and expenses
(including consultants' and attorneys' fees) from all contamination or
alleged contamination of the Property.
C. A "Proportionate Release" shall mean any spill, leak
or release of hydrocarbons or other contamination occurring after
Closing at the Property, which is not due to any negligence or other
wrongful conduct by Seller in performing remediation,
<PAGE> 8
and which is not a Superseding Release. For the purpose of this
Paragraph 8, a subsequent release shall be a Proportionate Release in
circumstances which include, but are not limited to the following:
(i) if such subsequent release is in a location physically removed
from any area in which Seller is engaged in remediation work and such
subsequent release does not significantly increase the quantity or
extent of the existing contamination to which Seller's remediation
work is directed, or (ii) if such subsequent release does not
significantly increase the cost to Seller or significantly extend the
time required to perform the corrective action or remediation work.
Upon the occurrence of a Proportionate Release, (i) Purchaser shall be
solely responsible for all assessment, corrective action, remediation
and monitoring activities necessary to address such subsequent release
in accordance with the requirements of the governmental agencies
having jurisdiction, (ii) Seller shall remain responsible for
continuing corrective action and remediation work to address
contamination caused by Seller provided, however, that Seller's
continuing obligations shall be limited to the cost to attain levels
of contamination necessary to obtain approval of the governmental
agency having jurisdiction for a "monitor only" course of remedial
action, absent such subsequent release; and (iii) the parties agree to
cooperate with each other and to coordinate corrective action and
remediation work in order to minimize the time and expense to both
parties in performing such activities.
D. In the event the parties cannot determine and agree
whether a material default by Purchaser has occurred under Paragraph
8(i) or whether a subsequent release is a Superseding Release or a
Proportionate Release, or in the event the parties cannot determine
and agree how to split or coordinate corrective action or remediation
work and/or costs, or otherwise resolve differences involving a
Proportionate Release, then such matters shall be submitted to
arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association by a single arbitrator appointed in
accordance with such rules. The decision of the arbitrator shall be
final, and judgment may be entered upon it in any court having
jurisdiction.
2. Paragraph 9 of the Contract is hereby amended by adding
thereto the following:
In addition, for the period of time commencing on the Closing
Date and ending 10 years thereafter, Seller shall indemnify
and hold harmless the Indemnified Purchaser Parties against
claims and demands made by a private third party unrelated to
Purchaser arising solely out of or pertaining solely to the
presence of hydrocarbon contamination originating on the
Property caused by Seller's use thereof prior to the Closing
Date which has emanated from the Property and purportedly
caused damage to the claiming third party ("Third Party
Claims"); provided, however, Seller's indemnity regarding such
Third Party Claims shall be limited as follows:
A. Indemnified Purchaser Parties shall provide to Seller
written notice of such Third Party Claim no later than 60 days after
Indemnified Purchaser Parties receive
<PAGE> 9
notice of the claim or demand made by the third party on an
Indemnified Purchaser Party. Failure to provide such notice shall
terminate any obligation of Seller to provide indemnity to the
Indemnified Purchaser Parties with regard to such claim.
B. At the time that notice is provided to Seller as set
forth in Subparagraph 2(A), Indemnified Purchaser Parties shall tender
defense of such claim to Seller and shall provide Seller with copies
of all documents and information in the possession of Indemnified
Purchaser Parties that pertain or relate to such claim; provided,
however, Indemnified Purchaser Parties at their sole cost and expense
shall have the right to employ their own counsel in defense of any
such claim. Indemnified Purchaser Parties shall continue to cooperate
with Seller in the defense of such claim until such time as the claim
is resolved or otherwise disposed of to the satisfaction of Seller.
C. Indemnified Purchaser Parties shall incur no costs or
expenses in relation to such Third Party Claim without the prior
written consent of Seller, and any costs or expenses so incurred
without such prior written consent shall not be covered by Seller's
indemnity.
3. Paragraph 10 of the Contract is hereby amended by adding
thereto the following:
Nothing in this Paragraph 10 shall be construed to obligate
Purchaser Indemnifying Parties to indemnify Indemnified Seller
Parties against Third Party Claims.
4. In the event of any inconsistency between the Contract and
this Amendment, this Amendment shall prevail and control.
IN WITNESS WHEREOF, the parties hereto have duly signed these presents the day
and year first above written.
WITNESS: AMOCO OIL COMPANY
By: /s/ Thomas J. Buehler
- ------------------------------- ---------------------------------
Thomas J. Buehler,
Real Estate Manager
WITNESS: PURCHASER
Wolfhoya Investments, Inc.
- ------------------------------- --------------------------------------
/s/ L.H. Tate
- ------------------------------- --------------------------------------
L.H. Tate, Vice President
<PAGE> 10
EXHIBIT "A"
SS #
15093
--------------------
201 S. Hough, Barrington, IL
----------------------------
Bill of Sale
(Excludes Tanks)
26-885-ET (3-94)E
Know all men by these presents: That Amoco Oil Company, a Maryland corporation
hereinafter called "Seller," for and in consideration of the sum of Ten Dollars
and other valuable consideration ($10.00), the receipt and sufficiency whereof
being hereby acknowledged, does hereby bargain, sell, transfer, set over, and
convey to
Wolfhoya Investments Inc. ,
- -------------------------------------------------------------------------------
hereinafter called "Buyer," all of the following described items of personal
property:
All trade fixtures and equipment owned by Seller and located on the premises
legally described as set forth in Attachment #1 attached hereto on the date
hereof, but expressly excluding: all underground storage tanks, pipes and
lines, Seller's corporate identification and "image" material (including but
not limited to all signs and pedestals), all dispensers and associated
above-ground electronics, point of sale equipment, credit processing equipment,
observation wells and remediation equipment.
Seller covenants and agrees with Buyer that it is the lawful owner of said
property and has good right and title to sell and convey the same to Buyer.
It is expressly understood that this sale is on an "as is" basis and that
Seller does not warrant the fitness or condition of said items of property for
any purpose whatsoever.
If this sale includes any equipment previously used for storage, handling or
dispensing of gasoline or other inflammable liquids, Buyer hereby acknowledges
that Seller has so informed Buyer and that Buyer understands that said
equipment may contain residuals of gasoline or other liquids which are
inflammable, toxic and explosive and that said gasoline or other inflammable
liquids may be hazardous or poisonous.
Buyer expressly assumes, as of the date of this sale, all risk of loss, damage,
or injury by reason of the aforesaid exposures and otherwise, and Buyer
expressly releases Seller from all claims of every kind or nature arising by
reason of, or in connection with, the ownership, possession, handling, or use
of said property.
<PAGE> 11
Buyer agrees to defend, indemnify and save harmless Seller from and against any
claims, demands, causes of action, losses, damages, costs or expenses of any
kind whatsoever (including without limitation, attorneys' fees), by any person
arising from or in any way connected with the ownership, possession, handling
or use of the property subject to this Bill of Sale, including claims for which
Seller is held strictly liable and/or claims for which Seller is held partly or
wholly at fault.
If Buyer enters premises under Seller's control to remove any property sold
hereby, Buyer assumes and agrees, in consideration of the foregoing sale, to
indemnify and save harmless Seller from and against any claims, demands, causes
of action, losses, damages, costs or expenses of any kind whatsoever (including
without limitation attorneys' fees), by any person arising from or in any way
connected with removal of said property.
To have and to hold unto buyer its personal representatives, successors, and
assigns.
In Witness Whereof, the parties hereto have executed this instrument on this
the ______ day of ________________, 19_____.
Witness: Amoco Oil Company
By
- ---------------------------------- ------------------------------------
Witness: Buyer
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
<PAGE> 12
SS#15093
201 Hough Street, Barrington, IL
EXHIBIT "B"
Environmental assessments, reports, correspondence:
1. Annual Ground Water Monitoring Report dated January 31, 1996, prepared
by Delta Environmental Consultants, Inc., and submitted to Illinois
Environmental Protection Agency by letter dated February 2, 1996, from
Dawn Wurt Remediation Coordinator of Amoco Oil Company
2. Environmental Status Report dated December 9, 1994, prepared by Ecova
Corporation and submitted to Jonathan Steel of Hiffman Shaffer &
Associates Inc.
3. Report of Findings dated November 11, 1994, prepared by Environmental
Services of America, Inc., and submitted to Amoco Oil Company
remediation Services Division, and submitted to Illinois Environmental
Protection Agency by letter dated August 18, 1994, from W.E. Barry of
Amoco Oil Company
4. Final Report of Findings for the Tank Removal Assessment dated August
11, 1994, prepared by Earth Science Technologies, Inc., and submitted
to Amoco Oil Company
4. Expanded Site Investigation dated June 2, 1992, prepared by Earth
Science Technologies of Illinois, Inc., and submitted to Amoco Oil
Company Remediation Services Division by letter dated June 2, 1992,
and submitted to Illinois Environmental Protection Agency by letter
dated June 16, 1992, from Linda Curran, Project Engineer for Amoco Oil
Company. Letter Report of Findings dated June 15, 1992, prepared by
Earth Science Technologies of Illinois, Inc., and submitted to Amoco
Oil Company Remediation Services Division.
5. Letter Report of Findings Expanded Investigation dated June 2, 1992,
prepared by Earth Science Technologies of Illinois, Inc., and
submitted to Amoco Oil Company Remediation Services Division by letter
dated June 2, 1992
6. Ground Water Quality Assessment dated October, 3 1991, prepared by
Earth Science Technologies of Illinois, Inc., and submitted to Amoco
Oil Company by letter dated February 13, 1992, from Kay L. Tauscher,
Senior Hydrogeologist of Earth Science Technologies of Illinois, Inc.
