<PAGE> 1
As filed with the Securities and Exchange Commission on January 24, 1997.
REGISTRATION NO. 333-18699
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
to
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. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================
ADDITIONAL AMOUNT
TITLE OF EACH CLASS OF PROPOSED ADDITIONAL OF REGISTRATION
SECURITIES TO BE REGISTERED OFFERING AMOUNT(1)(2) FEE(1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, without par value .... $5,172,500 $1,567
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</TABLE>
(1) A registration fee of $5,455 was previously paid to cover the
registration of a maximum aggregate offering amount of $18,000,000. The
additional registration fee of $1,567 is being paid herewith with respect to
$5,172,500 additional amount of Common Stock proposed to be offered. The
proposed maximum aggregate offering amount being registered under this
Registration Statement is $23,172,500.
(2) 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 JANUARY 24, 1997
PROSPECTUS
1,300,000 SHARES
WINTRUST FINANCIAL CORPORATION
COMMON STOCK
Wintrust Financial Corporation (the "Company") is offering hereby up to
1,300,000 newly issued shares of common stock, without par value (the "Common
Stock") at a price of $15.50 per share. The shares are being offered on a
priority basis to shareholders of record of the Company as of December 31, 1996
("Record Date Shareholders"), and to customers of the Company's banking
subsidiaries as of December 31, 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 February 24, 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 served by the Company's banking subsidiaries.
(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 March 6, 1997 (the "Expiration Date"). 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 INFORMATION OFFICE AT (888) 317-8625 AND ASK FOR AN EVEREN
SECURITIES, INC. REPRESENTATIVE.
-----------------
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH
UNDER "RISK FACTORS" BEGINNING ON PAGE 10 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 Proceeds to
Price to Public Commissions(1)(2) Company(3)
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share ............. $15.50 $0.3875 $15.1125
Total(4) .............. $20,150,000 $503,750 $19,646,250
==========================================================================
</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 1,300,000 of the shares are being offered by the Company on a
"best efforts" basis with the assistance of the Selling Agent. Assumes all
1,300,000 shares are sold on such basis without the assistance of
commissioned registered representatives. 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 price of the shares sold
directly by the Company in the Subscription and Community Offering without
the use of commissioned registered representatives; in the event that 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 price of the
shares sold by the Company in such manner; in the event an underwritten
Public Offering is commenced, the Selling Agent would offer a specified
number of shares to the general public at the per share Price to Public and
purchase such shares from the Company at such price less an underwriting
discount currently estimated to be 6.6%.
(3) Before deducting offering expenses payable by the Company estimated to
be approximately $500,000, including the maximum of $75,000 reimbursable to
the Selling Agent for out-of-pocket expenses.
(4) Assumes no exercise of the over-subscription or over-allotment option
and the sale of 1,300,000 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). The Company may, in its sole discretion, increase the
number of shares of Common Stock sold by up to 195,000 additional shares to
satisfy unfilled purchase orders in the Subscription and Community Offering,
in which case the Total Price to Public would be $23,172,500, the Total
Selling Agent Commissions would be $579,313 (assuming no assistance from
commissioned registered representatives), and the Total Proceeds to Company
would be $22,593,187. In addition, in the event the Selling Agent
undertakes an underwritten 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 the Public Offering.
____________________
EVEREN SECURITIES, INC.
The date of the Prospectus is January __, 1997
2
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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 TRANSACTIONS MAY BE EFFECTED IN THE
NASDAQ NATIONAL MARKET(SM) OR OTHERWISE. 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 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,
with total assets of approximately $700 million at December 31, 1996. The
Company engages in community banking and specialty finance through its
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 affluent suburbs of Chicago, Illinois. Through First Premium, the
Company is in the business of originating commercial insurance premium finance
loans on a national basis, a portion of which are purchased by the Banks. In
September 1996, the Banks and First Premium, which were previously affiliated
but separately owned, became subsidiaries of the Company as a result of a
transaction which joined their respective holding companies under one parent
company. See "THE COMPANY."
The Company provides banking and financial services to individuals, small
businesses, local governmental units and institutional clients residing
primarily in the Banks' local service areas. These services include
traditional demand, NOW, money market, savings and time deposit accounts, as
well as a number of innovative deposit products targeted to specific market
segments. The Banks offer home equity, home mortgage, real estate and
commercial loans, safe deposit facilities, trust services and other innovative
and traditional services specially tailored to meet the needs of customers in
their market areas.
First Premium commenced operations approximately six years ago and is
headquartered in Deerfield, Illinois. Based on limited industry data available
in certain state regulatory filings and First Premium management's experience
in and knowledge of the premium finance industry, management estimates that,
ranked by loan origination volume, First Premium is one of the top 10 premium
finance companies operating in the United States. Loans are originated by
First Premium's own sales force, working with medium and large insurance agents
and brokers throughout the United States. Insurance premiums are financed
primarily for commercial customers' purchase of property and casualty
insurance.
Each of the Banks was founded as a de novo banking organization (i.e.,
started new) within the last six years. The organizational efforts began in
1991, when a group of experienced bankers and local business people identified
an unfilled niche in the Chicago metropolitan area retail banking market. As
large banks acquired smaller ones and personal service was subjected to
consolidation strategies, the opportunity increased in affluent suburbs for
locally owned and operated, highly personal service-oriented banks. As a
result, Lake Forest Bank was founded in December 1991 to service the Lake
Forest and Lake Bluff communities. The Lake Bluff branch was opened in 1994.
In 1993, Hinsdale Bank was opened to service the communities of Hinsdale and
Burr Ridge. Its Clarendon Hills branch was opened in 1996. In 1994, North
Shore Community Bank was started in order to service Wilmette and Kenilworth.
A Glencoe branch was opened in 1995, and a Winnetka branch was opened in 1996
to service Winnetka and Northfield. In 1995, Libertyville Bank was opened to
service Libertyville, Vernon Hills and Mundelein. In December 1996, Barrington
Bank was opened to service the Barrington/Inverness areas. In raising the
initial equity required to open each of the first four Banks, the organizers
targeted
4
<PAGE> 6
residents within the communities to be served by the new Bank. As of December
31, 1996, the Company had approximately 800 shareholders of record, the
majority of whom reside in the Banks' primary market areas.
Anticipated future growth and profitability of the Company depends on two
principal strategies: (i) expanding market share in affluent suburban Chicago
markets, and (ii) augmenting interest income from the Banks' traditional loan
portfolios with interest income from loans in earning asset niches that fit the
Banks' asset/liability strategy and loan quality standards. Management
anticipates that the Banks, like many community banks, are not likely over time
to generate loans to local customers for more than about half of their
respective lending capacities. To build additional loan volume, the Company
has identified and finances loans in various asset niches to enhance its
loan-to-deposit ratio and to optimize its growth. Indirect auto loans,
mortgage warehouse lending, home mortgage products, and premium finance loans
originated by First Premium, are some of the earning asset niches that the
Company is now pursuing or developing. As a result of these strategies, since
inception the Banks have been among the fastest growing community-oriented de
novo banking operations in Illinois.
The historical financial performance of the Banks and First Premium has
been affected by the high costs associated with growing market share in
deposits and loans, opening new branches and banking facilities, and building
an experienced management team. Viewed in total, the Company's financial
performance over the past five years reflects the improving financial
performance of the Banks as they mature, adjusted for the significant costs of
opening new banks and branches. The Company's experience has been that it
generally takes from 13 to 24 months for new banking offices to first achieve
operational profitability.
For the last three fiscal years, the Company's net interest margin has
ranged from 3.83% to 2.96%, levels less favorable than peer group comparisons
due to the start-up nature of the Company's operations, while its net overhead
ratio has ranged from 4.95% to 2.01%. The "net overhead ratio," a measure of
operational efficiency, reflects non-interest expense less non-interest income,
as a percent of average assets. For the nine months ended September 30, 1996,
the Company's net interest margin was 2.86% and its net overhead ratio was
2.66%. The Company's management currently has long-term goals for net interest
margin and net overhead ratios of 4.0% to 4.5% and 1.5% to 2.0%, respectively,
which they expect will be reasonable targets as the Banks and First Premium
mature over the next three to five years.
The level of improvements in net interest margin, net overhead ratios and
other profitability measurements will depend on the Company's success in
implementing its business and growth strategies. Key elements of the Company's
business strategies include:
- Identifying and entering markets with a high concentration of wealth
and limited local banking competition. The Company expects to penetrate
new markets by opening either branches or de novo banks;
- Maintaining decision-making authority within each of the Banks and
First Premium. Local control and management provides the Banks with the
competitive advantage of being able to tailor products and services to
meet the needs of the community, to make decisions affecting its customers
quickly, and to enjoy the symbiotic benefits of investing and
participating in their communities;
- Employing fewer, but more highly qualified and productive,
individuals at relatively high compensation rates and focusing on low net
overhead ratios at the Banks and First Premium;
- Providing a high level of personal and professional service.
Management believes this has proven to be a key competitive strength for
the Banks and First Premium;
- Marketing innovative deposit and loan products. Local control and
management allows each Bank to target, and be more responsive to, the
needs of customers in their specific markets by offering customized
products and services;
- Building a portfolio of high quality loans. Conservative lending
practices are a critical element of the Company's strategy;
5
<PAGE> 7
- Augmenting the loan portfolio with selected loans from asset niches
which allow the Banks to more fully utilize their lending capacity;
- Pursuing new distribution methods and developing new products to
increase premium finance loan volume;
- Taking advantage of the synergism between First Premium and the
Banks in terms of loan yields and funding costs; and
- Expanding trust services to affluent individuals and small
businesses in new markets. To date, the Company's trust operations have
focused on target customers of Lake Forest Bank. The Company intends to
expand trust services to the other Banks' markets over the next three
years.
The Company's executive offices are located at 727 North Bank Lane, Lake
Forest, Illinois, 60045, and its telephone number is (847) 615-4096.
THE OFFERING
Common Stock offered
by the Company ........... 1,300,000 shares
Common Stock to be
outstanding after
the Offering .............. 7,919,847 shares(1)
Price to Public ............. $15.50 per share
Use of Proceeds ............. The Company intends to use the net proceeds
from the sale of shares of Common Stock
offered hereby to repay all or a portion of the
amounts outstanding under the Company's $25
million revolving line of credit. At January
22, 1997, approximately $22.1 million of
indebtedness was outstanding under the line.
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
December 31, 1996, and to customers of the
Company's banking subsidiaries as of December
31, 1996. The highest priority will be given to
those Record Date Shareholders placing purchase
orders prior to Noon, Central Time, on
February 24, 1997.
(1) Assumes no prior exercise of any of (i) outstanding Warrants to purchase
155,430 shares; (ii) currently outstanding Options to purchase up to an
aggregate of 1,110,750 shares, of which Options to purchase 642,968 shares
are currently exercisable; or (iii) outstanding Rights to purchase 103,236
shares, all of which are currently exercisable. An additional 565,908
shares, with respect to which Options remain available for grant, are
currently reserved for issuance under the Company's various stock option
plans maintained for the benefit of eligible officers, directors
and employees of the Company and its subsidiaries.
6
<PAGE> 8
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 in a direct community offering
with a preference given to residents of the
communities served by the Company's banking
subsidiaries. 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
March 6, 1997, unless extended by the Company.
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 195,000 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 $15.50 per share for
all shares subscribed for or ordered prior to
Noon, Central Time, on March 6, 1997. To
receive the highest priority in the
Subscription Offering, Record Date Shareholders
must place purchase orders prior to Noon,
Central Time, on February 24, 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.
7
<PAGE> 9
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
8
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SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial and other 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 OPERATIONS." 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(1) 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>
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 ......... $ -- $ -- $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======== ======= ======= ========
</TABLE>
9
<PAGE> 11
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------------
1996 1995(1) 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
(AT END OF PERIOD):
Total assets .............................. $ 621,264 $ 376,143 $ 470,890 $ 354,158 $ 188,590 $ 82,864 $ 52,422
Total deposits ............................ 549,303 322,516 405,658 221,985 98,264 42,996 2,361
Total loans ............................... 414,405 218,730 258,231 193,982 109,276 48,527 33,482
Notes payable and subordinated debt ....... 16,554 13,028 10,758 6,905 4,837 16,050 32,413
Total shareholders' equity ............... 40,785 28,743 40,487 25,366 17,227 11,291 14,583
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
Net overhead ratio(9) ................... 2.66% 1.99% 2.01% 3.57% 4.95% 9.72% 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% (12.20)% (25.40)% (46.01)% 14.46%
Loan-to-deposit 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(10) ................. 4 3 4 3 2 1 1
Banking offices(10) ................... 13 6 11 5 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 OPERATIONS." 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, the Company recorded
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) Non-interest expense less non-interest income divided by average assets.
(10) Excludes Barrington Bank which commenced operations on December 19, 1996.
10
<PAGE> 12
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 15 to 17 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 bank 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 strategies. 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-competition agreements, severance arrangements and benefits. 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 allowances for the
Banks is more difficult, and therefore the Banks may be more susceptible to
changes in estimates,
11
<PAGE> 13
and to losses exceeding estimates, than banks with more seasoned loan
portfolios. Although management believes that the allowance for loan losses is
adequate to absorb losses on any 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.
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 in an
effort 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, except
for 103,967 shares which are restricted securities, the 16,411 shares issued
pursuant to certain Option exercises, 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 Market(SM), 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 during or 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 1,300,000 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
12
<PAGE> 14
shares actually issued and would incur additional selling costs. See "TERMS OF
THE OFFERING -- Plan of 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 $15.50 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 April 21, 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 7,919,847
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"). Assuming no shares are
purchased in the Offering by affiliates of the Company, after the Offering, a
total of 6,475,756 shares, including the 1,300,000 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"). Of the shares currently held by affiliates
of the Company, 1,340,124 shares can be resold immediately following the
Offering subject to certain requirements of Rule 144 under the Securities Act
which generally limit the number of shares that may be sold by any person in
any three-month period to the greater of (a) 1% of the shares outstanding
(79,198 shares following completion of the Offering or 81,148 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. The remaining 103,967 shares are restricted securities
and cannot be resold without registration under the Securities Act unless an
exemption therefrom is available. A portion of such shares will first become
eligible for resale under Rule 144 in December 1998 and the remainder in
January 1999. See "SHARES ELIGIBLE FOR FUTURE SALE."
In addition to the shares of Common Stock issued and outstanding, as of
January 22, 1997, the Company had an aggregate of 1,935,324 shares reserved for
issuance as follows: (i) 155,430 shares issuable pursuant to Warrant
agreements; (ii) 103,236 shares issuable upon exercise of outstanding Rights,
all of which are currently exercisable; and (iii) an aggregate of 1,676,658
shares reserved for issuance under various stock option plans maintained for
the benefit of eligible employees, officers and directors of the Company and
its subsidiaries, pursuant to which plans there are currently outstanding
Options to purchase an aggregate of 1,110,750 shares of Common Stock, of which
Options to purchase 642,968 shares are currently exercisable. When any such
Warrants, Rights or Options are exercised, the shares issued in connection
therewith are expected to be eligible for resale in the public market without
restriction, except for any such shares held by persons who are then affiliates
of the Company.
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
13
<PAGE> 15
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
greater access to 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."
SUBSTANTIAL CONTROL BY OFFICERS, DIRECTORS AND OTHER AFFILIATED SHAREHOLDERS
After this Offering, assuming none of them purchase additional shares in
the Offering, the officers and directors of the Company and certain members of
their families will in aggregate own approximately 21.93% of the outstanding
shares of Common Stock (assuming 1,300,000 shares are sold in the Offering) and
are likely to continue to exercise substantial control over the Company's
affairs. Absent additional purchases, Howard D. Adams and members of his
immediate family will beneficially own approximately 11.63% of the Common Stock
after the Offering. See "PRINCIPAL SHAREHOLDERS."
CERTAIN ANTI-TRUST 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. However, as Federal Reserve member banks, dividends
declared in any calendar year by any of the Banks may not exceed its net profit
for the year plus its retained net profits for the preceding two years. In
addition, 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, Federal Reserve member banks, or in
the case of Barrington Bank, national banks. As of September 30, 1996, based
upon
14
<PAGE> 16
applicable regulatory limitations, Lake Forest Bank had approximately $2.4
million available to pay as dividends to the Company.
In addition, the payment of dividends may be restricted under certain
financial covenants in the Company's revolving line of credit and First
Premium's existing securitization facility. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Liquidity and
Capital Resources."
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 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
anticipated improvements in financial performance and management's long-term
performance goals, as well as statements relating to the Company's operational
philosophy and business and growth strategies, including 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 1,300,000 shares of
Common Stock in this Offering are estimated to be approximately $19.1 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 estimated aggregate expenses and commissions payable by the Company
of approximately $1.0 million.
The Company will use the net proceeds of this offering to repay all or
a portion of the amounts outstanding under the Company's $25 million revolving
line of credit. At January 22, 1997, approximately $22.1 million of
indebtedness was outstanding under the line. Borrowings under the line bear
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 7.08% 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
OPERATIONS -- 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.