7. Ground Water Quality Assessment dated October 3, 1991, prepared by
Earth Science Technologies of Illinois, Inc., and prepared for John
Wise of Amoco Oil Company
<PAGE> 13
page 2 of 2
SS#15093
201 Hough Street
Barrington, IL
8. Preliminary Contamination Assessment Report dated January 18, 1990,
prepared by Law Environmental, Inc., and submitted to Illinois
Environmental Protection Agency by letter dated January 18, 1990
Receipt of attached copies acknowledged:
Purchaser(s): Wolfhoya Investments, Inc.
/s/ L.H. Tate 2/28/96
- ---------------------------------------------
Wolfhoya Investments, Inc.
Its: Vice-President
-----------------------------------------
<PAGE> 14
EXHIBIT "C"
SS #
15093
--------------------
201 S. Hough, Barrington, IL
----------------------------
RELEASE AND RIGHT-OF-ENTRY
26-884-RRE (3-94) E
KNOW ALL MEN BY THESE PRESENTS THAT:
WHEREAS, AMOCO OIL COMPANY, a Maryland corporation ("Seller"), with offices at
200 East Randolph, Mail Code 1408B, Chicago, IL 60601, and Wolfhoya
Investments, Inc. ("Purchaser"), whose address is 9029 Lincolnwood Drive,
Evanston, IL 60203, entered into a Real Estate Sales Contract and Addendum to
Real Estate Sale Contract dated March 25, 1996, (the "Contract"), covering
certain real estate and the improvements thereon described as set forth in
Attachment #1 annexed hereto and made a part hereof (the "Property");
AND WHEREAS, Seller has agreed to sell and assign and Purchaser has agreed to
purchase and accept the Property "as is" in its present condition without any
representations or warranties regarding its fitness for any purpose;
AND WHEREAS, Seller has provided to Purchaser a copy of the environmental
assessment performed by or at the request of Seller, as set forth in the
Contract;
AND WHEREAS, Seller has further provided to Purchaser access to and the
opportunity to inspect the Property and to perform such soil, groundwater or
other tests upon the Property as Purchaser deemed necessary or appropriate;
AND WHEREAS, Seller has agreed to perform certain environmental assessment,
monitoring and remediation measures pursuant to the Contract to address
hydrocarbon contamination, if any, of the Property resulting from Seller's use
prior to the date of transfer of title, and Purchaser has agreed to assume all
responsibility and liability for any and all hydrocarbons or other contaminants
or regulated substances which occur after the date of transfer of title;
AND WHEREAS, Purchaser and Seller desire to provide a continuing right of
access to the Property to allow Seller to perform assessment, monitoring and
remediation measures after conveyance of the Property;
NOW, THEREFORE, in consideration of the mutual covenants of the parties herein
and as set forth in the Contract, the terms of which are by this reference
incorporated in full herein:
<PAGE> 15
1. For the period of time ending upon the expiration of the petroleum
restriction set forth in the deed from Seller to Purchaser, or at such sooner
time as is (i) no further remediation activities are required from Seller by
the Illinois Environmental Protection Agency (the "Department"); or (ii) any
gasoline, diesel fuel, kerosene, benzol, naphtha or any fuel used for internal
combustion engines is sold, handled or stored on the Property; or (iii)
Purchaser shall materially default in compliance with any applicable
environmental laws or regulations, or shall otherwise default in the
performance of any material covenant in the Contract relating to environmental
contamination, assessment or remediation; or (iv) a material spill, leak or
other release of hydrocarbons or other contamination occurs following the date
of transfer of title which makes Seller's remedial work significantly more
difficult, or significantly increases the cost or extends the time to complete
the remedial work (the "Ending Date"), Seller agrees to indemnify and hold
harmless Purchaser and Purchaser's heirs, legal representatives and successors
(collectively the "Indemnified Purchaser Parties"), from and against all
claims, demands, damages, losses, judgments, penalties and liabilities which
arise as a result of any enforcement action arising from the presence of
hydrocarbon contamination on the Property caused by Seller's use thereof prior
to the date of transfer of title; provided, however, that (i) Seller's
indemnity shall be limited to remediation costs actually incurred by or imposed
upon Indemnified Purchaser Parties as a result of such enforcement action, (ii)
Indemnified Purchaser Parties shall promptly notify Seller and provide to
Seller copies of all notices received by Indemnified Purchaser Parties
pertaining to any such enforcement action, and (iii) Indemnified Purchaser
Parties shall incur no costs or expenses for remediation without the prior
written consent of Seller.
2. Pursuant to the Contract, as of the date of transfer of title,
Purchaser expressly (i) assumed all responsibility and liability for compliance
with all environmental laws and regulations and for any environmental
assessment, inspection, monitoring and remediation relating to or resulting
form Purchaser's use of the Property; (ii) agreed at Seller's request, to
provide to Seller assurance of compliance with all environmental laws and
regulations, including but not limited to the results of all future
environmental tests, product inventory data, tank gauging data, tank leak
detection data and sampling data; (iii) agreed to promptly notify Seller of all
leaks, spills or releases of hydrocarbons or other regulated substances which
occur or of which Purchaser becomes aware, and (iv) agreed to permit Seller to
perform product tracing and other reasonable tests and procedures during the
period of any assessment or remediation activities by Seller, it being the
intent of the parties that Purchaser shall be responsible and liable for any
and all releases which occur subsequent to the date of transfer of title.
Commencing on the date of transfer of title, the Purchaser, for themselves and
on behalf of their agents, employee, heirs, personal representatives, grantees,
successors and assigns (collectively the "Purchaser Indemnifying Parties) agree
to indemnify and hold harmless Seller, its parent, affiliates and each of their
respective agents, employees, officers, directors, shareholders, successor and
assigns (collectively the "Indemnified Seller Parties) from and against all
claims, demands, damages, losses, liabilities, judgments, penalties, suits,
actions, costs and expenses (including consultants' and attorneys' fees)
arising from the presence of hydrocarbon or other contamination occurring after
the Closing Date; provided, however, that from and after the Ending Date, the
Purchaser Indemnifying Parties shall indemnify and hold harmless Indemnified
<PAGE> 16
Seller Parties from and against all claims, demands, damages, losses,
judgments, penalties, suits, actions, costs and expenses (including
consultants' and attorneys' fees) arising from all contamination of the
Property.
3. Purchaser, collectively, and jointly and severally, for themselves and
on behalf of Purchaser Indemnifying Parties, and all persons claiming by,
through or under Purchaser, hereby release and forever discharge Indemnified
Seller Parties from all claims, demands, losses, liabilities, judgments,
penalties, suits, actions, costs and expenses whatsoever, that may now exist or
hereafter accrue with respect to contamination of the Property existing at the
time of transfer of title or occurring after the date of transfer of title, but
not, except as hereinafter set forth, Seller's obligation to remediate
hydrocarbon contamination of the Property resulting from Seller's use of the
Property prior to transfer of title; and further covenant and agree to forever
refrain and desist from instituting or asserting against the Indemnified Seller
Parties, any claim, demand, action or suit whatsoever, either directly or
indirectly, arising or resulting from contamination or alleged contamination of
the soil or groundwater of the Property, or from the environmental condition of
the Property, except to enforce the remediation provisions of the Contract.
4. Purchaser hereby grants to Seller, its agents, employees, successors
and assigns, the irrevocable right to enter upon the Property, from and after
the date of transfer of title, for the purpose of (i) engaging in environmental
assessments, inspection and remediation, including but not limited to the
installation of such facilities and the conduct of such activities as deemed
necessary or advisable by Seller, in its sole discretion, or as are required by
governmental authorities having jurisdiction, for a period of time required to
comply with any applicable environmental law or regulation affecting the
Property and (ii) removing from the Property any property and equipment not
sold pursuant to the Contract. Seller shall not be liable for any damages to
the Purchaser, direct or indirect, resulting from contamination of the Property
existing on the date of transfer of title, or for any interruption or
interference with any business or activities being conducted on the Property,
or loss of opportunity, or any other loss, damage, costs or expense of any kind
whatsoever, caused by or resulting from the condition of the Property or the
performance of any activities authorized herein; provided, however, Seller
shall use reasonable efforts to minimize such interruption or interference.
Purchaser agrees to cooperate fully with Seller in the performance of the
activities authorized herein so as to minimize the time and expense to Seller,
including the grant of access to on-site utilities (e.g., electricity, sewer,
and water), if required for such activities; and further agrees that, during
the period of any assessment or remediation activities by Seller (i) no
construction or improvements shall be permitted on the Property which would
impede or restrict access to monitoring wells, remediation or monitoring
equipment, or to the hydrocarbon plume, or which would modify or affect the
size, location or nature of the hydrocarbon plume, without the prior written
consent of Seller, which consent shall not be unreasonably withheld; and (ii)
no gasoline fuel or other motor fuels shall be sold, handled or stored on the
Property.
5. Purchaser warrants that no promise or inducement has been offered
except as set forth herein; that this Release and Right-of-Entry is executed by
Purchaser without reliance upon any
<PAGE> 17
statement or representation by Seller, its agents or employees, concerning the
measure or extent of any contamination or the legal liability therefor; that
Purchaser is of legal age, legally competent to execute this Release and
Right-of-Entry and accepts full responsibility therefor; that this Release and
Right-of-Entry contains the entire agreement between Purchaser and Seller with
respect to this matter; and that the terms of this Release and Right-of-Entry
are contractual and not merely recital.
THIS RELEASE AND RIGHT-OF-ENTRY, and each of the covenants herein contained
shall run with the land and be binding upon the grantees, assigns and other
successors in title or interest of Purchaser.
SIGNED AND SEALED this ___________ day of _____________________, 19____.
WITNESS: AMOCO OIL COMPANY
_______________________________ By____________________________________
WITNESS: P U R C H A S E R - W O L F H O Y A
INVESTMENTS, INC.
_______________________________ By____________________________________
_______________________________ ______________________________________
Page 2 - Release and Right-of-Entry For Purchaser
(Exhibit "C") Wolfhoya Investments, Inc.