15
<PAGE> 17
MARKET FOR COMMON STOCK AND DIVIDENDS
LIMITED TRADING MARKET
Other than certain restricted shares, the majority of the Common Stock is
now freely tradeable by persons other than those who are currently affiliates
of the Company. However, prior to this Offering there has not been active
trading in the Common Stock. Following the Company's Reorganization in
September 1996, the Common Stock has traded occasionally in the
over-the-counter market where bid and asked prices are quoted for the Common
Stock on the OTC Bulletin Board. Prior to the Reorganization, there was no
established public market for the shares of the Company's predecessor
companies. Although a limited trading market for the Company's Common Stock
has developed, quotations of the bid and asked prices may not be indicative of
the fair value of the Common Stock.
The Company has made application for inclusion of the Common Stock,
subject to completion of this Offering, in The Nasdaq National MarketSM under
the symbol "WTFC." There can be no assurance, however, that an active or
liquid public market will necessarily develop for the Common Stock. See "RISK
FACTORS -- Limited Market for Shares."
On January 22, 1997, the last reported bid and asked prices on the OTC
Bulletin Board for the Common Stock were $14.50 and $15.25, respectively. The
table below sets forth the high and low bid prices quoted for the Common Stock
during the first quarter of 1997 to date and the fourth quarter of 1996, the
first full quarterly period for which there has been limited trading in the
Common Stock. Such over-the-counter market quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions. Furthermore, for the period from October 1,
1996 to October 18, 1996, bids for the Common Stock quotations were being
maintained by only one market maker.
<TABLE>
<CAPTION>
BID
---------------
HIGH LOW
------ -------
1997
----
<S> <C> <C>
First quarter (through
January 22, 1997) ..... $14.50 $14.125
1996
----
Fourth quarter(1) ...... 15.625 12.50
</TABLE>
_________
(1) The low bid price for the quarter was quoted during the beginning of the
quarter when there was only one market maker.
As of the Record Date, the Company had approximately 800 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
16
<PAGE> 18
securitization facility. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- 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.
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 completion in December 1996 of the transaction described in
"RECENT ACQUISITION" and the issuance of 16,411 shares pursuant to Option
exercises during January 1997; and pro forma capitalization as further adjusted
to reflect the issuance and sale by the Company of the maximum of 1,300,000
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 $ 17,056 $ --
======== ======== =======
SHAREHOLDERS' EQUITY:
Preferred Stock $ -- $ -- $ --
Common Stock, without par value, 30,000,000
shares authorized; 6,515,880 shares issued and
outstanding; 6,619,847 shares outstanding pro
forma; 7,919,847 shares outstanding pro forma as
adjusted(1) ............................................. 6,516 6,620 7,920
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 70,717
Retained earnings ......................................... (17,511) (17,511) (17,511)
Unrealized gain on investments available for sale ......... 24 24 24
-------- -------- -------
Total shareholders' equity .............................. $ 40,785 $ 42,104 $61,250
======== ======== =======
</TABLE>
______________
(1) On a pro forma basis, adjusted to give effect to completion of the
recent acquisition and the issuance of shares pursuant to Option exercises,
excludes (i) 155,430 shares subject to outstanding Warrants; (ii) an
aggregate of 1,110,750 shares of Common Stock issuable upon exercise of
outstanding Options (after giving effect to Option grants through the date
of this Prospectus), of which 642,968 shares are subject to currently
exercisable Options; (iii) 103,236 shares issuable upon the exercise of
outstanding Rights all of which are currently exercisable; and (iv) an
additional 565,908 shares, with respect to which Options remain available
for grant, which are reserved for issuance under the Company's various
stock option plans maintained for the benefit of eligible officers,
directors and employees of the Company and its subsidiaries.
17
<PAGE> 19
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 1,300,000 shares.
<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 leverage capital ............... $40,291 $ 29,250 $11,041 $59,437 $ 29,355 $30,082
Tier 1 risk-based capital ............. 40,291 27,240 13,051 59,437 27,265 32,172
Total risk-based capital .............. 44,040 45,400 (1,360) 63,186 45,442 17,744
PERCENTAGE BASIS:
Average equity-to-average
asset ratio ......................... 7.7% N/A N/A 11.3% N/A N/A
Leverage ratio ........................ 6.5% 5.0% 1.5% 10.1% 5.0% 5.1%
Tier 1 risk-based capital ratio ....... 8.9% 6.0% 2.9% 13.1% 6.0% 7.1%
Total risk-based capital ratio ....... 9.7% 10.0% (0.3)% 13.9% 10.0% 3.9%
</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.
18
<PAGE> 20
DILUTION
As of September 30, 1996, giving pro forma effect to the issuance of
87,556 shares of Common Stock in the transaction described in "RECENT
ACQUISITION" and the issuance of 16,411 shares pursuant to certain Option
exercises, the Company had an aggregate of 6,619,847 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 intangibles 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 application of the net
proceeds from the sale by the Company of 1,300,000 shares offered hereby (after
deduction of estimated Selling Agent fees and commissions and estimated
offering expenses), the pro forma net tangible book value at September 30,
1996, would have been $7.51 per share, representing an immediate increase of
$1.41 per share to current shareholders and an immediate dilution in book value
of $7.99 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 .............................. $15.50
Pro forma net tangible book value per share at
September 30, 1996 ................................ $6.10
Increase attributable to investors in the Offering... 1.41
-----
Pro forma net tangible book value per share after
Offering ............................................ 7.51
------
Per share book value dilution to investors in the
Offering(1) ......................................... $ 7.99
======
</TABLE>
- --------------------
(1) Does not give effect to and assumes no prior exercise of any of (i) 155,430
Warrants outstanding, giving effect to the recent acquisition; (ii)
currently outstanding Options to purchase up to an aggregate of 1,110,750
shares of Common Stock, of which 642,968 are currently exercisable; or (iii)
outstanding Rights to purchase 103,236 shares, all of which are currently
exercisable. Adjusted to give effect as of September 30, 1996, to the
exercise of such exercisable Warrants, Options and Rights in accordance with
their terms, based on calculations using the treasury stock method, the
estimated pro forma net tangible book value per share before the Offering
and after the Offering would be $5.80 and $7.20, respectively, and the
estimated per share book value dilution to investors in the Offering would
be $8.30.
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 transaction
described in "RECENT ACQUISITION" and the issuance of 16,411 shares pursuant to
certain Option exercises, and assuming the sale of 1,300,000 shares, before
deduction of estimated 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) ....... 6,619,847 84% $ 62,930 76% $ 9.51
Investors in the Offering ...... 1,300,000 16 20,150 24 15.50
--------- --- -------- ---
Total ........................ 7,919,847 100% $ 83,080 100%
========= === ======== ===
</TABLE>
- --------------------
(1) Does not give effect to and assumes no prior exercise of any of (i) 155,430
Warrants outstanding, giving effect to the recent acquisition; (ii)
currently outstanding Options to purchase up to an aggregate of 1,110,750
shares of Common Stock of which 642,968 are currently exercisable; or (iii)
outstanding Rights to purchase 103,236 shares, all of which are currently
exercisable.
19
<PAGE> 21
TERMS OF THE OFFERING
THE OFFERING
The Company is offering for sale up to 1,300,000 newly issued shares of
its Common Stock, without par value, at an offering price of $15.50 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 1,300,000 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 December 31, 1996 ("Record Date
Shareholders") and to certain customers of the Company's banking subsidiaries
as of December 31, 1996 ("Record Date Customers"). The highest priority will
be given to those Record Date Shareholders placing purchase orders prior to
Noon, Central Time, on February 24, 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 served by the
Banks. 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 March 6, 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 $15.50 per share for all shares subscribed for or ordered prior to
Noon, Central Time, on March 6, 1997. To receive preference in the
Subscription Offering, Record Date Shareholders must place purchase orders
prior to Noon, Central Time, on February 24, 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. The minimum
subscription for any investor is 100 shares, or $1,550.
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 such deposit accounts will be charged on the day the order is
received for the amount of the subscription and proceeds placed in a
non-interest-bearing escrow account at one of the Banks until completion or
termination of the Offering. To the extent subscription orders are filled, the
foregoing escrow accounts will be charged as of the closing date of the
Offering against issuance of certificates evidencing ownership of the shares of
Common Stock.
20
<PAGE> 22
In the event subscription orders are not filled, or are accepted only in part,
or if the Offering is terminated or extended beyond April 21, 1997, unaccepted
subscription funds placed in escrow will be returned to subscribers without
interest.
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 $15.50 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
Information Office at (888) 317-8625 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.
21
<PAGE> 23
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 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 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 195,000 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.
22
<PAGE> 24
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 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
of the 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 their warrants for a combination of shares of
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 have full oversight
responsibilities of their respective management teams. In the case of the
Banks, the boards are comprised largely of local community leaders and
influential business persons in their respective target markets.
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.
The purpose of the Offering is to enable the Company to repay all or 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 future branch office openings, and
23
<PAGE> 25
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.
DE NOVO COMMUNITY BANKING
Each of the Banks was founded as a de novo banking organization (i.e.,
started new) within the last six years. The organizational efforts began in
1991, when a group of experienced bankers and local business people identified
an unfilled niche in the Chicago metropolitan area retail banking market. The
organizers believed that, as large banks acquired smaller ones and personal
service was subjected to consolidation strategies, the opportunity increased in
affluent suburbs for locally owned and operated, highly personal
service-oriented banks. The Company's community banking strategy was developed
in response to this perceived market opportunity.
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 concept
developed, and continually enhanced, by the Company. To date, the Company has
opened a total of 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 with a high concentration of
wealth and limited local banking competition 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(1)
Lake Bluff, Illinois 1
Hinsdale Bank Dennis Jones, October 1993 $ 143,000 Hinsdale, Illinois 2
CEO Clarendon Hills, Illinois(2) 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 H. Bishop December 1996 N/A Barrington, Illinois 1
Barrington Hills, Illinois -
Lake Barrington, Illinois -
North Barrington, Illinois -
South Barrington, Illinois -
Inverness, Illinois -
</TABLE>
- ----------------------
(1) Does not include the new drive-up facility under construction at the train
station in West Lake Forest, scheduled to open during the first quarter of
1997.
(2) Operates in this community as Clarendon Hills Bank, a branch of Hinsdale
Bank.
24
<PAGE> 26
Each of the Banks provides a variety of financial services to individuals,
small businesses, local governmental units and institutional clients residing
primarily in the Banks' local service areas. These services include federally
insured deposits (traditional demand, NOW, money market, savings, and time
deposit accounts, as well as a number of innovative deposit products targeted
to specific market segments); home mortgages, 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
primarily to its target customers. The Company intends to expand trust
services to the other Banks' markets over the next three years. See
"BUSINESS." 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.
OPERATIONAL STRATEGIES
Key elements of the Company's operational strategies 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 organization. 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 that local control and management provide the Banks with the
competitive advantage of being able to tailor products and services to meet the
needs of the communities served, to make decisions affecting its customers
quickly, and to enjoy the symbiotic benefits of investing and participating in
their communities.
- Employing fewer, but more highly qualified and productive individuals at
relatively higher compensation rates and focusing on low net overhead ratios at
the Banks and First Premium. 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, while senior management of the
Company provides expertise to all 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. Management
believes this organizational structure and a strong commitment to cost control
throughout the organization will allow the Company to maintain favorable net
overhead ratios as the Banks and First Premium mature. 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 autonomy at the Banks and First Premium 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 presidents and
managers of the Banks and First Premium with those of the Company's
shareholders.
- Providing a high level of personal and professional 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. In addition, to ensure professional servicing of 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.
- Marketing innovative deposit and loan products. 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
25
<PAGE> 27
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. To be more responsive to the needs of consumers
in their specific markets, the Banks have introduced different innovative
deposit and loan products 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 which are
comprised primarily of small businesses.
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
distinct communities. As of December 31, 1996, the Company had a total of 14
banking facilities. Anticipated future growth and profitability of the Company
depend on two principal growth strategies: (i) expanding market share in
affluent suburban Chicago markets, and (ii) augmenting interest income from the
Banks' traditional loan portfolios with interest income from loans in earning
asset niches that fit the Banks' asset/liability strategy and loan quality
standards. Key elements of these strategies 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.
- Identifying and entering markets with a high concentration of wealth and
limited local banking competition. The Company expects to penetrate new
markets by opening either branches or de novo banks. 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 and nearby communities 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 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.
26
<PAGE> 28
- Building a portfolio of high quality loans. Conservative lending
practices are a critical element of the Company's strategy. Each of the Banks
adheres to strict underwriting standards in its loan origination activities and
loans in excess of certain specified lending limits are subject to approval by
each Bank's credit committee or, in certain circumstances, by the full board of
the Bank. The boards of directors and credit committees of the Banks, which
include a number of persons who also serve as directors of the Company, review
the loan portfolios on a monthly basis to assess loan quality using risk rating
systems. In addition to the internal review process, 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.
- Augmenting the loan portfolio with selected loans from asset niches
which allow the Banks to more fully utilize their lending capacity. 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
loans and mortgage warehouse loans. 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.
- Pursuing new distribution methods and developing new products to
increase premium finance loan volume. As part of its ongoing marketing, First
Premium has recently introduced, on a selective basis, various agent incentive
programs designed to increase the volume of finance contracts referred to First
Premium by key insurance agents and brokers and to strengthen continuing
loyalty of these relationships. The Company anticipates possible reductions in
loan portfolio yield as a result of these initiatives, although it is expected
that any effect on net interest income due to lower margin products will be
more than offset by volume increases related to such products. The Company
also intends to explore the feasibility of marketing its premium finance
services through other distribution channels.
- Taking advantage of the synergism between First Premium and the Banks
in terms of loan yields and funding costs. Prior to September 1996, First
Premium had financed its loan origination activities primarily through
short-term lines of credit and sales of loans through a securitization
facility. Currently, consistent with the Company's strategy of more fully
utilizing the Banks' lending capacity, the Banks are purchasing loans
originated by First Premium using lower-cost funds provided primarily by
deposits and creating a favorable shift in the Company's earning asset mix from
short-term investment securities to the higher yielding premium finance loans.
When the Banks' objectives for concentrations in premium finance loans are met,
additional First Premium loan volumes will be financed using other traditional
funding sources. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- Liquidity and Capital Resources."
- Expanding trust services to small businesses and affluent individuals
in new 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 Lake Forest Bank's target market area.
The Company plans 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 intends to establish trust operations in other Bank
locations over the next three years. Management believes the Company can
successfully compete for trust business by targeting customers whose needs will
be better served by the personalized attention offered by the Company's
community-oriented Banks.
27
<PAGE> 29
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 and stock options of Wolfhoya that, as a
result of the transaction, converted by their terms into Warrants to purchase
16,838 shares and Options to purchase 68,534 shares of Common Stock of the
Company, all at the adjusted exercise price of $14.85 per share. As part of
the transaction, the Company assumed approximately $502,000 of Wolfhoya's
outstanding debt that had been personally guaranteed by Messrs. Adams and
Wehmer which amount was refinanced under the Company's revolving line of
credit. See "CAPITALIZATION" for information regarding the pro forma effect of
the acquisition to the Company's September 30, 1996, capitalization. See also
"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.
Barrington Bank opened for business and first received deposits from
community residents on December 19, 1996. The communities expected to be
served by the Bank include Barrington, Barrington Hills, Lake Barrington, North
Barrington, South Barrington and Inverness. Management believes the same
community banking concept and similar marketing strategies used by the other
Banks can be employed successfully in these markets 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.
RECENT DEVELOPMENTS
Based on preliminary unaudited results of operations, the Company
recorded fourth quarter net income of approximately $548,000 (unaudited) during
1996 compared to net income of $364,000 (unaudited) in the same period of 1995.
For the year ended December 31, 1996, the Company recorded net loss of $973,000
(unaudited) compared to net income of $1.5 million for the year ended December
31, 1995. The year ended December 31, 1996, included $891,000 (unaudited) of
merger-related expenses from the Company's September 1996 reorganization
transaction and $312,000 (unaudited) in legal fees related to the collection of
a significant non-performing asset. See "THE COMPANY -- Background" for
information regarding the Reorganization and see "BUSINESS -- Asset Quality --
Nonaccrual, Past Due and Restructured Loans" for information regarding the
non-performing asset. Excluding these expenses, the pre-tax loss for 1996
would have been approximately $1.1 million (unaudited). In addition, the prior
year included an initial gain of $763,000 on the sale of premium finance loans
into a securitization facility and a one-time gain on settlement of
contingencies of $735,000 from the repurchase of a minority interest in a now
discontinued subsidiary and the settlement of various related contingencies.
Excluding these gains, the year ended December 31, 1995, would have posted a
net pre-tax loss of approximately $513,000. The $567,000 increase in pre-tax
loss, as adjusted to exclude the effect of the 1996 merger-related expenses and
exceptional legal fees and the 1995 initial and one-time gains, was primarily
the result of higher non-interest expenses associated with openings and
start-up operations of banking facilities in 1996 than in 1995. While the
Company opened three new facilities in 1996 compared to six openings in 1995,
five of the 1995 openings occurred in the fourth quarter and associated
start-up expenses continued to impact 1996 results.
The Company's total assets increased to $706.0 million (unaudited), or
49.9%, at December 31, 1996, from $470.9 million at the end of 1995. The
increase in total assets is attributable to a 52.4% increase, or $212.4
million, in
28
<PAGE> 30
deposit balances, while total loans increased 90.7% to $492.5 million at year
end 1996 from $258.2 million at year end 1995. Continued marketing efforts
and a full year of operations of the five banking offices opened in late 1995,
combined with opening of three additional banking facilities during 1996,
contributed to the strong growth. The Company had 14 total banking facilities
at the end of 1996, compared to 11 at the end of 1995.
The following table sets forth certain financial data of the Company at
the dates and for the periods indicated. Information at and for the year ended
December 31, 1995, is derived from the Company's audited consolidated financial
statements for such period. Information at and for the year ended December 31,
1996, and for the three months ended December 31, 1996 and 1995, is unaudited,
but, in the opinion of management, reflects all adjustments necessary for a
fair presentation of the results of operations and financial condition data
shown. All such adjustments are of a normal recurring nature. This
information should be read in conjunction with the "SELECTED CONSOLIDATED
FINANCIAL DATA" and the Consolidated Financial Statements and Notes thereto
presented elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT AND FOR THE FOR THE THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED DECEMBER 31,
----------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- -------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
SUMMARY STATEMENT OF OPERATIONS DATA:
Total interest income ............................... $ 39,037 $ 25,472 $ 11,639 $ 7,450
Total interest expense .............................. 24,155 15,772 7,144 4,648
-------- -------- -------- -------
Net interest income ................................. 14,882 9,700 4,495 2,802
Provision for possible loan losses ................. 1,935 1,430 591 660
-------- -------- -------- -------
Net interest income after provision for possible
loan losses ..................................... 12,947 8,270 3,904 2,142
-------- -------- -------- -------
Non-interest income, excluding securities gains ..... 7,514 8,544 1,676 2,940
Securities gains, net ............................... 18 -- -- --
-------- -------- -------- -------
Total non-interest income ......................... 7,532 8,544 1,676 2,940
-------- -------- -------- -------
Non-interest expense, excluding non-recurring items.. 21,871 15,829 6,266 5,032
Non-recurring merger related expenses ............... 891 -- 42 --
-------- -------- -------- -------
Total non-interest expense ........................ 22,762 15,829 6,308 5,032
-------- -------- -------- -------
Income (loss) before income taxes ................... (2,283) 985 (728) 50
Income tax benefit .................................. (1,310) (512) (1,276) (314)
-------- -------- -------- -------
Net income (loss) ................................... $ (973) $ 1,497 $ 548 $ 364
======== ======== ======== =======
Net income (loss) per common share................... $ (0.16) $ 0.24
======== ========
SUMMARY FINANCIAL CONDITION DATA (AT END OF PERIOD):
Total assets ........................................ $706,037 $470,890
Total deposits ...................................... 618,029 405,658
Total loans ......................................... 492,548 258,231
Total shareholders' equity .......................... 42,620 40,487
</TABLE>
29
<PAGE> 31
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 OPERATIONS"
included elsewhere in this Prospectus.
<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>
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) -- -- -- --
-------- -------- -------- -------- ------- ------- --------
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 ........... $ -- $ -- $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======== ======= ======= ========
</TABLE>
30
<PAGE> 32
<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 (AT
END OF PERIOD):
Total assets ............................. $621,264 $376,143 $470,890 $354,158 $188,590 $82,864 $ 52,422
Total deposits ........................... 549,303 322,516 405,658 221,985 98,264 42,996 2,361
Total loans .............................. 414,405 218,730 258,231 193,982 109,276 48,527 33,482
Notes payable and subordinated debt ...... 16,554 13,028 10,758 6,905 4,837 16,050 32,413
Total shareholders' equity ............... 40,785 28,743 40,487 25,366 17,227 11,291 14,583
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
Net overhead ratio(9) ................... 2.66% 1.99% 2.01% 3.57% 4.95% 9.72% 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% (12.20)% (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(10) ................. 4 3 4 3 2 1 1
Banking offices(10) ................... 13 6 11 5 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 OPERATIONS." 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, the Company recorded
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) Non-interest expense less non-interest income divided by average assets.
(10) Excludes Barrington Bank which commenced operations on December 19, 1996.
31
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "SELECTED
CONSOLIDATED FINANCIAL DATA" and the Company's 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 Operations" 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 and nine
months, 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
32
<PAGE> 34
facilitate loan 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.
Similarly, 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. For the last three fiscal years, the net overhead ratio
has ranged from 4.95% to 2.01% and for the nine months ended September 30,
1996, was 2.66%. 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 operations 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.
33
<PAGE> 35
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 $394,000. 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 $268,000. The $662,000 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 of $3.5 million, or
50.6%, was attributable to a 57.0% increase in average earning assets in 1996
compared to
34
<PAGE> 36
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 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 premium loans in the 1996
period. During the first nine months of 1996, average managed insurance
premium loans 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
full nine-month 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 accounts.
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 Company's ratio of non-interest expenses, excluding the
merger-related costs, to total average assets declined to 3.92% in 1996 from
4.18% in 1995.
35
<PAGE> 37
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 required 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 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 Reorganization resulted in various legal expenses,
accounting and tax related expenses, printing, Securities and Exchange
Commission filing expenses, and other applicable expenses.
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 loan 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.
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
36
<PAGE> 38
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 an 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 caused 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 loans. 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.
Trust fees increased to $399,000 in 1995 from $202,000 in 1994 primarily
attributable to new trust business generated by new trust officers.
37
<PAGE> 39
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.
38
<PAGE> 40
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 assets 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 $84.7 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
39
<PAGE> 41
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 $650,000, or 27.6%, for 1994 from $2.4 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.
40
<PAGE> 42
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, YEAR ENDED DECEMBER 31,
------------------------------------------------------------ ----------------------
1996 1995 1995
----------------------------- ----------------------------- ----------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE
BALANCE(1) INTEREST COST BALANCE(1) INTEREST COST BALANCE(1) INTEREST
---------- -------- ------- ---------- -------- ------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest bearing deposits with banks ......... $ 31,478 $ 1,323 5.60% $ 52,447 $ 2,507 6.37% $ 51,159 $ 3,194
Federal funds sold ........................... 43,804 1,733 5.28 32,540 1,409 5.77 35,172 2,048
Investment securities ........................ 93,231 3,315 4.74 54,974 1,933 4.69 58,015 3,202
Loans, net of unearned discount .............. 316,279 21,027 8.86 168,854 12,173 9.61 183,614 17,028
-------- ------- -------- ------- -------- -------
Total earning assets ..................... 484,792 27,398 7.54 308,815 18,022 7.78 327,960 25,472
-------- ------- ---- -------- ------- ---- -------- -------
Cash and due from banks-non-interest bearing.. 11,977 7,512 8,031
Allowance for possible loan losses ........... (3,166) (1,922) (2,038)
Premises and equipment, net .................. 26,400 14,281 17,687
Other assets ................................. 11,150 12,261 10,485
-------- -------- --------
Total assets ............................. $531,153 $340,947 $362,125
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits-interest bearing:
NOW accounts .............................. $ 41,907 1,158 3.68 $ 20,041 524 3.49 $ 23,214 844
Savings and money market deposits ......... 133,688 4,049 4.04 103,828 3,356 4.31 106,247 4,541
Time deposits ............................. 244,513 10,794 5.89 128,343 5,970 6.20 140,724 8,705
-------- ------- -------- ------- -------- -------
Total interest-bearing deposits .......... 420,108 16,001 5.08 252,212 9,850 5.21 270,185 14,090
-------- ------- -------- ------- -------- -------
Short-term borrowings ........................ 647 18 3.71 13,770 440 4.26 10,238 474
Term-debt and subordinated debt .............. 14,168 992 9.34 13,349 834 8.33 14,044 1,208
-------- ------- -------- ------- -------- -------
Total interest-bearing liabilities ....... 434,923 17,011 5.22 279,331 11,124 5.31 294,467 15,772
-------- ------- ---- -------- ------- ---- -------- -------
Non-interest bearing deposits ................ 49,123 26,893 29,304
Other liabilities ............................ 6,133 7,407 7,181
Shareholders' equity ......................... 40,974 27,316 31,173
-------- -------- --------
Total liabilities and
shareholders' equity ................... $531,153 340,947 $362,125
======== ======== ========
Net interest income/spread ................... $10,387 2.32% $ 6,898 2.47% $ 9,700
======= ==== ======= ==== =======
Net interest margin .......................... 2.86% 2.98%
==== ====
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1995 1994 1993
------- ----------------------------- -----------------------------
AVERAGE AVERAGE AVERAGE
YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
COST BALANCE(1) INTEREST COST BALANCE(1) INTEREST COST
------- ---------- -------- ------- ---------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest bearing deposits with banks .......... 6.24% $ 28,077 $ 1,290 4.59% $ 7,932 $ 274 3.45%
Federal funds sold ............................ 5.82 18,323 791 4.32 9,005 275 3.05
Investment securities ......................... 5.52 40,721 2,046 5.02 17,761 847 4.77
Loans, net of unearned discount ............... 9.27 148,209 13,617 9.19 79,052 6,843 8.66
-------- ------- -------- ------
Total earning assets ...................... 7.77 235,330 17,744 7.54 113,750 8,239 7.24
---- -------- ------- ---- -------- ------ ----
Cash and due from banks-non-interest bearing... 5,026 3,703
Allowance for possible loan losses ............ (1,447) (985)
Premises and equipment, net ................... 9,034 3,148
Other assets .................................. 11,460 9,194
-------- --------
Total assets .............................. $259,404 $128,810
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits-interest bearing:
NOW accounts ............................... 3.64 $ 7,586 202 2.66 $ 3,100 83 2.68
Savings and money market deposits .......... 4.27 80,324 3,210 4.00 39,083 1,365 3.49
Time deposits .............................. 6.19 44,709 2,086 4.67 13,752 525 3.82
-------- ------- -------- ------
Total interest-bearing deposits ........... 5.21 132,619 5,498 4.15 55,935 1,973 3.53
-------- ------- -------- ------
Short-term borrowings ......................... 4.63 78,741 3,577 4.54 34,761 1,321 3.80
Term-debt and subordinated debt ............... 8.60 9,373 796 8.49 7,861 590 7.51
-------- ------- -------- ------
Total interest-bearing liabilities ........ 5.36 220,733 9,871 4.47 98,557 3,884 3.94
---- -------- ------- ---- -------- ------ ----
Non-interest bearing deposits ................. 15,593 7,461
Other liabilities ............................. 4,445 9,601
Shareholders' equity .......................... 18,633 13,191
-------- --------
Total liabilities and
shareholders' equity ..................... $259,404 $128,810
======== ========
Net interest income/spread .................... 2.41% $ 7,873 3.07% $4,355 3.30%
==== ======= ==== ====== ====
Net interest margin ........................... 2.96% 3.35% 3.83%
==== ==== ====
</TABLE>
- -------------------
(1) Average balances were generally computed using daily balances.
41
<PAGE> 43
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
----------- ----------- ----------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Interest bearing 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 unearned 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.
42
<PAGE> 44
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>
TIME TO MATURITY OR REPRICING
---------------------------------------
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
(GAP = RSA - RSL) .................. $ (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
43
<PAGE> 45
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%
Leverage ratio .......................... 6.5% 8.5% 7.1%
Tier 1 risk-based capital ratio ......... 8.9% 11.1% 8.9%
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 ratios 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 ratio of Tier 1 capital to risk-based assets of 4.0% and
a ratio of total capital to risk-based assets 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. Banking laws impose restrictions upon the amount of dividends which
can be paid to the Company by the Banks. See "SUPERVISION AND REGULATION --
Financial Institution Regulation Generally -- Dividend Limitations." 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. In addition, the payment
of dividends may be restricted under certain financial covenants in the
Company's revolving line of credit and First Premium's existing securitization
facility. 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 the Banks during the
nine-month period ended September 30, 1996 or the years ended December 31,
1995, 1994, or 1993.
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. Upon completion of this
44
<PAGE> 46
Offering, the net proceeds will be used to repay all or a portion of the debt
outstanding under the line, and thereafter the entire unused portion of the
revolving line will remain available for future borrowings. All unpaid
principal amounts due under the revolver will mature on or before September 1,
1997.
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. The Banks' principal sources of funds are deposits, short-term
borrowings and capital contributions by the Company out of the proceeds of
borrowings under the revolving line. In addition, each of the Banks, except
Barrington Bank, has recently applied to become a member of the Federal Home
Loan Bank ("FHLB") and, upon approval of its application and payment for the
required purchase of FHLB stock, will become eligible to borrow FHLB advances,
an additional source of short-term liquidity. Lake Forest Bank and
Libertyville Bank have received the necessary approval of their membership
applications, and it is anticipated that the other Banks will soon be approved
as well.
The Banks' core deposits, the most stable source of liquidity for
community banks due to the nature of long-term relationships generally
established with depositors and the security of deposit insurance provided by
the FDIC, are available to provide long-term liquidity. At September 30, 1996,
64.5% of the Company's 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.
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 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.
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, $35.2 million and $27.6 million, respectively, of securities
collateralizing such public deposits. 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.
To finance its insurance premium loans, First Premium has over the past
several years 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, and First Premium
retained servicing rights. Loans have also been financed by short-term lines
of credit. Following the Reorganization in September 1996, consistent with the
Company's strategy of augmenting the Banks' internal loan generation
capabilities with special asset niches, the Banks began purchasing premium
finance loans originated by First Premium using funds provided by deposits and
other lower-cost funding sources. Consequently, First Premium's activities
under the existing securitization facility are being curtailed. The Company is
currently exploring the feasibility of establishing a single-seller
multi-purpose conduit facility that may be utilized in the future to securitize
a variety of different types of assets originated or purchased by the Company,
including premium finance loans, to the extent and at such times as management
determines asset securitizations to be desirable in implementing overall
asset/liability management strategies.
45
<PAGE> 47
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 loans, 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 -- Growth
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 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 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
BANK SERVED POPULATION(1) HOUSEHOLD INCOME(3)
---- ----------- ------------- -------------------
<S> <C> <C> <C>
Lake Forest Bank Lake Forest, Illinois 18,771 $ 142,688
Lake Bluff, Illinois 6,125 105,999
Hinsdale Bank Hinsdale, Illinois 16,357 106,288
Clarendon Hills, Illinois(2) 7,491 63,927
Western Springs, Illinois 12,464 78,364
Burr Ridge, Illinois 9,232 120,071
North Shore Bank Wilmette, Illinois 27,547 105,095
Kenilworth, Illinois 2,521 215,611
Glencoe, Illinois 8,705 164,254
Winnetka, Illinois 12,899 174,957
Libertyville Bank Libertyville, Illinois 19,757 72,815
Mundelein, Illinois 23,995 50,466
Vernon Hills, Illinois 18,830 53,722
Barrington Bank Barrington, Illinois 9,830 81,125
Barrington Hills, Illinois 4,629 178,096
Lake Barrington, Illinois 4,065 114,979
South Barrington, Illinois 3,760 170,271
North Barrington, Illinois 2,365 151,677
Inverness, Illinois 7,564 147,962
</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) Provided by Northeastern Illinois Planning Commission derived from 1989
information reported in 1990 U.S. Census Data.
46
<PAGE> 48
First Premium is licensed or otherwise qualified to do business as an
insurance premium finance company in 45 states and the District of Columbia,
and has applied for licenses in three additional states. Virtually all of its
outstanding loans 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 their communities through innovative marketing programs and attractive
interest rates, seeking 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:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(IN THOUSANDS)
<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
47
<PAGE> 49
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. In
addition, the Company is developing lending programs focused on specialized
earning asset niches having large volumes of homogeneous assets in order to
augment the Banks' portfolios and that can possibly be sold in the secondary
market to generate fee income. Currently, the Banks are financing premium
finance loans generated by First Premium, indirect auto paper and mortgage
warehouse loans.
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:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------
1996 1995 1994 1993 1992 1991
------------- -------- -------- -------- ------- -------
(IN THOUSANDS)
<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 areas. 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.
In addition to the home mortgages originated by the Banks' lending
officers, the Company participates in mortgage warehouse lending by providing
interim funding to unaffiliated mortgage brokers to finance residential
mortgages originated by such brokers for sale into the secondary market. The
Company's loans to the mortgage brokers are secured by the business assets of
the mortgage companies as well as the underlying mortgages, the majority of
which are funded by the Company on a loan-by-loan basis after they have been
preapproved for purchase by third party end lenders who forward payment
directly to the Company upon their acceptance of final loan documentation. In
addition, the Company may also provide interim financing for packages of
mortgage loans on a bulk basis in circumstances where the mortgage brokers
desire to competitively bid a number of mortgages for sale as a package in the
secondary market. Typically, the Company will serve as sole funding source for
its mortgage warehouse lending customers under short-term revolving credit
agreements. Amounts advanced with respect to any particular mortgages are
usually required to be repaid within 15 days. The Company has developed strong
relationships with a number of mortgage brokers and is seeking to expand its
customer base for this niche business.
48
<PAGE> 50
The following table classifies the commercial loan portfolio category at
December 31, 1995 by date at which the loans mature:
<TABLE>
<CAPTION>
ONE YEAR FROM ONE AFTER
OR LESS TO FIVE YEARS FIVE YEARS TOTAL
-------- ------------- ---------- --------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
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, the Banks
periodically offer promotional home equity loan products as part of their
marketing strategy often featuring lower introductory rates.