<PAGE> 18
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
Be it remembered that on this __________ day of __________________, 19_____,
before me, personally appeared ______________________________ who is personally
known to me to be the ________________________________ of Amoco Oil Company, a
Maryland corporation, and the same person who executed the foregoing
instrument, and they duly acknowledged the execution of the same for and on
behalf of and as the act and deed of said corporation.
In witness whereof, I have hereunto set my hand and fixed my seal the day and
year above written.
_______________________________________
My commission expires on _________________________, 19___.
STATE OF )
)SS
COUNTY OF )
On this day of _____________________, in the year 19____, before me, a Notary
Public in and for said State, personally appeared
__________________________________ personally known to me to be the persons
whose names are subscribed to the within instrument and acknowledged to me that
they executed the same in their authorized capacity, and that by their
signature on the instrument the persons, or the entity upon behalf of which the
persons acted, executed the instrument.
Witness my hand and official seal.
_______________________________________
My commission expires on _______________________ 19____.
Page 3 - Release and Right-of-Entry For Purchaser
(Exhibit "C") Wolfhoya Investments, Inc.
<PAGE> 19
SS #15093
201 S. Hough & Station
Barrington, IL
ADDENDUM TO
REAL ESTATE CONTRACT
THIS ADDENDUM, attached to and made a part of that certain Real Estate
Contract dated the 25th day of March, 1996, is made and given as further
consideration for Seller's agreement to sell and Purchaser's agreement to buy
the Property.
WITNESSETH: It is further agreed as follows:
[1. MODIFICATION OF RIDER TO REAL ESTATE CONTRACT. The parties hereby
agree that paragraph 1) concerning an attorney's approval, and paragraph 2)
concerning clarification of environmental issues, in the Rider to the Real
Estate Contract dated 1-8-96 are hereby deleted and shall be of no further
force or effect.]
2. SURVEY ALLOWANCE. Seller shall give purchaser a credit at closing up
to the amount of $2,000 upon presentation of an invoice for a current survey of
the property. Purchaser shall be totally responsible for obtaining the survey.
IN WITNESS WHEREOF, the parties hereto have duly signed these presents all this
25th day of March, 1996.
WITNESS: AMOCO OIL COMPANY - Seller
/s/ Thomas J. Buehler
- ------------------------------- ----------------------------------------
Thomas J. Buehler
WITNESS: Wolfhoya Investments, Inc. - Purchaser
By/s/ Lemuel H. Tate
- ------------------------------- --------------------------------------
Lemuel H. Tate , Vice President
Language indicated as being shown by strike out in the typeset document is
enclosed in brackets "[" and "]" in the electronic format.
<PAGE> 20
AMOCO
15093
201 S.Hough Barrington, IL
Real Estate Contract (Surplus Property)
26-884-SP (3-94) E
THIS CONTRACT, made this 25th day of March 1996 between Amoco Oil Company, a
Maryland corporation, with offices at 200 East Randolph, Mail Code 1408B,
Chicago, IL 60601 hereinafter called Seller, and Wolfhoya Investments, Inc.,
whose address is 9029 Lincolnwood Drive, Evanston, IL 60203 hereinafter called
Purchaser.
WITNESSETH:
That in consideration of the mutual covenants and agreements herein contained,
Seller hereby agrees to sell, and Purchaser hereby agrees to buy, for the price
of FOUR HUNDRED TWENTY-FIVE THOUSAND AND NO/100 Dollars ($425,000.00), and upon
the terms and conditions hereinafter set forth, the real estate described in
Attachment #1 annexed hereto and made a part hereof, together with all
improvements located thereon (the "Property"), and the personal property and
equipment, if any, set forth in Bill of Sale labeled Exhibit "A" annexed hereto
and made a part hereof; all other trade fixtures and equipment are excepted.
Seller hereby agrees, subject to the conditions hereinafter set forth, to
convey title to the Property to Purchaser by Special Warranty Deed, subject to:
(1) Existing leases, easements, sidetrack and license agreements, if any,
whether of record or not.
(2) Covenants and conditions of record, if any.
(3) Taxes and special assessments against the Property, if any.
(4) Zoning laws and municipal regulations, if any; environmental laws and
regulations, if any; building line restrictions, use restrictions and
building restrictions of record, if any; and any party wall agreements
of record.
(5) Encroachments, overlaps and other matters which would be disclosed by
an accurate current survey.
(6) The Release and Right-of-Entry as hereinafter set forth.
<PAGE> 21
(7) The following covenants and agreements of the Purchaser:
"The Grantee(s) herein and hereby covenant(s) and agree(s) for
themselves and their, executors and assigns, that no part of the real
estate herein conveyed shall be used by said grantee(s) heirs,
executors, grantees or assigns, for the purpose of conducting or
carrying on the business of selling, handling or dealing in gasoline,
diesel fuel, kerosene, benzol, naphtha, greases, lubricating oils, or
any fuel used for internal combustion engines, or lubricants in any
form."
"The foregoing restriction shall terminate and be of no further force
and effect upon the expiration of a period of 10 years from the date
hereof."
"The foregoing covenants shall run with the land and be binding on
said Grantee(s) their heirs, executors, grantees and assigns, and
inure to the benefit of the Grantor herein, its successors and
assigns"
It is further agreed between Seller and Purchaser that:
1. Purchaser has deposited with Seller the sum of FIVE THOUSAND AND
NO/100 TO BE INCREASED TO $21,250 AND NO/100 Dollars ($5,000.00 ), as
earnest money to be applied against the purchase price. On the date
of closing as set forth in Paragraph 13 (the "Closing Date"),
Purchaser agrees to pay to Seller the balance of the purchase price in
the amount of FOUR HUNDRED THREE THOUSAND SEVEN HUNDRED FIFTY AND
NO/100's Dollars ($403,750.00).
2. Seller agrees to furnish to Purchaser within thirty (30) days from the
date hereof a preliminary title report or commitment to insure title
to the Property issued by a responsible title insurance company, or
the equivalent under the Torrens Act in the event that the Property is
registered under the Torrens System, showing title in Seller subject
only to the exceptions above specified and the usual exclusions and
exceptions contained in standard title insurance policies.
3. Purchaser shall, within thirty (30) days after receiving said title
report or commitment, deliver to Seller a written statement of any
objection to the title or a written statement to the effect that the
title is satisfactory. In the event Seller does not receive
Purchaser's written statement of objections within such thirty (30)
day period, it shall be conclusively presumed that Purchaser has
waived all objections to title. In the event there are objections to
the title, Seller shall be allowed thirty (30) days or until the
Closing Date, whichever is longer, to cure the same, and should such
objections be not cured or waived within such period, then Seller
agrees to refund the earnest money deposit, this agreement shall
thereafter be inoperative and void and neither Seller nor Purchaser
shall have further liability hereunder.
4. Purchaser's obligation to close hereunder shall be subject to
Purchaser, at Purchaser's sole cost and expense, inspecting or causing
an inspection to be made by qualified
<PAGE> 22
professionals on Purchaser's behalf of the Property and other assets
described herein, including at Purchaser's option, environmental
inspections or tests for hydrocarbons or for any toxic or hazardous
substances. Purchaser, his agents or employees may enter upon the
Property for the purpose of making such inspections and tests;
provided, however, that Purchaser shall schedule such inspections and
tests with Seller, who shall have the right to have a representative
present at all times during inspections and tests performed by
Purchaser; that Purchaser shall provide to Seller complete copies of
the results of all such inspections and tests; that the results of
such tests shall be confidential and shall not be reproduced or
disclosed by Purchaser to anyone without written consent of Seller;
that Purchaser shall promptly repair any and all damages to the
Property caused by that such activities, and shall restore the
property to the same condition as before the inspections or tests to
the satisfaction of Seller; that such inspections and tests shall not
be conducted in such a manner as to interfere with business operations
conducted on the Property; and that Purchaser shall indemnify and hold
Seller harmless from and against any and all claims arising from or by
reason of Purchaser's entry upon the property. In the event such
inspections disclose conditions unsatisfactory to Purchaser, in
purchaser's sole discretion, and Purchaser so notifies Seller in
writing on or before August 17, 1996 then this Contract shall become
null and void, and Seller shall return the earnest money deposit to
Purchaser. In the event Seller does not receive Purchaser's written
notice by such date, it shall be conclusively presumed that Purchaser
has satisfied or has waived this contingency.
5. Purchaser expressly acknowledges and agrees (i) that the Property has
been used as a retail gasoline station; (ii) that Purchaser is relying
on the results of his own investigation of the physical and
environmental condition of the Property; (iii) that Purchaser is
relying solely on his own judgment in completing the purchase of the
Property, and (iv) that Purchaser is acquiring the Property 'as is'
with all faults on the date of conveyance, except as set forth in this
Contract. Seller makes no representations or warranties whatsoever
regarding the condition of the real estate or improvements, including
but not limited to the environmental condition of the Property and
warranties of merchantability or fitness for a particular purpose.
6. Seller agrees to remove the underground tanks and product lines now on
the Property and to backfill the tank hole(s) within thirty (30) days
after the Closing Date, subject to the availability of labor, weather
conditions, and other factors beyond Seller's control. Purchaser
hereby grants to Seller the right to enter on the Property, agrees to
cooperate with Seller in the removal of the existing tanks and lines,
and hereby releases Seller from all claims of loss of profits or
interference with Purchaser's business resulting therefrom. Purchaser
hereby expressly assumes all responsibility for grading, compacting
and resurfacing the Property.