Indirect auto loans. As part of its strategy to pursue specialized
earning asset niches to augment loan generation within the Banks' target
markets, the Company finances fixed rate automobile loans sourced indirectly
through unaffiliated automobile dealers. As of September 30, 1996, indirect
auto loans comprised approximately 81.9% of the Company's consumer loan
portfolio. Indirect automobile loans are secured by new and 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 generally 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.
Premium finance loans. The Company's most significant specialized earning
asset niche is comprised of commercial insurance premium finance loans. The
Company internally originates premium finance loans, primarily to commercial
customers, 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.
49
<PAGE> 51
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 medium and large
insurance agents and brokers 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. Loans are
originated by First Premium's own sales force by working with insurance agents
and brokers throughout the United States. As of December 31, 1996, First
Premium had the necessary licensing and other regulatory approvals to do
business in 45 states and the District of Columbia and has applied for licenses
in three additional states.
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 makes a down payment of
approximately 15% to 25% of the total premium and signs a premium finance
agreement with First Premium for the balance due, which amount First Premium
disburses directly to the insurance carrier or its agents to satisfy the unpaid
premium amount. As the insurer earns the premium ratably over the life of the
policy, the unearned portion of the premium secures payment of the balance due
to First Premium by the insured. 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 should be sufficient to cover the loan balance and
generally the interest and other charges due as well.
Other. Included in other loans is 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. Consumer 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:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -----------------------------------------
1996 1995 1994 1993 1992 1991
------------ ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<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>
50
<PAGE> 52
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. Of the $2.2
million of non-performing assets at September 30, 1996, $1.3 million relates to
a non-performing loan at First Premium, which amount is expected to be fully
recovered and a substantial portion of which management expects to be collected
early in 1997. Accordingly, no amount has been specifically reserved against
possible loss related to this loan.
Other than those loans reflected in the table 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.
Other Real Estate Owned. The Company did not have any Other Real Estate
Owned at the end of any of the reporting periods.
51
<PAGE> 53
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 charged-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 charged-off ................... (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 charged-off to average total
loans .............................. 0.15% 0.20% 0.18% 0.92% 2.38% 1.38%
======== ======== ======== ======= ======= =======
</TABLE>
52
<PAGE> 54
At September 30, 1996, management of the Company allocated the allowance
for possible loan losses by specific category as shown in the following table.
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
------ -------------
(DOLLARS IN THOUSANDS)
<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.
53
<PAGE> 55
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 certain 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:
<TABLE>
<CAPTION> Federal
WITHIN FROM ONE FROM FIVE TO AFTER RESERVE
ONE YEAR TO FIVE YEARS TEN YEARS TEN YEARS BANK STOCK TOTAL
-------- ------------- ------------ --------- ---------- -------
(IN THOUSANDS)
<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 ONE FROM FIVE TO AFTER RESERVE
ONE YEAR TO FIVE YEARS TEN YEARS TEN YEARS BANK STOCK TOTAL
-------- ------------- ------------ --------- ---------- ------
(IN THOUSANDS)
<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>
There were no securities of any single issuer which had book value in
excess of 10% of shareholders' equity at September 30, 1996.
54
<PAGE> 56
TRUST SERVICES
Currently, through Lake Forest Bank's trust department, the Company
provides investment management and trust services primarily for the customers
of Lake Forest 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 expanding trust services to the other Banks' markets
over the next three years.
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. In addition, Lake Forest Bank has leased a space in the
Telegraph Road Metra Station located at 911 South Telegraph Road, Lake Forest,
Illinois, where a new drive-up facility is under construction. The new
facility is scheduled to open during the first quarter of 1997. 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.
55
<PAGE> 57
Barrington Bank currently has one physical banking location, a 2,860
square foot space which it is leasing. The building is located at 202 South
Cook Street in Barrington, Illinois. 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 eight-year and nine
month 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 characteristic of 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 banking
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
56
<PAGE> 58
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, as well as being the
principal investor and chairman of community banks that were located in
Winnetka, Glencoe, Wilmette, and Hinsdale, Illinois. During his tenure at Booz
Allen, 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.
57
<PAGE> 59
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.
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.
Joseph Alaimo -- (66) Class III Director.
Mr. Alaimo has been Director of Trust Investments at Lake Forest Bank since
December 1994. Prior to joining Lake Forest Bank, he was employed for more
than 30 years by Continental Bank, where he served most recently as Director of
Investor Relations. Mr. Alaimo held various senior positions in the trust
department at Continental Bank before he became their Director of Investor
Relations.
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.
58
<PAGE> 60
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.
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.
59
<PAGE> 61
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.
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.
60
<PAGE> 62
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.
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 subject to the ratification of the full Board of Directors. The
Executive Committee consists of Messrs. Rademacher (Chairman), Alan Adams,
McCarthy, Schaper, Tate, Wehmer and Wright and Ms. McKenna.
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 Messrs. Schornack (Chairman) and Moschner
and Ms. Stein and Ms. Sylvester.
EXECUTIVE OFFICERS
The following persons serve as the executive officers of the Company.
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<PAGE> 63
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.
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 $600 million in sales.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid by the Company and
its subsidiaries to the Chairman and Chief Executive Officer and the four other
most highly paid executive officers (the "Named Executive Officers") during
1996, 1995 and 1994.
62
<PAGE> 64
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
-----------------------------------------------------------------------
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------- ------------
OTHER
ANNUAL SECURITIES ALL OTHER
COMPEN- UNDERLYING COMPEN-
NAME AND SALARY BONUS SATION(1) OPTIONS/ SATION(2)
PRINCIPAL POSITION YEAR ($) ($) ($) SARS (#) ($)
- ----------------------- ---------- ---------- ---------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Howard D. Adams 1996(3) 331,250 40,000 373 -- --
1995(3) 190,000 43,000 629 -- --
Chairman and CEO 1994(3) 141,000 10,000 -- -- --
Edward J. Wehmer 1996(4) 395,000 40,000 6,431 36,730 1,224
1995 326,250 43,000 5,935 -- 3,482
Chief Operating Officer 1994 255,000 25,000 4,862 -- --
David A. Dykstra 1996 155,000 32,000 4,790 6,824 582
Exec. Vice President &
Chief Financial Officer 1995(5) 80,889 12,000 2,486 30,880 --
1994 N/A N/A N/A -- --
Robert F. Key 1996(5)(6) 121,634 40,000 1,116 29,100 --
Exec. Vice President & 1995 N/A N/A N/A -- --
Director of Marketing 1994 N/A N/A N/A -- --
Lloyd M. Bowden 1996(5)(6) 90,000 20,000 2,745 18,670 --
Exec. Vice President & 1995 N/A N/A N/A -- --
Director of Technology 1994 N/A N/A N/A -- --
</TABLE>
(1) Other annual compensation represents the sum of compensation for the use
of a Company car and/or the payment of club dues.
(2) Represents compensation to the executive officer for the aggregate life
insurance premium paid on behalf of the named executive officer by the
Company or 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 "Phantom Stock Agreements"
pursuant to which he is entitled to cash payments equal to any appreciation
in the value of an aggregate of 36,730 shares of Common Stock from their
fair market value as of the date of the agreements (the weighted average
fair market value as of the date of the agreements was $12.06 per share
after adjustments resulting from the Reorganization) until such time as
Mr. Wehmer elects to exercise such stock appreciation rights. Mr. Wehmer
did not exercise any rights under the agreements in 1996 and elected to
defer receipt of compensation thereunder. The agreements expire in 2006.
(5) Reflects compensation for partial year service. The 1996 base salaries
for Messrs. Key and Bowden were $150,000 and $120,000, respectively, and the
1995 base salary for Mr. Dykstra was $140,000.
(6) Includes signing bonuses of $15,000 and $10,000, respectively, for Robert
F. Key and Lloyd M. Bowden.
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<PAGE> 65
The table below summarizes certain information about the Options/SARs
which were granted in 1996 by the Company for each Named Executive Officer or
by one or more of its subsidiaries prior to the Reorganization, which options
converted as a result of that transaction into Options to purchase Common Stock
of the Company. All Options/SARs were granted at per share exercise prices
equal to the fair market value per share of the shares subject to such
Options/SARs on the date of grant.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS/ ANNUAL RATES OF
WINTRUST SHARES SARS STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION
OPTIONS/ EMPLOYEES OR BASE FOR OPTION/SAR TERM
SARS IN FISCAL PRICE EXPIRATION ----------------------
NAME GRANTED YEAR ($/SH) DATE 5% 10%
- ---------------- --------------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Howard D. Adams..... -- -- -- -- -- --
Edward J. Wehmer.... 36,730 10.79% --(1) 2006 $ 278,601 $ 706,030
David A. Dykstra.... 6,824(5) 2.01% --(2) 2006 62,191 157,605
Robert F. Key....... 29,100(5) 8.55% --(3) 2006 235,961 597,972
Lloyd M. Bowden..... 18,670(5) 5.49% --(4) 2006 150,935 382,498
</TABLE>
- -----------------
(1) The per share base price for calculation of the stock appreciation value
to which Mr. Wehmer is entitled under his "Phantom Stock Agreements" is
$12.42 with respect to 24,155 shares and $11.37 with respect to 12,575
shares.
(2) The exercise price per share is $12.43 for Options to purchase 1,508
shares of Common Stock; $14.53 for Options to purchase 1,290 shares of
Common Stock; $15.00 for Options to purchase 4,026 shares of Common Stock;
and $12.42 for Options to purchase 5,837 shares of Common Stock.
(3) The exercise price per share is $11.37 for Options to purchase 10,834
shares of Common Stock; $14.09 for Options to purchase 7,241 shares of
Common Stock; $14.53 for Options to purchase 6,194 shares of Common Stock;
and $12.42 for Options to purchase 4,831 shares of Common Stock.
(4) The exercise price per share is $11.37 for Options to purchase 7,255
shares of Common Stock; $14.09 for Options to Purchase 4,525 shares of
Common Stock; $14.53 for Options to purchase 3,871 shares of Common Stock;
and $12.42 for Options to purchase 3,019 shares of Common Stock.
(5) All of the Options granted in 1996 to the Named Executive Officers
vest incrementally over time. Vesting of portions of each of the Options is
further conditioned upon particular Company subsidiaries achieving certain
levels of net profits during the term of the Option.
64
<PAGE> 66
The following table summarizes for each Named Executive Officer the number
of shares of Common Stock subject to outstanding Options/SARs and the value of
such Options/SARs that were unexercised at December 31, 1996. No Options/SARs
were exercised by the Named Executive Officers during 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
DECEMBER 31, 1996 (#) DECEMBER 31, 1996 ($)
SHARES ------------------------ ----------------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE(1) UNEXERCISABLE(1)
----- ------------- ------------- ------------------------ ----------------------------
<S> <C> <C> <C> <C>
Howard D. Adams -- -- 12,926/ 1,209 $ 39,130/$ 8,460
Edward J. Wehmer -- -- 147,625/ 5,185 1,012,681/ 36,278
David A. Dykstra -- -- 9,523/ 28,182 43,060/ 85,710
Robert F. Key -- -- 5,621/ 23,479 11,613/ 42,412
Lloyd M. Bowden -- -- 3,642/ 15,028 7,685/ 27,715
</TABLE>
- --------------
(1) The numbers and amounts in the above table represent shares of Common
Stock subject to Options/SARs granted by the Company or its subsidiaries
that were unexercised as of December 31, 1996.
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 contain confidentiality agreements and two-year
non-compete provisions in the event of termination of employment for any
reason, and provide for up to 24 months of severance pay in the event of (i)
termination without cause, (ii) a change of control of the Company where the
executive is not offered employment in a similar capacity; (iii) any other
material reduction in duties and responsibilities or (iv) reduction in base
annual compensation to less than 75% of the amount being earned as of the first
date following the dates of the agreements. The annual base salaries as of
such dates for Messrs. Adams and Wehmer were $445,000 and $395,000,
respectively. In addition to any increases in base salaries that may be agreed
to from time to time, the executives are entitled to participate in any
employee insurance and fringe benefit programs that may be established by the
Company for its employees.
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.
Such agreements are expected to provide for similar non-compete and
confidentiality agreements, severance arrangements and benefits.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Howard D. Adams, Chairman and Chief Executive Officer, serves on the
Compensation Committee that is responsible for determining compensation of the
Company's executive officers. Mr. Adams and Edward J. Wehmer, President of the
Company, serve on the compensation committee of Lake Forest Bank which is
responsible for determining the compensation of Lake Forest Bank's senior
officers. Joseph Alaimo and Alan W. Adams, senior officers of Lake Forest Bank,
are Directors of the Company. In addition, Messrs. Adams, Wehmer and David A.
Dykstra, the Company's Chief Financial Officer, serve on the board of directors
of First Premium, which is responsible for determining the compensation of First
Premium's executive officers. James Knollenberg, President of First Premium, is
a Director of the Company.
65
<PAGE> 67
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.
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 consummate 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 shares,
respectively, at a purchase price of $14.85 per share. Prior to such
acquisition by the Company, Wolfhoya's debt of approximately $502,000 under
a promissory note was personally guaranteed by Howard D. Adams and Edward J.
Wehmer. Following the acquisition, the outstanding principal balance and
accrued interest on the promissory note were repaid out of borrowings under the
Company's revolving line of credit.
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 35,317 and 10,268 shares, respectively, and
56,230 and 14,396 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 9,298 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
66
<PAGE> 68
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 65,509 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.
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.
In September 1996, two employees of the Selling Agent participated in a
private resale of Common Stock by a former shareholder of the Company and
purchased out of the shares sold 2,000 and 1,000 shares, respectively, of
Common Stock at $12.50 per share. The selling party was not an affiliate of the
Company for purposes of the Securities Act. In August 1995, another employee
of the Selling Agent purchased 1,000 shares of common stock of one of the
Company's predecessor companies at a price of $50 per share, which shares were
exchanged in the Reorganization for 4,025 shares of Common Stock.
67
<PAGE> 69
PRINCIPAL SHAREHOLDERS
The following table sets forth the beneficial ownership of the Common
Stock as of January 22, 1997, 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 and no additional
purchases of shares in the Offering by the persons shown), 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>
PERCENTAGE PERCENTAGE
AMOUNT OF OWNERSHIP OWNERSHIP
BENEFICIAL BEFORE AFTER
OWNERSHIP(1) OFFERING(1) OFFERING
------------ ----------- ----------
<S> <C> <C> <C>
DIRECTOR
Alan W. Adams(2)................. 215,699 3.24% 2.70%
Howard D. Adams(3)**............. 487,767 7.31% 6.12%
Joseph Alaimo.................... 11,732 * *
Peter Crist...................... 28,556 * *
Maurice F. Dunne, Jr............. 53,217 * *
Eugene Hotchkiss III............. 4,035 * *
James Knollenberg................ 79,110 1.18% *
John S. Lillard.................. 50,771 * *
James E. Mahoney................. 7,124 * *
James B. McCarthy................ 16,391 * *
Marguerite Savard McKenna........ 19,230 * *
Albin F. Moschner................ 3,869 * *
Hollis W. Rademacher............. 60,267 * *
J. Christopher Reyes............. 148,478 2.24% 1.87%
John N. Schaper.................. 1,811 * *
John J. Schornack................ 10,570 * *
Jane R. Stein.................... 604 * *
Katharine V. Sylvester........... 5,913 * *
Lemuel H. Tate................... 21,949 * *
Edward J. Wehmer**............... 266,977 3.95% 3.31%
Larry Wright(4).................. 487,997 7.34% 6.14%
--------- ----- -----
Total Directors 1,982,067 28.33% 23.89%
--------- ----- -----
NON-DIRECTOR EXECUTIVE OFFICERS
Lloyd M. Bowden.................. 19,278 * *
David A. Dykstra................. 29,219 * *
Robert F. Key.................... 25,772 * *
--------- ----- -----
Total Directors and Executive
Officers 2,056,336 29.30% 24.72%
========= ====== ======
OTHER SIGNIFICANT SHAREHOLDERS
Milbank Corporation(5)........... 497,669 7.49% 6.26%
Emmett McCarthy(6)............... 441,887 6.63% 5.55%
</TABLE>
- --------------
* Less than 1%
** Denotes person who serves as Director and as an executive officer.
(1) Beneficial ownership percentages are calculated in accordance with SEC
Rule 13d-3 promulgated under the Securities Exchange Act of 1934.
68
<PAGE> 70
(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. Also includes shares held by Mr. Adams' wife. Does not include
shares held in certain other family trusts (for which Alan W. Adams does
not act as co-trustee but of which Alan Adams or his son is a direct or
indirect beneficiary) 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 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 shares subject to Warrants held
directly by Larry Wright; (ii) 3,000 shares held by Milbank Corporation
("Milbank") of which Mr. Wright is an officer, director and sole
shareholder and with respect to which shares he exercises shared voting
and investment power; (iii) 26,173 shares and 3,334 shares subject to
Warrants 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 shares subject to Warrants 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 Mr. Wright acts
as co-trustee and exercises 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 shares subject to Warrants 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
shares subject to Warrants 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 shares subject to Warrants held in Deerpath to
which Milbank serves as investment advisor and with respect to which Mr.