7. Purchaser acknowledges receipt of copies of the assessments, reports
and/or correspondence regarding the Property, copies of which are
labeled Exhibit 'B" annexed hereto and made a part hereof. Purchaser
further acknowledges that additional assessments or diagnostic
measures may be required to be performed upon the Property
<PAGE> 23
to determine and to design and implement a reasonable and cost
effective plan for remediation of hydrocarbon contamination, and that
such assessments and remediation activities may be disruptive of
Purchaser's use and occupancy of the Property and may continue for an
indefinite period of time. Notwithstanding the foregoing, Purchaser
desires to complete the purchase of the Property and agrees to
cooperate with Seller in the performance of assessment and remediation
activities after the Closing Date.
8. Seller agrees to perform reasonable and cost effective assessment and
remediation measures to address hydrocarbon contamination on the
Property caused by Seller prior to the Closing Date as deemed
necessary or advisable by Seller, in its sole discretion, or as Seller
is required to perform by the ILLINOIS ENVIRONMENTAL PROTECTION AGENCY
(the 'Department'), for a period of time ending upon expiration of the
petroleum restriction set forth in (7) above, or sooner as hereinafter
provided (the 'Ending Date'); provided, however, at such sooner time
as (i) no further remediation activities are required from Seller by
the Department, or (ii) any gasoline, diesel fuel, kerosene, benzol,
naphtha or any fuel used for internal combustion engine is sold,
handled or stored on the Property; or (iii) Purchaser shall materially
default in compliance with any applicable environmental law or
regulation, or shall otherwise default in the performance of any
material covenant of this Contract relating to environmental
contamination, assessment or remediation, including but not limited to
Paragraph 10 hereafter, or (iv) a material spill, leak, or other
release of hydrocarbons or other contamination occurs following the
Closing Date which makes Seller's remedial work significantly more
difficult, or significantly increases the cost or extends the time to
complete the remedial work, then Seller shall thereafter have no
further responsibility to Purchaser, or to Purchaser's heirs, personal
representatives, grantees, successors and assigns, or to anyone
claiming by, through or under Purchaser, for remediation of any
contamination on the Property and all indemnity obligations of Seller
shall end.
9. For the period of time commencing on the Closing Date, and ending on
the Ending Date, Seller agrees to indemnify and hold harmless
Purchaser and Purchaser's heirs, legal representatives and successors
(collectively the 'Indemnified Purchaser Parties"), from and against
all claims, demands, damages, losses, judgments, penalties and
liabilities which arise as a result of any enforcement action
resulting from the presence of hydrocarbon contamination on the
Property caused by Seller's use thereof prior to the Closing Date;
provided, however, that (i) Seller's indemnity shall be limited to
remediation costs actually incurred by or imposed upon Indemnified
Purchaser Parties as a result of such enforcement action, (ii)
Indemnified Purchaser Parties shall promptly notify Seller and provide
to Seller copies of all notices received by Indemnified Purchaser
Parties pertaining to any such enforcement action, and (iii)
Indemnified Purchaser Parties shall incur no costs or expenses for
remediation without the prior written consent of Seller.
10. As of the Closing Date, Purchaser hereby expressly assumes all
responsibility and liability for compliance with all environmental
laws and regulations and for any environmental assessment, inspection,
monitoring and remediation relating to OR resulting
<PAGE> 24
from Purchaser's use of the Property. Purchaser shall, at Seller's
request, provide to Seller assurance of compliance with all
environmental laws and regulations, including but not limited to the
results of all future environmental tests, product inventory data,
tank gauging data, tank leak detection data and sampling data; shall
promptly notify Seller of all leaks, spills or releases of
hydrocarbons or other regulated substances which occur or of which
Purchaser becomes aware; and shall, at Seller's request, permit Seller
to perform product tracing and other reasonable tests and procedures
during the period of any assessment or remediation activities by
Seller, it being the intent of the parties that Purchaser shall be
responsible and liable for any and all spills, leaks and releases
which occur subsequent to the Closing Date. Commencing on the Closing
Date, Purchaser agrees, collectively, and jointly and severally, for
themselves and on behalf of their agents, employees, heirs, personal
representatives, grantees, successors and assigns (collectively
'Purchaser Indemnifying Parties"), to indemnify and hold harmless
Seller, its parent, affiliates, and each of their respective agents,
employees, officers, directors, shareholders, successors and assigns
(collectively the 'Indemnified Seller Parties') from and against all
claims, demands, damages, losses, liabilities, judgments, penalties,
suits, actions, costs and expenses (including consultants' and
attorneys' fees) arising from the presence of hydrocarbon or other
contamination occurring after the Closing Date; provided, however,
that from and after the Ending Date, Purchaser Indemnifying Parties
shall indemnify and hold harmless the Indemnified Seller Parties from
and against all claims, demands, damages, losses, judgments,
penalties, suits, actions, costs and expenses (including consultants'
and attorneys' fees) arising from all contamination of the Property.
11. Seller reserves the right, for itself, its agents, employees,
successors and assigns, to enter upon the Property, both before and
after the Closing Date, for the purpose of (I) engaging in
environmental assessment, inspection, monitoring and remediation,
including but not limited to the installation of such facilities and
the conduct of such activities as deemed necessary or advisable by
Seller, in its sole discretion, or as are required by governmental
authorities having jurisdiction, for a period of time required to
comply with any applicable environmental laws or regulations affecting
the Property, and (ii) removing from the Property any property and
equipment not sold hereunder. Seller shall not be liable for any
damages to Purchaser, direct or indirect, resulting from contamination
of the Property existing on the Closing Date or for any interruption
or interference with any business or activities being conducted on the
Property, or loss of opportunity, or any other loss, damage, cost or
expense of any kind whatsoever, caused by or resulting from the
condition of the Property or the performance of any activities
authorized herein; provided, however, Seller shall use reasonable
efforts to minimize such interruption or interference. Purchaser
agrees to cooperate fully with Seller in the performance of the
activities authorized herein so as to minimize the time and expense to
Seller, including the granting of access to on-site utilities (e.g.,
electricity, sewer, and water), if required for such activities, and
further agrees that, during the period of any assessment or
remediation activities by Seller, (i) no construction or improvements
shall be made upon the Property which would impede or restrict access
to monitoring wells, remediation or monitoring equipment, or to the
hydrocarbon plume, or which would modify or affect the size, location
or nature of the plume without the prior written consent of Seller,
which
<PAGE> 25
consent shall not be unreasonably withheld; and (ii) no gasoline,
diesel fuel or other motor fuels shall be sold, handled or stored on
the Property.
12. As further consideration without which Seller would not have entered
into this Contract, Purchaser agrees to execute and deliver to Seller
at closing the following documents: (i) the Bill of Sale in the form
set forth in Exhibit "A" annexed hereto and made a part hereof, and
Oil the Release and Right-of-Entry in the form set forth in Exhibit
'C" attached hereto and made a part hereof, each of said documents to
be effective as of the Closing Date.
13. The Closing Date shall be fifteen (15) days after all conditions have
been satisfied or waived, but not later than August 27, 1996. Closing
shall be effected through escrow with the title insurance company
acting as escrow agent for both parties. Seller shall deliver to the
escrow agent its Special Warranty Deed, any other documents required
hereunder, and all customary documents required by the title company
not inconsistent with this Contract. Purchaser shall deliver to the
escrow agent the balance, of the purchase price in cash or certified
funds, the Release and Right-of-Entry, any other documents required
hereunder, and all customary documents required by the title company
not inconsistent with this Contract. The escrow agent shall record
the Special Warranty Deed and the Release and Right-of-Entry; shall
deliver to Seller its Settlement Statement, a cashier's check for the
purchase price less Seller's expenses, and the recorded Release and
Right-of-Entry; and shall deliver to Purchaser its Settlement
Statement, the recorded Special Warranty Deed and the owner's title
insurance policy. Seller shall pay the fees for recording the Release
and Right-of-Entry and the title insurance premium. Purchaser shall
pay the fees for recording the Special Warranty Deed. Seller and
Purchaser each agree to pay 50% of the escrow fee.
14. Rents and other current charges, if any, shall be adjusted pro rata as
of date of delivery of deed. General taxes for the year of closing
shall be prorated from January 1st to date of delivery of deed. If
the amount of such taxes is not then ascertainable, prorating shall be
on the basis of the amount of the most recent ascertainable taxes.
Purchaser agrees to pay any and all Federal, State, and local real
estate transfer taxes and documentary stamp taxes applicable to this
transaction, and a present or future retailer's occupation tax, sales,
use, excise or similar tax applicable to the sale of goods, equipment
or other personal property covered by this Contract.
15. If, after the date of execution of this Contract and prior to closing,
a casualty loss occurs that results in damage or destruction such that
greater than five (5) percent of the value of improvements and
equipment are damaged or destroyed, then either party shall have the
right to terminate this Contract by notice to the other, in which case
this Contract shall be deemed null and void, the earnest money shall
be returned to Purchaser, and neither Seller nor Purchaser shall have
any further liability under this Contract. Seller shall have no duty
whatsoever to restore any improvements or equipment on the Property.
<PAGE> 26
16. Seller and Purchaser each represent and warrant to the other that no
brokers or finders have been involved in this transaction, except
HIFFMAN SHAFFER ASSOCIATES & BRADBURY ROMEY EGAN & ("Realtor"), and
that no commissions or fees are due to any broker or to any other
party with regard to this transaction, except as set forth in the
Commission Agreement labeled Exhibit "D" annexed hereto and made a
part hereof. Seller and Purchaser each agree to indemnify, defend and
hold the other harmless from any claims, loss, damage, costs and
expense arising from any breach hereof by the indemnifying party.
17. (a) In the event of default hereunder by Purchaser prior to closing,
Seller's remedies shall include, in addition to specific performance
and other remedies available at law or in equity, terminating this
Contract upon written notice to Purchaser, in which event Seller may
retain the earnest money at its option as liquidated damages, and
Seller or Purchaser shall thereafter have no further claim against or
liability to the other and this Contract shall be inoperative and
void.
(b) In the event of default hereunder by Seller prior to closing,
Purchaser's remedies shall include, in addition to specific
performance and other remedies available at law or in equity,
terminating this Contract upon written notice to Seller, in which
event Seller expressly agrees to refund to Purchaser the earnest money
deposit, and Seller or Purchaser shall thereafter have no further
claim or liability against the other and this Contract shall be
inoperative and void.
18. All notices required or sent hereunder shall be in writing and
delivered in person, by messenger or other express delivery service,
or by U.S. Mail Certified, Return Receipt Requested, to the address of
the other party as set forth in the first paragraph of this Contract,
or to such other address as the parties may from time to time
designate. A copy of any notice to Seller shall also be sent to Amoco
Oil Company, 200 East Randolph Drive, Chicago, Illinois 60601,
Attention: West Zone Real Estate. Each such notice shall be deemed
served and effective on the date of delivery or refusal, if delivered
personally, on the date of the delivery receipt, if delivered by
messenger or express service, or the date of mailing shown on the
certified mail receipt, if delivered by certified mail.
19. Purchaser acknowledges that Seller has made no representations or
warranties to Purchaser regarding (i) the economic viability,
profitability or business potential of the Property; (ii) the
condition or suitability of any assets sold to Purchaser for operating
Purchaser's business or for any other use; or (iii) the environmental
condition or status of the Property.
20. This Contract and Exhibits "A' through 'D" annexed hereto contain the
entire understanding and agreement between the parties hereto relative
to the subject matter hereof. No representations or statements, other
than those expressly set forth herein, were relied upon by the parties
in entering into this Contract. No modification, waiver of, addition
to, or deletion from the terms of this Contract shall be effective
unless reduced to writing and signed by Seller and Purchaser, each of
whom expressly waives, releases and
<PAGE> 27
forever forswears any right under Illinois law which permits a
contract, by its terms amendable only in writing, to be orally
amended.
21. Any covenant or provision hereof which by its nature requires
observance or performance after the Closing Date shall survive
delivery of the deed and shall continue in full force and effect.
22. The provisions hereof shall inure to the benefit of and bind the
parties hereto, their respective heirs, personal representatives,
successors and assigns. Purchaser shall not assign his rights under
this Contract without the prior written approval of Seller.
23. It is expressly understood and agreed that this Contract shall not be
binding on Seller unless and until it is executed on behalf of Seller
by an authorized representative and a signed copy thereof is delivered
to Purchaser.
In Witness Whereof, the parties hereto have duly signed these presents the day
and year first above written.
AMOCO OIL COMPANY, Seller
By: Signed
-------------------------------------
Thomas Buehler, Real Estate Manager
WOLFHOYA INVESTMENTS, INC.
By: Signed
-------------------------------------
Lemuel H. Tate, Vice President
<PAGE> 28
SS #15093
201 S. Hough & Station
Barrington, IL
ATTACHMENT #I
Property Description:
Lots 7 and 8 in Block 2 in "Village of Barrington", in the East
one-half of the Northwest quarter of Section 1, Township 42 North,
Range 9, East of the Third Principal Meridian, in Cook County,
Illinois.
<PAGE> 29
SS #15093
201 S. Hough & Station
Barrington, IL
ADDENDUM TO
REAL ESTATE CONTRACT
THIS ADDENDUM,attached to and made a part of that certain Real Estate Contract
dated the 25th day of March, 1996,is made and given as further consideration
for Seller's agreement to sell and Purchaser's agreement to buy the Property.
WITNESSETH: It is further agreed as follows:
1.SURVEY ALLOWANCE. Seller shall give Purchaser a credit at closing up to the
amount of $2,000 upon presentation of an invoice for a current survey of the
property. Purchaser shall be totally responsible for obtaining the survey.
2. CONTINGENCIES.
APPROVALS. This sales agreement is wholly subject to Purchaser
securing State, FDIC and Federal Reserve Banking approvals for a
financial institution on the property within 145 days hereof. In the
event Purchaser is unable to secure such approvals within said 145
days, then the earnest money deposit made by Purchaser shall be
refimded by Seller and this agreement shall be declared null and void.
SPECIAL ASSESSMENTS. This sales ageement is contingent upon
Purchaser's verification that there are no special assessments against
the property and that none are planned. In the event Purchaser is
unable to satisfy this contingency then this agreement shall become
null and void at Purchaser's election and any and all earnest money
deposited by Purchaser shall be refunded by Seller.
IN WITNESS WHEREOF, the parties hereto have duly signed these presents all this
25th day of 1996.
AMOCO OIL COMPANY, Seller
By: Signed
--------------------------------------
Thomas Buehler, Real Estate Manager
WOLFHOYA INVESTMENTS, INC.
By: Signed
--------------------------------------
Lemuel H. Tate, Vice President
<PAGE> 1
EXHIBIT 10.26
EMPLOYMENT AGREEMENT
This Employment Agreement is made by and between WINTRUST FINANCIAL
CORPORATION ("Wintrust"), an Illinois bank holding company, and ____________
_____________, an individual resident in the State of Illinois ("Executive").
WITNESSETH THAT:
WHEREAS, Wintrust is an Illinois bank holding company;
WHEREAS, Executive has particular expertise and knowledge concerning the
business of Wintrust and its operations and is a valued member of Wintrust's
senior management;
WHEREAS, Wintrust desires to continue to employ Executive on the terms and
conditions set forth herein and Executive desires to continue to be employed by
Wintrust on the terms and conditions set forth herein;
WHEREAS, by virtue of his employment with Wintrust, Executive will become
acquainted with certain confidential information regarding the services,
customers, methods of doing business, strategic plans, marketing, and other
aspects of the business of or related to the business of Wintrust or its
Affiliates.
NOW THEREFORE, in consideration of the covenants and agreements contained
herein, of Executive's employment, of the compensation to be paid by Wintrust
for Executive's services, and of Wintrust's other undertakings in this
Agreement, the parties hereto do hereby agree as follows:
1. SCOPE OF EMPLOYMENT. Executive will be employed as_______________ of
Wintrust and shall perform such duties as he may be assigned in such position.
Executive agrees that during his employment he will be subject to and abide by
the policies and practices of Wintrust. Executive also agrees to assume such new
or additional positions and responsibilities as he may from time to time be
assigned for or on behalf of Wintrust or any Affiliate of Wintrust. For purposes
of this Agreement, the term "Affiliate" shall include but not be limited to
Barrington Bank & Trust Company, Hinsdale Bank & Trust Company, Lake Forest Bank
& Trust Company, Libertyville Bank & Trust Company, North Shore Community Bank &
Trust Company, First Premium Services, Inc. and any subsidiary of any of them
and shall further include any affiliate of any of them as defined by the rules
and regulations of the Federal Reserve Board.
2. COMPENSATION AND BENEFITS. Executive will be paid such salary as may
from time to time be agreed upon between Executive and Wintrust. Executive will
be entitled to coverage under such insurance plans and other fringe benefit
plans and programs as may from time to time be established for employees of
Wintrust in accordance with the terms and conditions of such plans and programs.
<PAGE> 2
3. COMPETITION. During the period in which Executive performs services for
Wintrust and for a period of two years after termination of Executive's
employment with Wintrust, regardless of the reason, Executive shall not,
directly or indirectly, either alone or in conjunction with any person, firm,
association, company or corporation: (a) compete with Wintrust or any Affiliate
as principal, agent, employee, or in any other capacity of or for a bank or
other financial institution that operates in the market area of Wintrust or any
Affiliate; (b) in any way participate in planning or opening a bank or other
financial institution which operates or is to operate in the market area of
Wintrust or any Affiliate; (c) hire, solicit, induce or attempt to solicit or
induce any employee, consultant, or agent of Wintrust or any Affiliate: (i) to
terminate his or her employment or association with Wintrust or any Affiliate;
or (ii) to become employed by or to serve in any capacity a bank or other
financial institution which operates or is planned to operate in market area of
Wintrust or any Affiliate. For purposes of this Agreement, the market area of
Wintrust or of an Affiliate shall be the area within a ten (10) mile radius of
the principal office and branches of Wintrust and of any Affiliate.
4. CONFIDENTIAL INFORMATION. Executive acknowledges that, during his
employment with Wintrust, he has and will obtain access to Confidential
Information of and for Wintrust or its Affiliates. For purposes of this
Agreement, "Confidential Information" shall mean information not generally known
or available without restriction to the trade or industry, including, without
limitation, the following categories of information and documentation:
shareholder information for Wintrust or any Affiliate; credit files of Wintrust
or any Affiliate; marketing and product data and documentation and information
used by Wintrust or any Affiliate and the nature and scope of the use of such
marketing data and product information and documentation by Wintrust or any
Affiliate; computer programs, computer software and systems used by Wintrust or
any Affiliate in the development of marketing, credit and management programs of
Wintrust or any Affiliate; information and documentation regarding the depositor
and creditor base of Wintrust or any Affiliate; the strategic growth plans of
Wintrust or any Affiliate; the business plans of Wintrust or any Affiliate;
information, documentation and data on all deposit, lending and trust customers
of Wintrust or any Affiliate; information and documentation in any way relating
to trusts managed and controlled by Wintrust or any Affiliate; lists of actual
or potential customers of Wintrust or any Affiliate; identification of the
various suppliers of Wintrust or any Affiliate. Absent prior authorization by
Wintrust or as required in Executive's duties for Wintrust, Executive will not
at any time, directly or indirectly, use, permit the use of, disclose or permit
the disclosure to any third party of any such Confidential Information, either
during his employment with Wintrust or thereafter.