Wright exercises voting and investment power; and (v) 14,499 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. The address of Milbank Corporation is 135 South LaSalle
Street, Chicago, Illinois 60603. 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 151,311 shares, 28,962 shares subject to Warrants, and 17,689
shares subject to Rights held by the Alan W. Adams Family Trust and
151,470 shares, 28,962 shares subject to Warrants, and 17,689 shares
subject to Rights 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. Mr. McCarthy disclaims beneficial
ownership of all such shares. Also reflects 28,254 shares held by the
Sarah Katherine Adams Trust, an irrevocable trust for which Emmett D.
McCarthy serves as trustee, the beneficiary of which trust is Sarah K.
Adams. The address of Mr. McCarthy, as Trustee, is Suite 303, 727 North
Bank Lane, Lake Forest, Illinois 60045. See footnote (2) above regarding
beneficial ownership of Alan W. Adams, a vice president of Lake Forest
Bank and a Director of the Company.
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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 First Premium. 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
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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 Tier 1 risk-based capital ratio of 8.9%, total risk-based
capital ratio of 9.7% 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 Reserve Bank and as such is also subject to examination by the
Federal Reserve.
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.
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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 OCC N/A N/A
</TABLE>
- --------------
* Reports not yet received.
While the examination reports received by the Banks 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.
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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, 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 to the Company.
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. Furthermore, federal policy also prohibits
any Federal Reserve member bank, including each of the Banks, from declaring
dividends in any calendar year in excess of its net profit for the year plus
the retained net profits for the preceding two years. Similarly, as a national
association, Barrington Bank may not declare dividends in any year in excess of
its net profit for the year plus the retained net profits for the preceding two
years. 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.
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.
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
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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 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
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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 insured 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 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 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, deposits insured by the Bank Insurance Fund ("BIF") 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 3% reserves on
the first $51.3 million of transaction accounts plus ten percent on the
remainder. The first $4.3 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
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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.
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. Each of the Banks is eligible under the statutory standard to accept
brokered deposits as a funding source and may use this funding source from
time to time when management deems it appropriate from an asset/liability
management perspective.
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.
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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 21, 1997, there were
issued and outstanding 6,619,847 shares of Common Stock and no shares of
Preferred Stock, with 1,369,416 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.
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;
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<PAGE> 79
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.
WARRANTS
As of January 22, 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.
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<PAGE> 80
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 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 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 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% or
more of the outstanding shares of the Company's voting stock. This provision
of the Company's Articles applies
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<PAGE> 81
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% 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% 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.
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 vote of
the outstanding shares of Common Stock, provided, however, that an affirmative
vote of at least 85% 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.
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<PAGE> 82
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.
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 Board 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.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Illinois Stock
Transfer Company, Chicago, Illinois.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 7,919,847 shares
of Common Stock issued and outstanding (8,114,847 if the over-subscription or
over-allotment option is exercised in full), assuming no exercise of any
Options, Rights or Warrants. Of these shares, 6,475,756 shares, including
1,300,000 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 1,444,091 shares, 1,340,124 were
previously registered and are held by certain Directors, officers and other
affiliates of the Company (the "Affiliate Shares") and can be resold by such
persons subject to certain requirements described below. The other 103,967
shares (the "Restricted Shares"), including the 87,556 shares issued in
connection with the transaction described in "RECENT ACQUISITION," were issued
and sold by the Company in reliance upon exemptions from registration under the
Securities Act and may not be sold in the absence of registration thereunder
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, 87,556 of the
Restricted Shares will become eligible for sale in December 1998, and the
remaining Restricted Shares will become eligible for sale in January 1999, in
each case 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
has beneficially owned Restricted Shares for at least two years, and any
affiliate of the Company with respect to the Affiliate Shares, 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 (79,198
shares immediately after this Offering or 81,148 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 has beneficially owned
Restricted Shares for at least three years, would be entitled to sell
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<PAGE> 83
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.
In addition to the shares of Common Stock issued and outstanding, as of
January 22, 1997, the Company had an aggregate of 1,935,324 shares reserved for
issuance as follows: (i) 155,430 shares issuable pursuant to Warrant
agreements; (ii) 103,236 shares issuable upon exercise of outstanding Rights,
all of which are currently exercisable; and (iii) an aggregate of 1,676,658
shares reserved for issuance under various stock option plans maintained for
the benefit of eligible employees, officers and directors of the Company and
its subsidiaries, pursuant to which plans there are currently outstanding
Options to purchase an aggregate of 1,110,750 shares of Common Stock, of which
Options to purchase 642,968 shares are currently exercisable. When any such
Warrants, Rights or Options are exercised, the shares issued in connection
therewith are expected to become eligible for resale in the public market
without restriction, except for any such shares held by persons who are then
affiliates of 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 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 over-the-counter
market, and bid and asked 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.
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 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 Bank board of
directors. As of January 22, 1997, Mr. Lipke owned 5,105 shares, Warrants to
purchase 1,834 shares and Options to purchase 2,413 shares of 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
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<PAGE> 84
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 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. The
Company is also subject to the proxy solicitation rules, reporting requirements
and restrictions on stock purchases and sales by Directors, officers and
greater than 10% shareholders, 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.
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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 and 1994 ............................................................ 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>
F-i
<PAGE> 86
Independent Auditors' Report
The Board of Directors
Wintrust Financial Corporation:
We have audited the accompanying consolidated statements of condition
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> 87
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> 88
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;
6,515,880, 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> 89
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> 90
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> 91
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> 92
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 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> 93
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.
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> 94
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> 95
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> 96
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> 97
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> 98
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> 99
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> 100
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> 101
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 Banks. These loans totaling $4,430,000 at December 31, 1995
were made at substantially the same terms, including interest
F-16
<PAGE> 102
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 $101,871,000 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> 103
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> 104
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> 105
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 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> 106
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> 107
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> 108
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> 109
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 provide 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 in 20%
increments in years in which the respective subsidiary bank holding
companies attain certain profitability levels. All of the Crabtree and
First Premium options are or will become fully vested during 1996.
F-24
<PAGE> 110
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> 111
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> 112
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> 113
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> 114
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> 115
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> 116
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> 117
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> 118
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> 119
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> 120
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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 or EVEREN Securities, Inc. 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
<TABLE>
<S> <C>
Prospectus Summary ............................................... 4
Risk Factors ..................................................... 11
Use of Proceeds .................................................. 15
Market for Common Stock and Dividends ............................ 16
Capitalization ................................................... 17
Dilution ......................................................... 19
Terms of the Offering ............................................ 20
The Company ...................................................... 23
Recent Acquisition ............................................... 28
Recent Developments .............................................. 28
Selected Consolidated Financial Data ............................. 30
Management's Discussion and Analysis of
Financial Condition and Results of Operations .................. 32
Business ......................................................... 46
Management ....................................................... 57
Certain Transactions ............................................. 66
Principal Shareholders ........................................... 68
Supervision and Regulation ....................................... 70
Description of Capital Stock ..................................... 77
Shares Eligible for Future Sale .................................. 81
Legal Matters .................................................... 82
Experts .......................................................... 82
Available Information ............................................ 83
Index to Consolidated Financial Statements ....................... F-i
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1,300,000 SHARES
WINTRUST
FINANCIAL
CORPORATION
COMMON STOCK
PROSPECTUS
EVEREN SECURITIES, INC.
JANUARY ___, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 121
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 .................................... $ 7,022
NASD filing fee ......................................... 2,818
Nasdaq listing fee ...................................... 37,787
Reimbursable Selling Agent expenses ..................... 75,000
Printing expenses ....................................... 40,000
Accounting fees and expenses ............................ 80,000
Legal fees and expenses ................................. 150,000
Blue Sky fees and expenses .............................. 1,000
Transfer agent fees ..................................... 1,500
Postage and other miscellaneous costs ................... 104,873
--------
$500,000
========
</TABLE>
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
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.
II-1
<PAGE> 122
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.
(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
II-2
<PAGE> 123
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, 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,
II-3
<PAGE> 124
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.)
The Company has purchased a $15 million insurance policy which insures the
Company's directors and officers against liability which they may incur as a
result of actions taken in such capacities. In addition, the Company maintains
fiduciary liability coverage up to a $2 million limit and trust errors and
omissions coverage up to a limit of $5 million.
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, Options to purchase
34,622 shares of the Company's Common Stock were granted pursuant to an
employee stock option plan to a limited number of key employees. Such Options
were issued in reliance on the exemption from registration pursuant to Section
4(2) of the Securities Act. In January 1997, 16,411 shares were issued by the
Company pursuant to certain Option exercises. The Options had been granted
pursuant to an employee stock option plan in June 1990, and the shares were
issued in reliance on the exemption from registration pursuant to Section 4(2)
of the Securities Act.
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. Options that were granted by Wolfhoya prior
to its acquisition by the Company in the fourth quarter of 1996 were also
adjusted in connection with such acquisition into Options to purchase 68,534
shares of the Company's Common Stock.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The exhibits filed as a part of this Registration Statement are as
follows:
<TABLE>
<S> <C>
1.1* Form of Agency Agreement.
</TABLE>
II-4
<PAGE> 125
<TABLE>
<S> <C>
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).
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).
</TABLE>
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<PAGE> 126
<TABLE>
<S> <C>
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).
</TABLE>
II-6
<PAGE> 127
<TABLE>
<S> <C>
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).
10.27* First Premium Services, Inc. Lease, as amended, for
corporate offices located at Lake Cook Road, Deerfield, Illinois.
10.28* Lake Forest Bank & Trust Company Lease for drive-up and
walk-up facility located at 911 South Telegraph Road, Lake Forest,
Illinois, dated November 7, 1996.
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.
</TABLE>
- -------------
* Filed herewith.
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.
II-7
<PAGE> 128
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(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> 129
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to 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 January 22, 1997.
WINTRUST FINANCIAL CORPORATION
By: HOWARD D. ADAMS
----------------------------------
Howard D. Adams, Chairman
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to 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 January 22, 1997
- ------------------------- Chief Executive Officer
Howard D. Adams
EDWARD J. WEHMER President and Director January 22, 1997
- -------------------------
Edward J. Wehmer
DAVID A. DYKSTRA Chief Financial Officer January 22, 1997
- ------------------------- (and principal accounting officer)
David A. Dykstra
ALAN W. ADAMS Director January 22, 1997
- -------------------------
Alan W. Adams
JOSEPH ALAIMO Director January 22, 1997
- -------------------------
Joseph Alaimo
PETER CRIST Director January 22, 1997
- -------------------------
Peter Crist
MAURICE F. DUNNE, JR. Director January 22, 1997
- -------------------------
Maurice F. Dunne, Jr.
EUGENE HOTCHKISS, III Director January 22, 1997
- -------------------------
Eugene Hotchkiss, III
JAMES C. KNOLLENBERG Director January 22, 1997
- -------------------------
James C. Knollenberg
JOHN S. LILLARD Director January 22, 1997
- -------------------------
John S. Lillard
JAMES E. MAHONEY Director January 22, 1997
- -------------------------
James E. Mahoney
JAMES B. MCCARTHY Director January 22, 1997
- -------------------------
James B. McCarthy
</TABLE>
II-9
<PAGE> 130
<TABLE>
<S> <C> <C>
MARGUERITE SAVARD MCKENNA Director January 22, 1997
- -------------------------
Marguerite Savard McKenna
ALBIN F. MOSCHNER Director January 22, 1997
- -------------------------
Albin F. Moschner
HOLLIS W. RADEMACHER Director January 22, 1997
- -------------------------
Hollis W. Rademacher
J. CHRISTOPHER REYES Director January 22, 1997
- -------------------------
J. Christopher Reyes
JOHN N. SCHAPER Director January 22, 1997
- -------------------------
John N. Schaper
JOHN J. SCHORNACK Director January 22, 1997
- -----------------------
John J. Schornack
JANE R. STEIN Director January 22, 1997
- -----------------------
Jane R. Stein
KATHARINE V. SYLVESTER Director January 22, 1997
- -----------------------
Katharine V. Sylvester
LEMUEL H. TATE, JR. Director January 22, 1997
- -----------------------
Lemuel H. Tate, Jr.
LARRY WRIGHT Director January 22, 1997
- -----------------------
Larry Wright
</TABLE>
II-10
<PAGE> 131
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
- -------
<S> <C>
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).
10.11 Wolfhoya Investments, Inc. 1995 Stock Option Plan (Barrington Bank
and Trust Company Stock Option Plan).
</TABLE>
II-11
<PAGE> 132
<TABLE>
<S> <C>
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 Registrant's Form S-4
Registration Statement (No. 333-4645) filed with the Securities and
Exchange Commission on July 22, 1996).
</TABLE>
II-12
<PAGE> 133
<TABLE>
<S> <C>
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).
10.27* First Premium Services, Inc. Lease, as amended, for corporate
offices located at 520 Lake Cook Road, Deerfield, Illinois.
10.28* Lake Forest Bank & Trust Company Lease for drive-up and walk-up
facility located at 911 South Telegraph Road, Lake Forest, Illinois, dated
November 7, 1996.
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.
</TABLE>
- -----------------
* Filed herewith.
II-13
<PAGE> 1
EXHIBIT 1.1
Much Shelist Freed, et al.,
Draft of December 18, 1996
[SUBJECT TO CLIENT REVIEW AND APPROVAL]
WINTRUST FINANCIAL CORPORATION
(an Illinois corporation)
1,200,000 SHARES OF COMMON STOCK*
AGENCY AGREEMENT
January ____, 1997
EVEREN Securities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601-1994
Gentlemen:
Wintrust Financial Corporation, an Illinois corporation (the "COMPANY"),
hereby confirms its agreement with EVEREN Securities, Inc. ("EVEREN
SECURITIES," "AGENT" or "YOU"), as follows:
Introductory
The Company is offering for sale, on a best efforts basis, up to 1,200,000
newly issued shares (the "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 first to shareholders of the Company as of __________ ___,
1996 (the "RECORD DATE SHAREHOLDERS") and to customers of the Banks (as defined
below) 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 who place purchase
orders for Shares prior to Noon, Central Time, on _____________ __, 1997. To
the extent Shares remain available for sale after satisfying purchase orders in
the Subscription Offering, the Company is offering Shares 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 Banks have
offices. The Subscription Offering and Community Offering are collectively
referred to herein as the "SUBSCRIPTION AND COMMUNITY OFFERING." Depending on
market conditions, the Shares 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 Agent. It is acknowledged that the Subscription
and Community Offering will terminate at Noon, Central Time, on _____________,
1997 (the "EXPIRATION DATE") unless extended by the Company. It is
further acknowledged that the Company may, in its sole discretion,
______________________
* The Company may, in its sole discretion, increase the number of Shares sold
by up to 180,000 Shares to cover over-subscriptions in the Subscription and
Community Offering.
<PAGE> 2
Everen Securities, Inc.
January __, 1997
Page 2
regardless of any priorities or preferences, accept or reject orders in whole
or in part in the Subscription and Community 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. The
Company may, in its sole discretion, increase the number of Shares sold by up
to 180,000 Shares to cover over-subscriptions in the Subscription and Community
Offering. In addition, depending on market conditions, upon 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
("PUBLIC OFFERING") to be managed by the Agent. The Subscription and Community
Offering and the Public Offering are referred to collectively herein as the
"OFFERING."
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a Registration Statement on Form S-1 (File No. 333-____) (the
"REGISTRATION STATEMENT") containing a Prospectus relating to the Offering (the
"PROSPECTUS") for the registration of the Shares under the Securities Act of
1933, as amended (the "1933 ACT"), and has filed such amendments thereto, if
any, and such amended Prospectuses as may have been required as of the date
hereof. The Prospectus, as amended, on file with the Commission at the time
the Registration Statement initially becomes effective is hereinafter called
the "PROSPECTUS," except that if the Company files a Prospectus pursuant to
Rule 424 of the rules and regulations of the Commission under the 1933 Act (the
"1933 ACT REGULATIONS") which differs from the Prospectus on file at the time
of the Registration Statement initially becomes effective, or if the Company
files an amendment to the Registration Statement subsequent to the time it
initially becomes effective and such amendment contains a Prospectus which
differs from the Prospectus on file at the time the Registration Statement
initially became effective, the term "PROSPECTUS" shall refer to the Prospectus
filed pursuant to Rule 424 or contained in such amendment to the Registration
Statement from and after the time said Prospectus is filed with or transmitted
to the Commission for filing.
Any terms not expressly defined herein shall have the same definition and
meaning as is set forth in the Prospectus.
<PAGE> 3
Everen Securities, Inc.
January __, 1997
Page 3
SECTION 1. APPOINTMENT OF AGENT; COMPENSATION TO THE AGENT
Subject to the terms and conditions herein set forth, the Company hereby
appoints EVEREN Securities as its exclusive marketing agent to consult with and
advise the Company, and, on a "best efforts" basis, to assist the Company with
the solicitations of purchase orders for the Shares in connection with the
Company's offering of the Shares in the Subscription and Community Offering.