5. INVENTIONS. All discoveries, designs, improvements, ideas, and
inventions, whether patentable or not, relating to (or suggested by or resulting
from) products, services, or other technology of Wintrust or any Affiliate or
relating to (or suggested by or resulting from) methods or processes used or
usable in connection with the business of Wintrust or any Affiliate that may be
conceived, developed, or made by Executive during his employment with Wintrust
(hereinafter "Inventions"), either solely or jointly with others, shall
automatically become the sole property of Wintrust or an Affiliate. Executive
shall immediately disclose to Wintrust all such Inventions and shall, without
additional compensation, execute all assignments and other documents deemed
necessary to perfect the property rights of Wintrust or any Affiliate therein.
These obligations shall
2
<PAGE> 3
continue beyond the termination of Executive's employment with respect to
Inventions conceived, developed, or made by Executive during his employment with
Wintrust. The provisions of this Paragraph 5 shall not apply to any Invention
for which no equipment, supplies, facility, or trade secret information of
Wintrust or any Affiliate is used by Executive and which is developed entirely
on Executive's own time, unless (a) such Invention relates (i) to the business
of Wintrust or an Affiliate or (ii) to the actual or demonstrably anticipated
research or development of Wintrust or an Affiliate, or (b) such Invention
results from work performed by Executive for Wintrust.
6. REMEDIES. Executive acknowledges that his compliance with the terms of
this Agreement is necessary to protect the Confidential Information and goodwill
of Wintrust and its Affiliates and that any breach by him of this Agreement will
cause continuing and irreparable injury to Wintrust and its Affiliates for which
money damages would not be an adequate remedy. Executive acknowledges that
Affiliates are and are intended to be third party beneficiaries of this
Agreement. Executive acknowledges that Wintrust and any Affiliate shall, in
addition to any other rights or remedies they may have, be entitled to
injunctive relief for any breach by Executive of any part of this Agreement.
This Agreement shall not in any way limit the remedies in law or equity
otherwise available to Wintrust and its Affiliates.
7. TERM OF EMPLOYMENT.
a. The initial term of Executive's employment pursuant to this Agreement
shall be five (5) years, commencing on the date of this Agreement. After such
initial term, this Agreement shall be extended automatically for successive one
(1) year terms, unless either Executive or Wintrust gives contrary written
notice not less than ninety (90) days in advance of the expiration of the
initial or any succeeding term of this Agreement.
b. Executive's employment and any and all of Wintrust's obligations under
this Agreement shall terminate upon the death of Executive or his death or
permanent disability. For purposes of this Agreement, "permanent disability"
means any mental or physical illness, disability or incapacity which renders
Executive unable to perform his duties hereunder for ninety (90) consecutive
working days. In the event Executive's employment terminates due to permanent
disability, the Board of Directors of Wintrust will consider whether to pay him
Severance Pay under the terms of Paragraph 8 of this Agreement.
c. Upon termination of employment with Wintrust for any reason, Executive
shall promptly deliver to Wintrust all writings, records, data, memoranda,
contracts, orders, sales literature, price lists, client lists, data processing
materials, and other documents, whether or not obtained from Wintrust or any
Affiliate, which pertain to or were used by Executive in connection with his
employment by Wintrust or which pertain to any Affiliate, including, but not
limited to, Confidential Information.
d. Termination of employment shall not affect the obligations of Executive
that, pursuant to the express provisions this Agreement, continue in effect.
3
<PAGE> 4
8. SEVERANCE PAY
a. Executive expressly acknowledges and agrees that he is an employee at
will and that Wintrust may terminate his employment at any time for any reason.
The termination of Executive's employment shall terminate this Agreement and any
and all of Wintrust's obligations under this Agreement except: (i) for the
payment of Severance Pay pursuant to this Paragraph 8 and (ii) that within
thirty (30) days of the termination of Executive's employment, Wintrust will pay
to him the full amount of any unpaid compensation earned pursuant to this
Agreement through and including the date of his termination.
b. In the event Executive's employment is terminated by Wintrust other
than upon the expiration of the initial term or the expiration of any succeeding
one (1) year terms of this Agreement, Wintrust shall, except as provided in
subparagraph (c) of this Paragraph 8, pay Severance Pay to Executive. Severance
Pay shall be paid to the Executive in equal twenty-four (24) monthly
installments commencing with the first day of the month following the date of
his termination. The amount of Severance Pay shall be the Executive's current
base annual salary at the time of his termination plus the amount of any bonuses
paid to him over the preceding twelve month period, reduced by any income
received by Executive during the twenty-four (24) month Severance Pay period
from employment of any sort, including without limitation full, part time or
temporary employment or work as an independent contractor or as a consultant.
Executive agrees that he will promptly notify Wintrust if he obtains employment
of any sort during the twenty-four (24) month Severance Pay period.
c. Executive shall not be entitled to Severance Pay if Wintrust terminates
his employment for Good Cause. For purposes of this Agreement, "Good Cause"
means:
i. the commission of an act of dishonesty or moral turpitude;
ii. the use of illegal drugs or abuse of legal drugs;
iii. conviction of a felony or pleading guilty or nolo contendere
to same;
iv. failure to follow a specific written or oral directive
relating to his duties and responsibilities under this Agreement, provided,
however, that Executive shall be given prior written notice of the intention to
terminate his employment for such reason and shall have seven days following the
giving of such written notice to cure, if curable, his failure to follow the
specific written or oral directive given to him;
v. any act of fraud or embezzlement or the breach of any
fiduciary duty;
vi. a material breach by Executive of any provision of this
Agreement;
vii. a material violation by Executive of any local, state or
federal law, regulation or ordinance with which Executive's compliance is
material to the performance of his duties under
4
<PAGE> 5
this Agreement or to the compliance of Wintrust or any Affiliate with applicable
law, regulations or ordinances;
viii. a material breach by Executive of any standard, rule or policy
adopted by Wintrust;
ix. Executive's refusal or negligent or intentional failure to
fulfill or inability to perform any material duties required to be performed by
Wintrust. Wintrust shall specifically state in writing to Executive its reasons
for termination on such basis; or
x. a written recommendation for removal of Executive from his
position with Wintrust by any regulatory agency or body.
d. Executive shall not be paid severance pay in the event he terminates
his employment with Wintrust, provided, however, Executive will be paid
Severance Pay if:
i. Wintrust is sold to an unrelated entity and Executive is not
offered employment after the sale in a position substantially equivalent to the
position he occupied immediately prior to the closing of such sale;
ii. Executive terminates his employment by Wintrust because of a
material reduction by Wintrust in the duties and responsibilities of Executive;
or
iii. Executive terminates his employment by Wintrust because
Wintrust has reduced his base annual compensation to less than seventy-five
percent (75%) of the base annual compensation of Executive on the first day
following the execution of this Agreement.
e. Executive's right to receive Severance Pay is contingent upon his not
violating any of his on-going obligations under this Agreement.
f. The payment of Severance Pay to Executive pursuant to this Paragraph 8
shall be liquidated damages for and in full satisfaction of any and all claims
Executive may have relating to or arising out of his employment and termination
of employment by Wintrust, any and all claims he may have relating to or arising
out of this Agreement and the termination thereof and any and all claims he may
have arising under any statute, ordinance or regulation or under common law.
Executive expressly acknowledges and agrees that, except for whatever claim he
may have to Severance Pay, he shall not have any claim for damages or other
relief of any sort relating to or arising out of his employment or termination
of employment by Wintrust or relating to or arising out of this Agreement and
the termination thereof.
9. GENERAL PROVISIONS.
a. All provisions of this Agreement are intended to be interpreted and
construed in a manner to make such provisions valid, legal, and enforceable. To
the extent that any paragraph of
5
<PAGE> 6
this Agreement or any word, phrase, clause, or sentence hereof shall be deemed
by any court to be illegal or unenforceable, such word, clause, phrase,
sentence, or paragraph shall be deemed modified, restricted, or omitted to the
extent necessary to make this Agreement enforceable. Without limiting the
generality of the foregoing, if the scope of any covenant in this Agreement is
too broad to permit enforcement to its full extent, such covenant shall be
enforced to the maximum extent provided by law; and Executive agrees that such
scope may be judicially modified accordingly.
b. This Agreement may be assigned by Wintrust. This Agreement and the
covenants set forth herein shall inure to the benefit of and shall be binding
upon the successors and assigns of Wintrust.
c. This Agreement may not be assigned by Executive, but shall be binding
upon Executive's executors, administrators, heirs, and legal representatives.
d. No waiver by either party of any breach by the other party of any of
the obligations, covenants, or representations under this Agreement shall
constitute a waiver by any prior or subsequent breach.
e. Where in this Agreement the masculine gender is used, it shall include
the feminine if the sense so requires.
f. The use of any number shall be construed as singular or plural, as the
case may require.
g. This instrument constitutes the entire agreement of the parties with
respect to its subject matter. This Agreement may not be changed or amended
orally but only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, extension, or discharge is
sought. Any other understandings and agreements, oral or written, respecting the
subject matter hereof are hereby superseded and cancelled.
10. GOVERNING LAW. The parties agree that this Agreement shall be
construed and governed by the laws of the State of Illinois, excepting its
conflict of laws principles. Further, the parties acknowledge and specifically
agree to the jurisdiction of the courts of the State of Illinois in the event of
any dispute regarding this Agreement.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date written opposite their signatures.
WINTRUST FINANCIAL CORPORATION
By:
-------------------------------
Its
------------------------------
Dated:
----------------------------
[Executive]
- ----------------------------------
Dated:
------------
7
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
State or Jurisdication
of Organization
Subsidiary or Incorporation
---------- ---------------------
<S> <C>
Lake Forest Bank and Trust Company Illinois
Lake Forest Bancorp, Inc. Delaware
North Shore Community Bank and Trust Company Illinois
Hinsdale Bank and Trust Company Illinois
Hinsdale Bancorp, Inc. Illinois
Libertyville Bank and Trust Company Illinois
Libertyville Bancorp, Inc. Illinois
Barrington Bank and Trust Company N.A. United States
Crabtree Capital Corporation Delaware
First Premium Services, Inc. Illinois
</TABLE>
<PAGE> 1
EXHIBIT 23.1
The Board of Directors
Wintrust Financial Corporation
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Chicago, Illinois
December 20, 1996
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
on the financial statements of Crabtree Capital Corporation and Subsidiaries
(not included in this registration statement), dated May 20, 1996 and to all
references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
December 23, 1996
<PAGE> 1
EXHIBIT 99.1
WINTRUST FINANCIAL CORPORATION Expiration Date: [ ] [ ], 1997
- North Shore Community Bank and Trust Company Noon, Central Time
- Lake Forest Bank and Trust Company
- Hinsdale Bank and Trust Company Stock Sale Center
- Clarendon Hills Bank 727 North Bank Lane
- Libertyville Bank and Trust Company Lake Forest, Illinois 60045
- Barrington Bank and Trust Company, N.A. (847) [ - ]
SUBSCRIPTION AND COMMUNITY OFFERING STOCK ORDER FORM
Please read the Stock Order Form Instructions and Guide as you complete this
form.
STOCK REGISTRATION
Write one letter/number per box, beginning from the left. Leave one blank
box for a space.
(1) Form of Stock Ownership: __Individual __Joint tenants
__Tenants in common __Fiduciary
__UTMA __IRA __Corporation __Partnership __Other____________
(2) Name(s) in which your stock is to be registered (PLEASE PRINT CLEARLY IN
CAPITAL LETTERS. USE BLACK OR BLUE INK.)
First Name_______________________ M.I.____ Last Name____________________
Joint Name________________________________________________________________
Joint Name________________________________________________________________
Address____________________________________________________________________
City___________________ State___ Zip Code_________
County of Residence (First 8 Letters)_____________
Social Security or Tax ID No.______________ Daytime Phone__________________
Evening Phone________________
Check one: __Social Security No. or __Tax ID No.
(3) AFFILIATIONS
Under the regulations of the National Association of Securities Dealers,
Inc. ("NASD"), certain persons may not be eligible to purchase shares.
___Check here if you are:
(i) A member of the NASD, a person associated with an NASD member, a
member of the immediate family of any such person to whose support
such person contributes, directly or indirectly, or the holder of
an account in which an NASD member or person associated with an
NASD member has a beneficial interest; or
(ii) A senior officer of a bank, savings and loan institution,
insurance company, registered investment company, registered
invesetment advisory firm or any other institutional-type account,
or a person who is employed in the securities department of any
such institution or who otherwise may influence or whose activities
directly or indirectly are related to the buying and/or selling of
securities by any of such institutions, or a member of the
immediate family of any such person.
<PAGE> 2
(4) ASSOCIATES AND PERSONS ACTING IN CONCERT
Check here, and complete the reverse side of this Stock Order Form, if you
or any associates ("associate" is defined on the reverse side of this Stock
Order Form) or persons acting in concert with you ("acting in concert" is
defined on the reverse side of this Stock Order Form), have submitted other
orders for shares in the Subscription and Community Offering.
AMOUNT OF ORDER
FILL BLANKS BEGINNING FROM THE LEFT (EXCEPT DOLLAR AMOUNTS)
Subscription Total
(5) Number of Price Payment
Shares _______ x $[ . ] = Due $______________
(mininum number 100)
METHOD OF PAYMENT
FILL BLANKS BEGINNING FROM THE LEFT (EXCEPT DOLLAR AMOUNTS)
(6) __Check, bank draft, or money order made payable Check Amount
to "Wintrust Financial Corporation" $______________
<TABLE>
<S> <C> <C> <C>
(7) __The undersigned authorizes withdrawal from Account Number(s) Amount
this (these) account(s) at the Bank listed on the _________________ $ ______________
reverse side of this Stock Order Form under (8)b. _________________ $ ______________
If using an IRA account to subscribe for stock, _________________ $ ______________
please call the Stock Sale Center immediately at
(847) [ - ]. SPECIAL ADVANCE ARRANGEMENTS
MUST BE MADE FOR IRA ACCOUNTS BY
[ ] [ ], 1997.
TOTAL (must match Total Payment Due in Item #5 above) $ ______________
</TABLE>
PURCHASER INFORMATION
Check the appropriate box(es) below indicating whether you were:
(8)a __A Record Date Shareholder (i.e., as of [ ] [ ], 1996),
(8)b __A Record Date Customer (i.e., as of [ ] [ ], 1996), and/or
(8)c __A resident of one of the following metropolitan Chicago communities:
Barrington, Barrington Hills, Clarendon Hills, Glencoe, Hinsdale,
Inverness, Kenilworth, Lake Barrington, Lake Bluff, Lake Forest,
Libertyville, Mundelein, North Barrington, South Barrington, Vernon Hills,
Western Springs, Wilmette, or Winnetka.
If you checked box (8)a and/or (8)b, please enter the identifying information
regarding these relationships on the reverse side of this Stock Order Form. This
information will be used to identify your stock purchase priority.
<PAGE> 3
ACKNOWLEDGMENT
(9) To be effective, this fully completed original Stock Order Form and
accompanying Certification Form, fully executed, must be actually received
by Wintrust Financial Corporation no later than Noon, Central Time, on
[ ] [ ], 1997, unless extended (or by [ ] [ ], 1997, to receive
highest priority as a Record Date Shareholder). Completed original Stock
Order Forms (facsimile copies and photocopies will not be accepted) and
executed Certification Forms, together with the required payment or
withdrawal authorization, may be delivered to the Stock Sale Center or
to the main or any full-service branch office of any of the Banks.
Alternatively, you may mail these documents in the postage-paid envelope
that has been provided.
It is understood that this Stock Order Form will be accepted in accordance
with, and subject to, the terms and conditions described under the caption
"TERMS OF THE OFFERING" in the Wintrust Financial Corporation Prospectus
dated as of [ ] [ ], 1997, receipt of which is hereby acknowledged at
least 48 hours prior to the return of this Stock Order Form to Wintrust.
SIGNATURE
(10)The undersigned agrees that after receipt by Wintrust Financial
Corporation, this Stock Order Form may not be modified, withdrawn, or
canceled without Wintrust's consent unless the offering is not completed or
terminated by [ ] [ ], 1997, and if authorization to withdraw from a deposit
account at one of the Banks has been given as payment for shares, the amount
authorized for withdrawal will not be available for withdrawal by the
undersigned.
THE UNDERSIGNED ACKNOWLEDGES THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT
AND IS NOT FEDERALLY INSURED OR GUARANTEED.
Under penalty of perjury, I (we) certify that the Social Security or Tax ID
Number and the information provided under items 2, 3, and 4 of this Stock
Order Form are true, correct, and complete and that I am (we are) not
subject to back-up withholding.
Signature______________________ Date____________
Signature____________________ Date____________
YOUR ORDER CANNOT BE PROCESSED WITHOUT AN EXECUTED CERTIFICATION FORM.
<PAGE> 4
ITEM (4) - CONTINUED
List below all other orders submitted by you or "associates" (as defined below)
or by persons "acting in concert" (as defined below) with you.
Name(s) listed on the other Stock Order Form(s) Number of Shares Ordered
1._______________________________________________________
2._______________________________________________________
3._______________________________________________________
4._______________________________________________________
The term "associate" is used above to indicate any of the following
relationships with a person: (i) any corporation or organization (other than
Wintrust Financial Corporation or any of the Banks or a majority-owned
subsidiary thereof of which a person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10% or more of any class of equity security;
(ii) any trust or other estate in which such person has a substantial beneficial
interest or as to which such person serves as trustee or in a similar fiduciary
capacity; and (iii) any relative or spouse of such person or any relative of
such spouse who has the same home as such person or who is director or officer
of Wintrust or any of the Banks or any subsidiary thereof.
The term "acting in concert" is defined to mean (i) knowing participation in a
joint activity or interdependent conscious parallel action towards a common goal
whether or not pursuant to an express agreement; (ii) a combination of pooling
of voting or other interests in the securities of an issuer for a common purpose
pursuant to any contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise; or (iii) a person or company which
acts in concert with another person or company ("other party") shall also be
deemed to be acting in concert with any person or company who is also acting in
concert with that other party, except that any employee stock benefit plan of
will not be deemed to be acting in concert with its trustee or a person who
serves in a similar capacity solely for the purpose of determining whether stock
held by the trustee and stock held by the plan will be aggregated. No director
of Wintrust or any of the Banks shall be deemed to be acting in concert with any
other director of Wintrust or any of the Banks solely by reason of their
services in such capacities.
ITEM (8)A - CONTINUED
If you were a Record Date Shareholder, please enter the information below:
1. Exact name in which stock is held: ________________________________________
2. Nominee name if held by other(s):__________________________________________
3. Number of shares:__________________________________________________________
ITEM (8)B - CONTINUED
If you were a Record Date Customer, please list the following information for
your deposit and/or loan accounts.
Name of Bank Account Number Account Title
1.__________________ ______________________ ______________________
2.__________________ ______________________ ______________________
3.__________________ ______________________ ______________________
4.__________________ ______________________ ______________________
<PAGE> 5
SUBSCRIPTION AND COMMUNITY OFFERING
STOCK ORDER FORM INSTRUCTIONS AND GUIDE
COMPLETING THE STOCK ORDER FORM
Information on this Stock Order Form will be mechanically scanned. As a result,
it is important that the Stock Order Form be completed neatly and legibly.
Please print in capital letters, using black or blue ink, within the confines of
each box. Write one letter per box, from left to right, leaving one box blank
for a space. Write dollar amounts in the appropriate boxes utilizing the commas
and decimal places provided. Please see the example below.