On the basis of the representations, warranties and agreements herein
contained, and subject to the terms and conditions herein set forth, EVEREN
Securities accepts such appointment and agrees to consult with and advise the
Company as to the matters set forth in Exhibit A attached hereto and agrees to
use its best efforts to solicit purchase orders for Shares in accordance with
this Agreement; provided, however, that the Agent shall not be responsible for
obtaining purchase orders for any specific number of Shares, shall not be
required to purchase any Shares and shall not be obligated to take any action
which is inconsistent with all applicable laws, regulations, decisions or
orders or decrees, directives, agreements or memoranda of or with any court,
regulatory body, administrative agency, or other government body. Shares will
be offered hereunder by means of Stock Order Forms and Certification Forms (the
"ORDER FORMS"), the form of which is set forth as Exhibit 99.1 to the
Registration Statement. The Company and EVEREN Securities may jointly
determine that EVEREN Securities may also assemble and manage a selling group
of broker-dealers, all of which will be members of the National Association of
Securities Dealers, Inc. (the "NASD") to participate in the solicitation of
purchase orders for the Shares on a "best efforts" basis under a Selected
Dealer's Agreement (the "SELECTED DEALER'S AGREEMENT"), the form of which is
set forth as Exhibit B to this Agreement. Following the Subscription and
Community Offering, any Shares then remaining available for sale may be offered
to the general public in a "firm commitment" Public Offering to be managed by
the Agent. Completion of the Public Offering will be subject to the execution
of an underwriting agreement between the Company and the Agent. Whether a
Public Offering occurs and an underwriting agreement is executed with the Agent
will depend upon, among other factors, on the negotiation of a mutually
acceptable underwriting agreement, market conditions then prevailing, the
aggregate number of Shares not purchased in the Subscription and Community
Offering, and the then-current financial condition of the Company. The number
of Shares to be sold in the Public Offering, if any, will be determined by the
Agent and the Company.
In addition to the reimbursement of expenses of the Agent specified in
Section 6 hereof and any amounts which may become payable to the Agent under
Sections 7 and 8 hereof, the Company will pay the following fees to the Agent
as compensation for the Agent's services under this Agreement:
(a) A management fee equal to 2.5% of the aggregate Price to Public of the
Shares (as set forth on the cover page of the Prospectus, the "PRICE TO
PUBLIC") sold by the Company in the Subscription and Community Offerings
without the use of commissioned registered representatives.
(b) In the event the Company and the Agent elect to employ selected
broker-dealers (including the Agent) to solicit purchase orders in the
Community Offering using the assistance of commissioned registered
representatives, the Company will pay the Agent 4.0% of the aggregate Price to
Public of the Shares sold by the Company in such manner of which 2.5% would
represent the management fee of the Agent and 1.5% would be paid by the Agent
to the selected broker-dealer. No commissions will be paid to any
broker-dealer except the Agent unless a broker-dealer enters into a Selected
Dealer's Agreement with the Agent.
<PAGE> 4
Everen Securities, Inc.
January __, 1997
Page 4
(c) In the event the Company and the Agent determine to commence a 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 Agent would offer a specified number of Shares
to the general public at the Price to Public set forth on the cover page of the
Prospectus 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 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 Agent for
the other Shares purchased pursuant to the underwriting agreement.
The compensation specified above shall be payable to the Agent in same day
funds on the Closing Date (as defined in Section 2 below). The Company agrees
to reimburse the Agent for the costs and expenses specified in Section 6
hereof, to the extent such costs and expenses are incurred by the Agent,
provided that such reimbursement will not exceed $75,000 without the Company's
prior consent.
The appointment of the Agent hereunder shall terminate upon completion of
the Subscription and Community Offering.
SECTION 2. CLOSING DATE; RELEASE OF FUNDS AND DELIVERY OF CERTIFICATES
Subject to the terms and conditions of this Agreement, the Company agrees
to issue or have issued the Shares sold in the Subscription and Community
Offering and to release for delivery certificates for such Shares on the
Closing Date (as hereinafter defined) against payment therefor by release of
funds from the non-interest bearing escrow account referred to in Section 5(r)
hereof and by the authorized withdrawal of funds from deposit accounts
designated by the Company. provided, however, that no such funds shall be
released to the Company or withdrawn until the conditions specified in Section
9 hereof shall have been complied with to the reasonable satisfaction of the
Agent and its counsel. Such release, withdrawal and payment shall be made at
the Closing Date, at 10:00 a.m. Central time, on a business day and at a Bank
designated by the Company, on at least two business days' prior notice to the
Company and no more than ten business days after the later of the expiration of
the Subscription and Community Offering, as extended, or such other time or
place as shall be agreed upon by the Agent and the Company. Certificates for
Shares shall be delivered directly to the purchasers thereof or in accordance
with their directions. The hour and date upon which the Company shall release
or deliver the Shares sold in the Subscription and Community Offering, in
accordance with terms hereof, are herein called the "CLOSING DATE."
SECTION 2A. DELIVERY OF FUNDS RECEIVED BY AGENT TO THE COMPANY
Any funds received by EVEREN Securities or other broker-dealers under a
Selected Dealer's Agreement in the Community Offering shall be transmitted
(either by U.S. Mail or similar type of transmittal) to the Bank designated by
the Company by 12:00 Noon, Central time, of the following business day for
deposit in the non-interest bearing escrow account referred to in Section 5(r)
hereof. In addition, to the extent that EVEREN Securities desires to solicit
indications of interest from its customers, EVEREN Securities will subsequently
(i) contact any customer indicating interest to confirm the interest and give
instructions to execute and return an order form or to receive authorization to
execute the Order Form on a customer's behalf, (ii) mail acknowledgments of
receipt
<PAGE> 5
Everen Securities, Inc.
January __, 1997
Page 5
of orders to each customer confirming interest on the business day following
such confirmation, (iii) debit accounts of such customers on the third business
day (the "DEBIT DATE") following receipt of the confirmation referred to in
(i), and (iv) forward completed order forms together with such funds to the
designated Bank on or before 12:00 Noon, Central time on the next business day
following the Debit Date for deposit in the account referred to in Section 5(r)
hereof.
SECTION 3. SUBSCRIPTION AND COMMUNITY OFFERING; PROSPECTUS
The anticipated maximum number of Shares to be offered in the Subscription
and Community Offering and the Price to Public per Share are as set forth on
the cover page of the Prospectus. The Company may, in its sole discretion,
increase the number of Shares sold by up to 180,000 Shares to cover
over-subscriptions in the Subscription and Community Offering. The total
number of Shares may be increased or decreased from the maximum by the Company
with the prior consent of the Agent, subject to limitations set forth in the
Prospectus.
SECTION 4. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent as follows:
(a) The Registration Statement was declared effective by the Commission on
____________ __, 1997. At the time the Registration Statement became
effective, the Registration Statement complied in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations and the
Registration Statement, any preliminary or final Prospectus, any Blue Sky
Application and any Sales Document (as such terms are defined previously herein
or in Section 7 hereof) authorized by the Company for use in connection with
the Subscription and Community Offering did not contain an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and at the time any Prospectus was
filed with or mailed to the Commission for filing the Registration Statement,
any preliminary or final Prospectus, any Blue Sky Application or any Sales
Document (as such terms are defined previously herein or in Section 7 hereof)
authorized by the Company for use in connection with the Subscription and
Community Offering will not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, provided, however, that the representations and warranties in this
Section 4(a) shall not apply to statements in or omissions from such
Registration Statement, Prospectus or Sales Document made in reliance upon and
in conformity with information furnished to the Company by the Agent expressly
regarding the Agent for use in the Prospectus or Sales Document, which
information solely consists of the disclosure included in the Prospectus in the
second paragraph under the caption "Terms of the Offering -- Plan of
Distribution for the Subscription, Community and Public Offerings."
(b) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Illinois with full
corporate power and authority to own or lease its properties and conduct its
business as described in the Prospectus, and has been duly qualified to do
business as a foreign corporation under the corporation law of, and is in good
standing as such in, every jurisdiction where ownership or leasing of property,
or the conduct of its business requires such qualification, except where the
failure to so qualify would not have a material adverse effect on the
condition, financial or otherwise, or the business, property, operations or
<PAGE> 6
Everen Securities, Inc.
January __, 1997
Page 6
income of the Company and its Subsidiaries (as defined below) on a consolidated
basis.
(c) Except as described in the Prospectus, the Company does not own,
directly or indirectly, equity securities or any equity interest in any
business enterprises other than Lake Forest Bancorp, Inc. an Illinois
corporation ("LAKE FOREST"), Hinsdale Bancorp, Inc., an Illinois corporation
("HINSDALE"), Libertyville Bancorp, Inc., an Illinois corporation
("LIBERTYVILLE"), Wolfhoya Investments, Inc., an Illinois corporation
("WOLFHOYA"), and Crabtree Capital Corporation, an Illinois corporation
("CRABTREE") (together, the "HOLDING COMPANY SUBSIDIARIES"), and North Shore
Community Bank and Trust Company, an Illinois banking corporation ("NORTH SHORE
BANK"), Lake Forest Bank and Trust Company, an Illinois banking corporation
("LAKE FOREST BANK"), Hinsdale Bank and Trust Company, an Illinois banking
corporation ("HINSDALE BANK"), Libertyville Bank and Trust Company, an Illinois
banking corporation ("LIBERTYVILLE BANK"), and Barrington Bank and Trust
Company, N.A., a national banking association ("BARRINGTON BANK") (together,
the "BANKS") and First Premium Services, Inc., an Illinois corporation ("FIRST
PREMIUM"). (The Holding Company subsidiaries, the Banks and First Premium are
referred to together herein as the "SUBSIDIARIES" and the Banks and First
Premium are referred to together herein as the "SIGNIFICANT SUBSIDIARIES").
Each Subsidiary has been duly organized and is validly existing as a
corporation, an Illinois banking corporation or national banking association,
as the case may be, in good standing under the laws of the jurisdiction of its
organization or with the Office of the Illinois Commissioner of Banks and Real
Estate (the "ILLINOIS COMMISSIONER") or the Office of Comptroller of the
Currency (the "OCC"), as the case may be, with full power and authority
(corporate and other) to own or lease its properties and conduct its business
as described in the Prospectus, and each is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions in which the
nature of its business or the character or location of its properties requires
such qualification, except where the failure to so qualify would not have a
material adverse effect on the condition, financial or otherwise, or the
business, property, operations or income of the Company and its Subsidiaries on
a consolidated basis and each of the Significant Subsidiaries considered
separately. The activities of the Company and the Subsidiaries are permitted
under applicable federal and state banking laws and regulations.
(d) All the outstanding shares of capital stock of each Subsidiary have
been duly authorized and validly issued and are fully paid and nonassessable.
All of the outstanding shares of the Subsidiaries are owned of record and
beneficially by the Company, directly or through Holding Company Subsidiaries,
and, except as described in the Prospectus, free and clear of all liens,
security interests, charges, claims, encumbrances or restrictions on transfer
or rights of others, except for restrictions on transfer set forth in the 1933
Act or under applicable state securities laws.
(e) KPMG Peat Marwick LLP, the firm which has issued its report on certain
financial statements included in the Registration Statement and the Prospectus,
are independent certified public accountants within the meaning of the Code of
Professional Conduct of the American Institute of Certified Public Accountants
and are independent accountants as required by the 1933 Act and the 1933 Act
Regulations.
(f) This Agreement has been duly and validly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms except to
the extent limited by bankruptcy, reorganization, insolvency, moratorium and
other laws of general application relating to or affecting the enforcement of
creditors' rights and by general equitable principles and except as rights to
indemnity hereunder may be limited by applicable securities laws. The Company
has full power and lawful authority to
<PAGE> 7
Everen Securities, Inc.
January __, 1997
Page 7
issue and sell the Shares to be sold by it hereunder on the terms and
conditions set forth herein, all necessary corporate proceedings therefor have
been duly and validly taken, and no consent, approval, authorization or other
order of any governmental authority is required in connection with such
authorization, execution and delivery or with the authorization, issue and sale
of the Shares, except such as may be required under the 1933 Act or state
securities laws.
(g) The Shares have been duly and validly authorized and, when issued and
delivered pursuant to this Agreement, will be duly and validly issued, fully
paid and nonassessable. The Shares are not subject to preemptive rights of any
security holder of the Company.
(h) The consummation of the transactions herein contemplated and the
fulfillment of the terms of this Agreement will not conflict in any material
respect with or result in a material breach of any of the terms or provisions
of, or constitute a material default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the property or
assets of the Company or any Subsidiary pursuant to the terms of any indenture,
mortgage, deed of trust, agreement for money borrowed or any other material
agreement or instrument to which the Company or any Subsidiary is a party, or
by which the Company or any Subsidiary may be bound, or to which any of the
property or assets of the Company or Subsidiary are subject, nor will such
action result in any violation of the provisions of the charter or the bylaws,
as amended, of the Company or any Subsidiary, or any statute or any order, rule
or regulation applicable to the Company or any Subsidiary of any court or any
regulatory authority or other governmental body having jurisdiction over the
Company or any Subsidiary.
(i) The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus under "Capitalization"; the shares of issued and
outstanding capital stock of the Company set forth thereunder have been duly
authorized, validly issued, are fully paid and nonassessable and, to the
knowledge of the Company, were issued in compliance with all applicable
securities laws; and the capital stock conforms in all material respects to all
statements relating thereto contained in the Registration Statement and the
Prospectus. Except as disclosed in the Prospectus, no options, warrants or
other rights or agreements, written or oral, to purchase or otherwise acquire
any authorized but unissued shares of Common Stock or other equity interests of
the Company or any security convertible into shares of Common Stock or other
equity interests of the Company are outstanding or reserved for issuance.
(j) The Company and each Subsidiary has good and marketable title to all
properties and assets described in the Prospectus as owned by it, free and
clear of all liens, charges, encumbrances or restrictions, except such as are
described or referred to in the Prospectus or are not, individually or in the
aggregate, material in relation to the business of the Company and its
Subsidiaries on a consolidated basis and each of the Significant Subsidiaries
considered separately; all of the leases and subleases under which the Company
or any Subsidiary is the lessor or sublessor of properties or assets, or under
which the Company or any Subsidiary holds properties or assets as lessee or
sublessee, as disclosed in the Prospectus, which are material to the business
of the Company and its Subsidiaries on a consolidated basis, and each of the
Significant Subsidiaries considered separately, are in full force and effect,
and neither the Company nor any Subsidiary is in default in respect of any of
the material terms or provisions of any of such leases or subleases, and no
claim has been asserted by anyone adverse to the Company's or any Subsidiary's
rights as lessor, sublessor, lessee or sublessee under any of the leases or
subleases mentioned above, or affecting or questioning the Company's or any
Subsidiary's right to the continued
<PAGE> 8
Everen Securities, Inc.
January __, 1997
Page 8
possession of the leased or subleased premises or assets under any such lease
or sublease; and each of the Company and each Subsidiary owns or leases all
such properties as are necessary to its operations as now conducted and, except
as otherwise disclosed in the Prospectus, as proposed to be conducted as set
forth in the Prospectus.
(k) The combined and consolidated financial statements of the Company,
together with related schedules and notes, set forth in the Registration
Statement and the Prospectus, fairly present the financial position and results
of operations of the Company on the basis stated in the Registration Statement,
at the respective dates and for the respective periods to which they apply.
Such statements and related schedules and notes are accurate, complete and
correct, comply as to form in all material respects with all applicable
accounting requirements, including the 1933 Act Regulations, have been prepared
in accordance with generally accepted accounting principles ("GAAP"), which
were consistently applied throughout the periods involved, except as otherwise
disclosed therein, and are consistent in all material respects with the most
recent financial statements and other reports filed by the Company with the
Federal Reserve Board (the "FRB"), except for inconsistencies attributable
solely to differences between GAAP and regulatory accounting principles. Since
the date of the balance sheets included in the Registration Statement, there
has been no material change in the financial condition of the Company. The
summaries of such financial statements and other financial, statistical and pro
forma information and related notes set forth in the Registration Statement and
the Prospectus are (i) accurate and correct and fairly present the information
purported to be shown thereby at the dates and for the periods indicated on a
basis consistent with the audited financial statements of the Company and (ii)
in compliance in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations. All pro forma adjustments described therein
shall have been properly applied on the basis described therein and have been
prepared in accordance with the applicable requirements of the 1933 Act and the
1933 Act Regulations. Any allowance for loan losses by the Company is adequate
to cover anticipated losses. The carrying value of any real estate owned by
the Company does not exceed the current estimated market value of such real
estate owned nor does it exceed the original loan amount secured by such real
estate owned plus costs of foreclosure and improvements (as permissible to be
capitalized under GAAP) made to such real estate owned by the Company.
(l) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus, and except as may otherwise be
stated therein: (i) there has not been any material change in the condition,
financial or otherwise, or earnings, properties or business affairs of the
Company and its Subsidiaries on a consolidated basis or each of the Significant
Subsidiaries considered separately; (ii) there has not been any change in the
capital stock, or any material increase in the long-term debt, of the Company
and its Subsidiaries on a consolidated basis or each of the Significant
Subsidiaries considered separately, nor has any such entity issued any
securities or incurred any liability or obligation for borrowing other than in
the ordinary course of business, consistent with past practices, or issued any
options, warrants or rights to purchase its capital stock; (iii) there have not
been any material transactions entered into by the Company or any Subsidiary,
except those transactions entered into in the ordinary course of business,
consistent with past practices; (iv) there has not been any material increase
in the aggregate dollar amount of the Significant Subsidiaries' criticized
assets, loans more than 90 days past due or real estate owned, or any material
decrease in the surplus and reserves or total assets of the Significant
Subsidiaries; (v) there has not been any material adverse change in the
aggregate amount of the Banks' deposits; (vi) there has not been more than a
$_________ million increase in the aggregate amount of the aggregate borrowings
of the Company and the Subsidiaries, on a
<PAGE> 9
Everen Securities, Inc.