First Name M.I. Last Name
_____________ _______ _____________
You may deliver your completed Stock Order Form, executed Certification Form,
and full payment to the Stock Sale Center or to the main or any full-service
branch office of any of the Banks. Alternatively, you may mail these documents
in the postage-paid envelope that has been provided. Your properly completed
original Stock Order Form (facsimile copies and photocopies will not be
accepted) and executed Certification Form, and payment in full (or withdrawal
authorization), at $[ . ] per share, must be actually received by Wintrust no
later than Noon, Central Time, on [ ] [ ], 1997 or your order will become
void. If you need further assistance, please call the Stock Sale Center at
(847) [ - ] and ask for an EVEREN Securities, Inc. representative. An EVEREN
Securities representative will be pleased to help you with the completion of
your Stock Order Form and Certification Form or answer any questions you may
have.
ITEM 1 INSTRUCTIONS
Please check the box for the desired form of stock ownership. The stock transfer
industry has developed a uniform system of stockholder registrations that will
be used in the issuance of your Wintrust Financial Corporation common stock
certificate. Stock ownership must be registered in one of the ways described
under these guidelines. If you have any questions or concerns regarding the
registration of your stock, please consult your legal adviser. Listed below are
some general guidelines for stockholder registration.
INDIVIDUAL
Include the first name, middle initial, and the last name of the subscriber.
Avoid the use of two initials. Please omit words that do not affect ownership
rights, such as "Mrs.", "Mr.", "Dr.", "special account", "single person", etc.
JOINT TENANTS
Joint tenants with right of survivorship may be specified to identify two or
more owners. When stock is held by joint tenants with right of survivorship,
ownership passes automatically to the surviving joint tenant(s) upon the death
of any joint tenant. All parties must agree to the transfer or sale of shares
held by joint tenants.
TENANTS IN COMMON
Tenants in common may also be specified to identify two or more owners. When
stock is held by tenants in common, upon the death of one co-tenant, ownership
of the stock will be held by the surviving co-tenant(s) and by the heirs of the
deceased co-tenant. All parties must agree to the transfer or sale of shares
held by tenants in common.
UNIFORM TRANSFER TO MINORS OR UNIFORM GIFT TO MINORS
Stock may be held in the name of a custodian for a minor under the Uniform Gift
to Minors Act ("UGTMA") or Uniform Transfer to Minors Act ("UTMA") of each
state. There may be only one custodian and one minor designated on a stock
certificate. The minor is the actual owner of the stock with the adult custodian
responsible for the investment until the minor reaches legal age. The standard
abbreviation for Custodian is "CUST". Standard U.S. Postal Service state
abbreviations should be used to describe the appropriate state. For example,
stock held by John Doe as custodian for Susan Doe under the Illinois Uniform
Transfers to Minors Act will be abbreviated John Doe, CUST Susan Doe UTMA, IL.
Use minor's social security number.
<PAGE> 6
FIDUCIARIES
Information provided with respect to stock to be held in a fiduciary capacity
must contain the following:
1. The name(s) of the fiduciary. If an individual, list the first name, middle
initial, and last name. If a corporation, list the corporation's title
before the individual.
2. The fiduciary capacity, such as administrator, executor, personal
representative, conservator, trustee, committee, etc.
3. A description of the document governing the relationship, such as a trust
agreement or court order.
4. The date of the document governing the relationship, except that the date of
a trust created by a will need not be included in the description.
5. The name of the maker, donor, or testator and the name of the beneficiary.
An example of fiduciary ownership of stock in the case of a trust is: John Doe,
Trustee UAD 10-1-87 for Susan Doe. The standard abbreviation for "Under
Agreement Dated" is "UAD".
ITEM 2 INSTRUCTIONS
Please complete Item 2 as fully and accurately as possible. Please print in
capital letters and use black or blue ink. Leave one blank box for a space.
Please be certain to supply your social security or tax identification number as
well as your daytime and evening telephone number(s). It may be necessary to
call you if your order cannot be executed as given.
ITEM 3 INSTRUCTIONS
Please check this box if either of these descriptions applies to you.
ITEM 4 INSTRUCTIONS
Please check this box if you or any associate, as defined on the reverse side of
the Stock Order Form, or person acting in concert with you, also defined on the
reverse side of the Stock Order Form, has submitted another order for shares and
complete the continuation of Item 4 on the reverse side of the Stock Order Form.
ITEM 5 INSTRUCTIONS
Fill in the number of shares for which you wish to subscribe and the total
payment due. The amount due is determined by multiplying the number of shares by
the subscription price of $[ . ] per share. Wintrust Financial Corporation has
reserved the right to reject the subscription of any order received in the
Subscription and Community Offering, in whole or in part. The minimum order is
100 shares.
ITEM 6 INSTRUCTIONS
Please check this box if your method of payment is by check, bank draft, or
money order and fill in the boxes to the right of Item 6 with the total amount
of checks, bank drafts, and money orders submitted. Checks, bank drafts, or
money orders should made payable to Wintrust Financial Corporation. Your funds
will be held in a non-interest-bearing escrow account at one of the Banks until
completion or termination of the Offering.
ITEM 7 INSTRUCTIONS
Please check this box if you intend to pay for your stock by a withdrawal from a
deposit account at one of the Banks. Supply the name of the Bank (See Item 8
below), account number(s), and the total amount of your withdrawal authorization
for each account in the boxes provided. The amount submitted under Item 6 (if
applicable) when added to the amount withdrawn under Item 7 should equal the
total amount of your stock purchase under Item 5. There will be no penalty
assessed for early withdrawals from certificates of deposit used for stock
purchases. SPECIAL ARRANGEMENTS MUST BE MADE BY [ ] [ ], 1997 IF USING AN
INDIVIDUAL RETIREMENT ACCOUNT ("IRA") FOR STOCK PURCHASES. PLEASE CONTACT THE
STOCK SALE CENTER AT (847) [ - ] FOR INFORMATION REGARDING SUBSCRIPTIONS USING
AN IRA.
<PAGE> 7
ITEM 8 INSTRUCTIONS
a. Please check this box only if you were a shareholder of Wintrust Financial
Corporation as of [ ] [ ], 1996.
b. Please check this box only if you were a deposit or loan customer as of
[ ] [ ], 1996 of:
- North Shore Community Bank and Trust Company,
- Lake Forest Bank and Trust Company,
- Hinsdale Bank and Trust Company (including Clarendon Hills Bank),
- Libertyville Bank and Trust Company, and/or
- Barrington Bank and Trust Company, N.A.
c. Please check this box if you were a resident of one of the following
metropolitan Chicago communities: Barrington, Barrington Hills, Clarendon
Hills, Glencoe, Hinsdale, Inverness, Kenilworth, Lake Barrington, Lake
Bluff, Lake Forest, Libertyville, Mundelein, North Barrington, South
Barrington, Vernon Hills, Western Springs, Wilmette, or Winnetka.
To ensure proper identification of your stock purchase priorities, you must list
the Wintrust stock registration or Bank account information requested on the
reverse side of the Stock Order Form.
ITEM 10 INSTRUCTIONS
Please sign and date the Stock Order Form and Certification Form where
indicated. Review both documents carefully before you sign. Normally, only one
signature is required. An additional signature is required only when payment is
to be made by withdrawal from a deposit account that requires multiple
signatures to withdraw funds. ALL PERSONS LISTED IN ITEM 2 MUST SIGN THE
CERTIFICATION FORM.
If you have any remaining questions, or if you would like assistance in
completing your Stock Order Form, you may call the special Stock Sale Center
telephone number (847) [ - ] and ask for a representative of EVEREN Securities.
The Stock Sale Center is open between the hours of 8:00 A.M. and 5:00 P.M.,
Central Time, Monday through Friday.
<PAGE> 8
CERTIFICATION FORM
This Certification Form must be carefully reviewed and executed by all the
parties listed on the accompanying Stock Order Form for Wintrust Financial
Corporation common stock.
I ACKNOWLEDGE THAT THE COMMON STOCK OF WINTRUST FINANCIAL CORPORATION IS NOT A
DEPOSIT OR ACCOUNT, IS NOT AN OBLIGATION OF ANY BANK, AND IS NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC") OR BY ANY GOVERNMENTAL AGENCY.
I further certify that, before purchasing the common stock, no par value, of
Wintrust Financial Corporation (the "Company"), I have received a Prospectus
dated as of [ ] [ ], 1997 which contains disclosure regarding the nature of
the Company's common stock being offered and describes the risks involved in the
investment, including, but not limited to:
- The impact of the Company's de novo bank operations and branch opening
strategy on profitability;
- The Company's reliance on certain key personnel, including senior
management of the Company and other executive and management personnel
of the Banks;
- The risk that the Company's allowance for loan losses may prove to be
inadequate;
- The potential adverse effects that changes in market rates of interest
may have on the Company's profitability;
- The limited trading market for the shares of common stock;
- The risk that the $[ ] offering price per share the Company has
determined for the common stock will be higher than the market trading
price following the Offering;
- The "best efforts" nature of the Subscription and Community Offering,
which does not require any minimum number of shares to be sold;
- The risks associated with potential delay in completing the Offering;
- The risk that additional shares of common stock becoming eligible for
sale in the future could lead to a decrease in the market price of the
common stock;
- The substantial control of the Company held by officers, directors, and
other affiliated shareholders who will beneficially own approximately
[ ]% of the outstanding shares of common stock after the Offering;
- The effects of substantial competition in the financial services
industry;
- The anti-takeover effects of certain provisions of the Company's
Articles of Incorporation and By-Laws;
- The restrictions various regulations place upon the ability of the
Company to pay dividends;
- The effects financial institutions regulation generally have on the
Company's costs of doing business and ability to compete; and
- The risk that actual results will vary from those projected in the
forward-looking statements contained in the Prospectus.
For a more detailed description of the risks involved in the Offering, see "RISK
FACTORS" at pages [ ] through [ ] of the Prospectus.
Note: If the stock is to Signature:
be held in joint name, -------------------------------
all parties must sign.
Signature:
-------------------------------
Date:
-------------------------------