January __, 1997
Page 9
consolidated basis; (vii) there has not been more than a $___________ million
increase in the aggregate amount of fixed-rate loans and investment securities
with a remaining term of maturity in excess of five years of the Company and
the Subsidiaries, on a consolidated basis; and (viii) there has been no
material adverse change in the insurance coverage of the Company or any
Subsidiary, including, without limitation, cancellation or other termination of
any fidelity bond or any other type of insurance coverage. Neither the Company
nor any Subsidiary has any material liability of any kind, contingent or
otherwise, except as set forth in the Prospectus. The capitalization,
liabilities, assets, properties and business of the Company and the
Subsidiaries conform in all material respects to the descriptions thereof
contained in the Prospectus.
(m) Except as disclosed in the Registration Statement and Prospectus,
there is not now pending or, to the knowledge of the Company, threatened, any
action, suit or proceeding to which the Company or any Subsidiary is a party,
including, without limitation, any action, suit or proceeding relating to
discrimination or environmental matters, before or by any court or governmental
agency or body, which might result in any material adverse change in the
condition (financial or other), business or prospects of the Company and its
Subsidiaries on a consolidated basis and each of the Significant Subsidiaries
considered separately, or might materially and adversely affect the properties
or assets thereof, nor is the Company aware of any facts which would form the
basis for the assertion of any material claim or liability that are not
disclosed in the Registration Statement and Prospectus; and no labor
disturbance by the employees of the Company or any Subsidiary exists or is
imminent which might be expected to materially and adversely affect the conduct
of the business, property, operations, financial condition or earnings of the
Company and its Subsidiaries on a consolidated basis and each of the
Significant Subsidiaries considered separately.
(n) The Company and the Subsidiaries have filed all necessary federal,
state, local and foreign income and franchise tax returns and have paid, or are
contesting in good faith, all taxes shown as due thereon; and the Company has
no knowledge of any tax deficiency which has been or might be asserted against
the Company or any Subsidiary, which would materially and adversely affect the
business or operations of the Company and the Subsidiaries on a consolidated
basis.
(o) All contracts and other documents of the Company or any of the
Subsidiaries which are, under the 1933 Act Regulations, required to be filed as
exhibits to the Registration Statement have been so filed.
(p) The Company and each Subsidiary are in possession of all necessary
licenses, permits, consents, certificates, orders, trademarks, patent rights,
copyright protection and other governmental authorizations currently required
for the conduct of their respective businesses, except where failure to obtain
such licenses, permits, consents, certificates, orders, trademarks, patent
rights, copyright protection or governmental authorizations would not have a
material adverse impact on the business or operations of the Company or the
Subsidiary, as the case may be, and all such licenses, permits, consents,
certificates, orders, trademarks, patent rights, copyright protection or
governmental authorizations are in full force and effect, and the Company and
each Subsidiary are in all material respects complying therewith; the
expiration of any such licenses, permits, consents, certificates, orders,
trademarks, patent rights, copyright protection and other governmental
authorizations would not materially affect their operations; and none of the
products, activities or businesses of the Company or any Subsidiary is in
violation of, or causes the Company or any Subsidiary to violate, any material
law, rule, regulation or order of the United States, any state, county or
locality, or any agency or body of the United States or of any state, county or
locality.
<PAGE> 10
Everen Securities, Inc.
January __, 1997
Page 10
Without limiting the generality of the foregoing, the Company and the Holding
Company Subsidiaries have all necessary approvals of the FRB and the OCC to own
the stock of the Subsidiaries, Barrington Bank has a valid charter from the OCC
and each of the other Banks has a valid charter from the Illinois Commissioner.
(q) Neither the Company nor any Subsidiary is in violation, breach or
default of or under its charter or bylaws or any material bond, debenture, note
or other evidence of indebtedness or any material contract, agency agreement,
indenture, mortgage, loan agreement, lease, joint venture or other material
agreement or instrument to which the Company or any Subsidiary is a party or by
which it or any of its properties may be bound, or is in material violation of
any federal, foreign, state or local law, order, rule, regulation, writ,
injunction or decree of any government, governmental instrumentality or court,
which violation would have a materially adverse effect on the business of the
Company and the Subsidiaries on a consolidated basis.
(r) Neither the Company nor any Subsidiary, nor any of their officers and
directors in their role as such, has at any time (i) made any unlawful
contributions to any candidate for political office, or failed to disclose
fully any such contributions in violation of applicable law; (ii) made any
payment to any state, federal or foreign governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments required or allowed by applicable law; (iii) used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; (iv) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (v) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended; (vi) made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment; or (vii) engaged
in any transaction, maintained any bank account or used any corporate funds
except for transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of the Company or the
Subsidiaries; and neither the Company nor any Subsidiary has reimbursed or
repaid, directly or indirectly, any officer or director for any such unlawful
or improper contribution or payment.
(s) The Company and the Subsidiaries make and keep accurate books and
records reflecting their respective assets and maintain internal accounting
controls which provide reasonable assurance that (i) transactions are executed
with management's authorization (ii) transactions are recorded as necessary to
permit preparation of the Company's consolidated financial statements and to
maintain accountability for the assets of the Company and the Subsidiaries;
(iii) access to the assets of the Company and the Subsidiaries is permitted
only in accordance with management's authorization; and (iv) the reported
accountability of the assets of the Company and the Subsidiaries is compared
with existing assets at reasonable intervals.
(t) The deposit accounts of the Banks are insured by the Federal Deposit
Insurance Corporation (the "FDIC") to the fullest extent provided by law, and
no proceeding for the termination or revocation of such insurance is pending or
threatened.
(u) The Company and the Subsidiaries are not subject to any directive from
the Commission, the OCC, the FDIC, the FRB, the Illinois Commissioner or any
other governmental authority to make any material change in the method of
conducting their respective businesses and no such directive is pending or
threatened by such authorities. The Company knows of no unlawful storage,
treatment or disposal of waste by the Company or any Subsidiary (or any of
their predecessors-in-interest) at any of the facilities owned thereby, except
for such violations which
<PAGE> 11
Everen Securities, Inc.
January __, 1997
Page 11
would not have a material adverse effect on the condition (financial or other),
business or prospects of the Company and its Subsidiaries on a consolidated
basis and each of the Significant Subsidiaries considered separately; the
Company knows of no material spill, discharge, leak, emission, ejection,
escape, dumping or release of any kind onto the properties owned by the Company
or into the environment surrounding those properties, of any toxic or hazardous
substances as defined under any federal, state or local regulations, laws or
statutes, except for those releases permissible under such regulations, laws or
statutes or otherwise allowable under applicable permits and except for such
releases which would not have a material adverse effect on the condition
(financial or other), business or prospects of the Company and its Subsidiaries
on a consolidated basis and each of the Significant Subsidiaries considered
separately.
(v) The Company knows of no outstanding claims for finder's, origination
or underwriting fees with respect to the sale of the Shares.
(w) The Company has delivered to the Agent a written agreement from the
Company and from each director, executive officer and shareholder beneficially
owning more than 5% of the outstanding Common Stock of the Company to the
effect that the Company or such officer or director will not, without the
Agent's prior written consent, sell or otherwise dispose of or transfer, or
offer, agree or contract to sell or otherwise dispose of or transfer, any
shares or rights to purchase shares of the Common Stock or any interest therein
for 180 days after the date of the Prospectus.
(x) The Company and each Subsidiary maintain insurance of the types and in
the amounts required by the rules and regulations of the FRB and the Illinois
Commissioner and consistent with insurance coverage maintained by similar
companies and businesses, all of which insurance is in full force and effect.
(y) All material transactions between the Company and the Subsidiaries and
the officers, directors and major shareholders (i.e., those shareholders who
beneficially own more than 5% of any class of the Company's voting securities)
of the Company and the Subsidiaries have been accurately disclosed in the
Registration Statement and the Prospectus, and, except as noted therein, the
terms of each such transaction are fair to the Company and no less favorable to
the Company than the terms that could have been obtained from unrelated
parties.
(z) The Company will not take, directly or indirectly, any action (and
does not know of any action taken by its directors, officers, shareholders or
others) designed to or which has constituted or which might reasonably be
expected to cause or result in, under the Securities Exchange Act of 1934, as
amended (the "1934 ACT"), stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares.
Any certificate signed by an officer of the Company and delivered to the
Agent or its counsel that refers to this Agreement shall be deemed to be a
representation and warranty by the Company to the Agent as to the matters
covered thereby with the same effect as if such representation and warranty
were set forth herein.
SECTION 4. COVENANTS OF THE COMPANY
The Company hereby covenants with you as follows.
<PAGE> 12
Everen Securities, Inc.
January __, 1997
Page 12
(a) The Company will not, at any time before or after the Registration
Statement, including any supplement filed pursuant to Rule 424 under the 1933
Act, is declared effective by the Commission file any amendment to such
Registration Statement without so notifying you and without providing you and
your counsel a reasonable opportunity to review such amendment.
(b) The Company will immediately upon receipt of any information
concerning the events listed below notify you and promptly confirm the notice
in writing:
(i) of the receipt of any comments from the Commission, the OCC, the
FRB, the FDIC, or any other governmental entity with respect to the transactions
contemplated by this Agreement;
(ii) any requests by the Commission or any other governmental entity
for any amendment or supplement to the Registration Statement or for additional
information;
(iii) of the issuance by the Commission or any other governmental
entity of any order or other action suspending the Subscription and Community
Offering or the use of the Registration Statement or the Prospectus;
(iv) the issuance by the Commission or any state authority of any
stop order suspending the effectiveness of the Registration Statement or of the
initiation or threat of initiation or threat of any proceedings for that
purpose; or
(v) of the occurrence of any event mentioned in paragraph (g) below.
The Company will make every reasonable effort to prevent the issuance by
the Commission or any other state authority of any such order and, if any such
order shall at any time be issued, to obtain the lifting thereof at the
earliest possible time.
(c) The Company will give you notice of its intention to file, and
reasonable time to review prior to filing, any amendment or supplement to the
Registration Statement or the Prospectus.
(d) The Company has delivered or will deliver to you and to your counsel
two complete conformed copies (including all exhibits) of the Registration
Statement, as originally filed and each amendment thereto.
(e) The Company will furnish to you, without charge, from time to time
during the period when the Prospectus is required to be delivered under the
1933 Act or the 1934 Act, such number of copies of such Prospectus (as amended
or supplemented) as you may reasonably request for the purposes contemplated by
the 1933 Act or the 1934 Act or the respective applicable rules and regulations
of the Commission thereunder. The Company authorizes the Agent to use the
Prospectus (as amended or supplemented, if amended or supplemented) for any
lawful manner in connection with the sale of the Shares by the Agent.
(f) The Company will comply in all material respects with the 1933 Act
Regulations, the 1934 Act and the rules and regulations of the Commission
promulgated under the 1934 Act (the "1934 ACT REGULATIONS"), and all other
applicable laws (including state Blue Sky laws) to be complied with prior to,
at, and subsequent to the Closing Date. During the periods prior to the
<PAGE> 13
Everen Securities, Inc.
January __, 1997
Page 13
Closing Date and when the Prospectus is required to be delivered, the Company
will comply in all material respects, at its own expense, with all requirements
imposed upon it by the 1933 Act, the 1933 Act Regulations, the 1934 Act and the
1934 Act Regulations, including, without limitations, Rule 10b-6 under the 1934
Act, in each case as from time to time in force, in accordance with the
provisions hereof and the Prospectus.
(g) If, at any time during the period when the Prospectus relating to the
Shares is required to be delivered (including the period after the Expiration
Date and prior to the Closing), any event relating to or affecting the Company
shall occur, as a result of which it is necessary or appropriate, in the
reasonable good faith opinion of the Agent's counsel, to amend or supplement
the Registration Statement or Prospectus in order to make the Registration
Statement or Prospectus not misleading in light of the circumstances existing
at the time it is delivered to a purchaser, the Company will, at its expense,
forthwith prepare, file with the Commission and furnish to you a reasonable
number of copies of an amendment or amendments of, or a supplement or
supplements to, the Registration Statement or Prospectus (in form and substance
satisfactory to you and your counsel after a reasonable time for review) which
will amend or supplement the Registration Statement or Prospectus so that as
amended or supplemented it will not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances existing at the time the Prospectus is
delivered to a purchaser, not misleading. For the purpose of this Agreement,
the Company will timely furnish to you such information with respect to itself
as you may from time to time reasonably request.
(h) The Company will take all necessary actions, in cooperation with you,
and furnish to whomever the Agent may direct such information as may be
required to qualify or register the Shares for offering and sale by the Company
under the applicable securities or Blue Sky laws of each jurisdiction as you
may reasonably designate, provided, however, that the Company shall not be
obligated to qualify to do business in any jurisdiction in which it is not so
qualified. In each jurisdiction where any of the Shares shall have been
qualified or registered as above provided, the Company will make and file such
statements and reports in each fiscal period as are or may be required by the
laws of such jurisdictions.
(i) The Company will not sell or issue, contract to sell or otherwise
dispose of, for a period of 180 days after the Closing Date, without your prior
written consent which shall not be unreasonably withheld, any shares of Common
Stock other than the Shares or other than in connection with any employee
benefit plan or arrangement described in the Prospectus.
(j) During the period which the Common Stock is registered under the 1934
Act or for the three years from the Closing Date, whichever period is greater,
the Company will furnish to its shareholders as soon as practicable after the
end of each fiscal year an annual report (including a consolidated statement of
condition and consolidated statements of income or operations, changes in
shareholders' equity and cash flows of the Company and its subsidiaries as at
the end of and for such year, certified by independent public accountants in
accordance with Regulation S-X under the 1933 Act).
(k) During the period of three years from the date hereof, the Company
will furnish to you: (i) as soon as practicable, a paper copy of each report of
the Company furnished generally to shareholders of the Company or furnished to
or filed with the Commission under the 1934 Act or any national securities
exchange or system on which any class of securities of the Company is listed or
<PAGE> 14
Everen Securities, Inc.
January __, 1997
Page 14
quoted (including, but not limited to, reports on Forms 10-K, 10-Q and 8-K and
of all proxy statements and annual reports to shareholders), a copy of each
other report of the Company mailed to its shareholders or filed with the
Commission and each report of a public nature filed with the OCC, the FRB, the
FDIC, or any other supervisory or regulatory authority or national securities
exchange or system on which any class of securities of the Company is listed or
quoted, each press release and material news items and articles released by the
Company and such additional documents and information with respect to the
Company as you may reasonably request, and (ii) from time to time, such other
non-confidential information concerning the Company as you may reasonably
request.
(l) The Company will use the net proceeds from the sale of the Shares in
the manner set forth in the Prospectus under the caption "Use of Proceeds."
(m) Other than as permitted by the 1933 Act, the 1933 Act Regulations and
the laws of any state in which the Shares are qualified for sale, the Company
will not distribute any Prospectus, offering circular or other offering
material in connection with the offer and sale of Shares.
(n) The Company will make generally available to its security holders as
soon as practicable, but not later than 90 days after the close of the period
covered thereby, an earning statement (in form complying with the provisions of
Rule 158 of the regulations promulgated under the 1933 Act) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date (as defined in said Rule 158)
of the Registration Statement.
(o) The Company will file with the Commission such reports on Form SR as
may be required pursuant to Rule 463 under the 1933 Act.
(p) The Company will promptly register the Shares under Section 12(g) of
the 1934 Act and not deregister the Shares for a period of at least three years
thereafter, unless such registration is no longer required.
(q) The Company will use its best efforts to obtain approval for quotation
of the Shares on the Nasdaq National Market, effective on or prior to the
Closing Date and will use its best efforts to maintain such quotation (or, in
lieu thereof, listing on a national or regional securities exchange) for a
minimum of three years following the Closing Date.
(r) The Bank designated by the Company will maintain appropriate
arrangements for depositing all funds received from persons mailing Order Forms
to purchase Shares in the Subscription Offering and the Community Offering
until the Closing Date and satisfaction of all conditions precedent to the
release of such Bank's obligation to refund payments received from persons
ordering Shares in the Subscription and Community Offering as described in the
Prospectus or until refunds of such funds have been made to the person entitled
thereto and as described in the Prospectus. Such Bank will maintain such
records of all funds received as are necessary to permit the funds of each
subscriber to be separately insured by the FDIC (to the maximum extent
allowable) and to enable such Bank to make appropriate refunds of such funds in
the event that such funds are required to be made as described in the
Prospectus.
(s) The Company will take such actions and furnish such information as are
reasonably
<PAGE> 15
Everen Securities, Inc.
January __, 1997
Page 15
requested by the Agent in order for the Agent to ensure compliance with the
NASD's "Interpretation With Respect to Free Riding and Withholding."
(t) Prior to the Closing Date, the Company will conduct its business in
compliance in all material respects with all applicable federal and state laws,
rules, regulations, decisions, directives and orders including, without
limitation, all decisions, directives and orders of the OCC, the FDIC and the
Illinois Commissioner.
(u) The Company and its Subsidiaries on a consolidated basis and each of
the Significant Subsidiaries considered separately will not, prior to the
Closing Date, incur any liability or obligation, direct or contingent, or enter
into any material transactions, other than in the ordinary course of business,
except as contemplated by the Prospectus.
(v) The Company will use all reasonable efforts to comply with, or cause
to be complied with, the conditions precedent to the several obligations of the
Agent specified in Section 9 hereof.
(w) The representations and warranties made in this Agreement will be true
and correct as of the date hereof and as of the Closing Date.
SECTION 5. PAYMENT OF EXPENSES
The Company agrees to pay all expenses incident to the performance of the
obligations of the Company under this Agreement, including, without limitation,
the following: (i) the preparation, issuance and delivery of certificates for
the Shares to the purchasers in the Subscription and Community Offering; (ii)
the fees and disbursements of the Company's counsel, accountants and other
advisors; (iii) the qualification of the Shares under all applicable securities
or Blue Sky laws, including filing fees and the fees and disbursements of
counsel in connection therewith and in connection with the preparation of a
Blue Sky memorandum; (iv) the printing and delivery to you in such quantities
as you shall reasonably request of copies of the Registration Statement and the
Prospectus, as amended or supplemented and all other documents in connection
with this Agreement; (v) filing fees incurred in connection with the review of
the Subscription and Community Offering by the Commission and by the NASD; (vi)
the fees for listing the shares on the Nasdaq National Market; (vii) fees and
expenses relating to advertising expenses, data processing expenses, temporary
personnel expenses, stock sale center expenses, investor meeting expenses, and
other miscellaneous expenses relating to the marketing by the Agent of the
Shares; (ix) the cost of printing all stock certificates and all other
documents applicable to the Subscription and Community Offering, including the
Order Forms, and the fees and charges of any transfer agent, registrar and
other agents; and (x) all reasonable and documented out-of-pocket expenses of
EVEREN Securities including without limitation the fees and expenses of your
counsel, provided that such reimbursement shall not exceed $75,000 (excluding
Blue Sky fees and expenses, including legal fees and expenses) incurred by you
in connection with the Offering which shall be payable from time to time upon
request. The reimbursement of expenses of the Agent provided in this Section 6
shall be in addition to the amounts payable to the Agent under Section 1 hereof
and any amounts which may become payable to the Agent under Sections 7 and 8
hereof.
<PAGE> 16
Everen Securities, Inc.
January __, 1997
Page 16
SECTION 6. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless you, your officers,
directors, agents, servants and employees and each person, if any, who controls
you within the meaning of Section 15 of the 1933 Act or Section 20(a) of the
1934 Act, against any and all loss, liability, claim, damage or expense
whatsoever (including but not limited to settlement expenses), joint or
several, that you or any of them may suffer or to which you or any of them may
become subject under all applicable federal and state laws or otherwise, and to
promptly reimburse you and any such persons upon written demand for any
expenses (including fees and disbursements of counsel) incurred by you or any
of them in connection with investigating, preparing or defending any actions,
proceedings or claims (whether commenced or threatened) to the extent such
losses, claims, damages, liabilities or actions: (i) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in (a) the Registration Statement (or any amendment or supplement
thereto), the preliminary or final Prospectus (or any amendment or supplement
thereto), (b) any application or other instrument or document of the Company or
based upon written information supplied by the Company or their representatives
filed in any state or jurisdiction to register or qualify any or all of the
Shares under the securities laws thereof (collectively, the "BLUE SKY
APPLICATION"), or (c) any application or other document, advertisement, oral
statement, or communication ("SALES INFORMATION") prepared, made or executed by
or, with its consent, on behalf of the Company, or based upon written or oral
information furnished by, or with its consent, on behalf of the Company, in
connection with or in contemplation of the transactions contemplated by this
Agreement; (ii) arise out of or are based upon the omission or alleged omission
to state in any of the foregoing documents or information a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; or (iii)
arise from any theory of liability whatsoever relating to or arising from or
based upon the Registration Statement (or any amendment or supplement thereto),
preliminary or final Prospectus (or any amendment or supplement thereto), Blue
Sky Application or Sales Information or other documentation distributed in
connection with the Subscription and Community Offering; provided, however,
that no indemnification is required under this paragraph (a) to the extent such
losses, claims, damages, liabilities or actions arise out of or are based upon
any untrue statements or alleged untrue statements in, or material omission or
alleged material omission from, the Registration Statement (or any amendment or
supplement thereto), preliminary or final Prospectus or Sales Information made
in reliance upon and in conformity with information furnished to the Company by
you regarding EVEREN Securities expressly for use in the Prospectus, which
information consists of the disclosure included in the Prospectus as the second
paragraph under the caption "Terms of the Offering -- Plan of Distribution for
the Subscription, Community and Public Offerings."
(b) You agree to indemnify and hold harmless the Company, its directors,
officers, agents, servants and employees, and each person, if any, who controls
the Company with the meaning of Section 15 of the 1933 Act or Section 20(a) of
the 1934 Act, against any and all loss, liability, claim, damage or expense
whatsoever (including but not limited to settlement expenses), joint or
several, that you or any of them may suffer or to which you or any of them may
become subject under all applicable federal and state laws or otherwise, and to
promptly reimburse you and any such persons upon written demand for any
expenses (including fees and disbursements of counsel) incurred by you or any
of them in connection with investigating, preparing or defending any actions,
proceedings or claims (whether commenced or threatened) to the extent such
losses, claims, damages, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement (or any amendment or supplement thereto) or the
preliminary or final Prospectus (or any amendment or
<PAGE> 17
Everen Securities, Inc.
January __, 1997
Page 17
supplement thereto), the Sales Information, or arise out of or are based upon
the omission or alleged omission to state in any of the foregoing documents a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that your obligations under this Section 7(b)
shall exist only if, and only to the extent, that such untrue statement or
alleged untrue statement was made in, or such material fact or alleged material
fact was omitted from the Registration Statement (or any amendment or
supplement thereto) or the preliminary or final Prospectus (or any amendment or
supplement thereto) or the Sales Information in reliance upon and in conformity
with information furnished to the Company by you regarding EVEREN Securities
expressly for use in the Prospectus, which information consists of the
disclosure included in the Prospectus as the second paragraph under the caption
"Terms of the Offering -- Plan of Distribution for the Subscription, Community
and Public Offerings."
(c) Each indemnified party shall give prompt written notice to each
indemnifying party of any action, proceeding, claim (whether commenced or
threatened), or suit instituted against it in respect of which indemnity may be
sought hereunder, but failure to so notify any indemnifying party shall not
relieve it from any liability which it may have on account of this Section 7 or
otherwise. An indemnifying party may participate at its own expense in the
defense of such action. In addition, if it so elects within a reasonable time
after receipt of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume the defense of such
action with counsel chosen by it and approved by the indemnified parties that
are defendants in such action, and such indemnified parties shall not be liable
for any fees and expenses of such counsel for the indemnified parties incurred
thereafter in connection with such action, proceeding or claim, other than
reasonable costs of investigation. In any action, proceeding or claim, the
indemnified party shall have the right to retain its own counsel, but the fees
and disbursements of such counsel shall be at its own expense unless (i) the
parties to any such action, proceeding or claim include both the indemnifying
party and the indemnified party and (ii) representation of both parties by the
same counsel reasonably would be deemed inappropriate due to actual or
potential conflicting interests between them. In no event shall the
indemnifying parties be liable for the fees and expenses of more than one
separate firm of attorneys (other than any special counsel that said firm may
retain) for each indemnified party in connection with any one action,
proceeding or claim or separate but similar or related actions, proceedings or
claims in the same jurisdiction arising out of the same general allegations or
circumstances.
SECTION 8. CONTRIBUTION
In order to provide for just and equitable contribution in circumstances
in which the indemnification provided for in Section 7 is due in accordance
with its terms but is for any reason held by a court to be unavailable from the
Company or you, the Company or you shall contribute to the aggregate losses,
claims, damages and liabilities (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding of any claims asserted, but after deducting any
contribution received by the Company or you from persons other than the other
party thereto, who may also be liable for contribution) to the party entitled
to indemnification in such proportion so that you are responsible for that
portion represented by the percentage that the fees paid to the Agent pursuant
to Section 1 of this Agreement (not including expenses) bears to the gross
proceeds received by the Company from the sale of the Shares in the
Subscription and Community Offering and the Company shall be
<PAGE> 18
Everen Securities, Inc.
January __, 1997
Page 18
responsible for the balance. If, however, the allocation provided above is not
permitted by applicable law, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and you on the other in connection with
the statements or omissions which resulted in such losses, claims, damage or
liabilities (or actions, proceedings or claims in respect thereof), as well as
any other relevant equitable considerations. The relative benefits received by
the Company on the one hand and you on the other shall be deemed to be in the
same proportion as the total gross proceeds from the Subscription and Community
Offering (before deducting expenses) received by the Company bears to the total
fees (not including expenses) received by the Agent. The relative fault shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or other omission or alleged
omission to state a material fact relates to information supplied by the
Company on the one hand or you on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and you agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to above in this Section 8. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions, proceedings or claims in respect
thereof) referred to above in this Section 8 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action, proceeding or
claim. It is expressly agreed that the Agent shall not be liable for any loss,
liability, claim, damage or expense or be required to contribute any amount
which in the aggregate exceeds the amount paid to the Agent under the
Agreement. It is understood that the above-stated limitation on the Agent's
liability is essential to the Agent and that the Agent would not have entered
into this Agreement if such limitation had not been agreed to by the parties to
this Agreement. No person found guilty of any fraudulent misrepresentation
(within the meaning of Section 11 (f) of the 1933 Act) shall be entitled to
contribution from any person who was not also found guilty of such fraudulent
misrepresentation. The obligations of the Company and the Agent under this
Section 8 and under Section 7 hereof shall be in addition to any liability
which the Company and the Agent may otherwise have. For purposes of this
Section 8, each of your officers and directors and each person, if any, who
controls you within the meaning of the 1933 Act and the 1934 Act shall have the
same rights to contribution as you and each person, if any, who controls the
Company within the meaning of the 1933 Act and the 1934 Act, and each officer
and director of the Company, shall have the same rights to contribution as the
Company. Any party entitled to contribution, promptly after receipt of notice
of commencement of any action, suit, claim or proceeding against such party in
respect of which a claim for contribution may be made against another party
under this Section 8, will notify such party from whom contribution may be
sought, but the omission to so notify such party shall not relieve the party
from whom contribution may be sought from any other obligation it may have
hereunder or otherwise than under this Section 8.
SECTION 9. CONDITIONS OF THE OBLIGATIONS OF THE AGENT
Your obligations hereunder are subject, in your discretion, to the
condition that all representations and warranties and other statements of the
Company herein are, at and as of commencement of the Subscription and Community
Offering and at and as of the Closing Date, true and correct in all material
respects, the condition that the Company shall have performed in all material
respects all of its obligations hereunder to be performed on or before such
dates, and to the following further conditions (which are solely for your
benefit), unless waived in writing by you:
<PAGE> 19
Everen Securities, Inc.
January __, 1997
Page 19
(a) The Registration Statement shall have been declared effective by the
Commission not later than 5:30 p.m., Eastern time, on the date of this
Agreement, or with your consent at a later time and date; and at the Closing
Date no stop order suspending the effectiveness of the Registration Statement
shall have been issued under the 1933 Act or proceedings therefor initiated or
threatened by the Commission or any state authority, and no order or other
action suspending the effectiveness of the Prospectus shall have been issued or
proceedings therefor initiated or threatened by the Commission or any state
authority.
(b) At the Closing Date you shall have received:
(1) The favorable opinion, dated as of the Closing Date addressed to the
Agent and for its benefit, of Vedder, Price, Kaufman & Kammholz, counsel for
the Company, and in form and substance satisfactory to EVEREN Securities to the
effect that:
(i) the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Illinois with full
power and authority to own or lease its properties and conduct its business as
described in the Prospectus; and the Company has been duly qualified to do
business as a foreign corporation under the corporation law of, and is in good
standing as such in, every jurisdiction where the ownership or leasing of
property, or the conduct of its business requires such qualification except
where the failure to so qualify would not have a material adverse effect on the
condition, financial or otherwise, or the business, property, operations or
income of the Company and its Subsidiaries on a consolidated basis;
(ii) an opinion to the same general effect as paragraph (i) of this
subsection (1) in respect of each direct and indirect subsidiary of the
Company;
(iii) The Company has an authorized and outstanding capitalization as set
forth in the Prospectus and the Shares conform to the description thereof
contained in the Prospectus. All of the issued and outstanding shares of Common
Stock have been duly authorized, validly issued and are fully paid and
non-assessable and free of preemptive or other similar rights and there are no
options, agreements, contracts or other rights in existence to acquire from the
Company any shares of Common Stock, except as set forth in the Prospectus.
Except as set forth in the Prospectus, there are no holders of the securities
of the Company having rights to the registration thereof. The Company has no
banking subsidiary other than the Banks. All of the capital stock of each
Subsidiary of the Company has been duly authorized, validly issued and is fully
paid and non-assessable. Except as set forth in the Prospectus, the Company,
directly or indirectly, owns of record and beneficially, free and clear of any
liens, claims, encumbrances or rights of others, all of the issued and
outstanding shares of each of its subsidiaries. There are no options,
agreements, contracts or other rights in existence to purchase or acquire from
the Company or its subsidiaries any issued and outstanding shares of such
subsidiaries;
(iv) The Shares to be sold by the Company in the Subscription and
Community Offering have been duly authorized and, when issued and delivered by
the Company pursuant to the Subscription and Community Offering against payment
of the consideration therefor, will be validly issued, fully paid and
non-assessable and good title to the Shares will be transferred from the
Company to the purchasers thereof against payment therefore to such claims as
may be asserted against the purchaser by third party claimants; the holders of
the Shares will not be subject to personal liability by reason of being such
holders; the Shares are not subject to the preemptive rights
<PAGE> 20
Everen Securities, Inc.
January __, 1997
Page 20
of any shareholder of the Company; and all corporate actions required to be
taken for the authorization, issue and sale of the Shares have been validly and
sufficiently taken;
(v) This Agreement has been duly and validly authorized, executed and
delivered and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except insofar as
(A) such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally; (B) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
thereafter may be brought; and (C) such enforcement may be subject to any
limitations under applicable law which relate to the indemnification and
contribution provisions of this Agreement.
(vi) The making and performance by the Company of this Agreement has been
duly authorized by all necessary corporate action and will not violate any
provision of the Company's charter or bylaws and will not result in the breach
or be in contravention of any of the terms or provisions of or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or its Subsidiaries
under any agreement, franchise, license, indenture, lease, mortgage, deed of
trust, or other instrument known to such counsel to which the Company or any
Subsidiary is a party or by which the Company, any Subsidiary or the property
of any of them may be bound or affected, or, to such counsel's knowledge, any
law, order, judgment, rule or regulation applicable to the Company or any
Subsidiary of any government, governmental instrumentality, court or regulatory
body, administrative agency or other governmental body having jurisdiction over
the Company or any Subsidiary or any of their respective properties, or any
order of any court or governmental agency or authority entered in any
proceeding to which the Company or any Subsidiary was or is now a party or by
which it is bound. No consent, approval, authorization or other order of, or
filing with, any court, regulatory body, administrative agency or other
governmental body is required for the execution and delivery of this Agreement
or the consummation of the transactions contemplated herein, except for
compliance with the 1933 Act and applicable Blue Sky laws public and clearance
of the Subscription and Community Offering with the NASD;
(vii) the Registration Statement has become effective under the 1933 Act,
and, to the best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or contemplated by the
Commission under the 1933 Act, and the Registration Statement (including the
information deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b), if applicable), the Prospectus and each
amendment or supplement thereto (except for the financial statements and other
statistical or financial data included therein as to which such counsel need
express no opinion) comply as to form in all material respects with the
requirements of the 1933 Act; and such counsel does not know of any statutes or
regulations or any legal or governmental proceedings pending or threatened
required to be described in the Prospectus which are not described as required,
nor of any contracts or documents of a character required to be described in
the Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement which are not described or filed, as required; and
(viii) the statements under the captions "______________-- Limitation of
Liability and Indemnification," "Supervision and Regulation," and "Description
of Capital Stock" in the
<PAGE> 21
Everen Securities, Inc.
January __, 1997
Page 21
Prospectus, insofar as such statements constitute a summary of documents
referred to therein or matters of law, are accurate summaries and fairly and
correctly present, in all material respects, the information called for with
respect to such documents and matters.
In rendering such opinion, such counsel may rely, provided that the
opinion shall state that you and they are entitled to so rely, as to factual
matters on certificates of the officers and employees of, and accountants for,
the Company. Such opinion may contain such other qualifications and assumptions
as are reasonably acceptable to counsel for the Agent.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the Company, and
representatives of the Agent and its counsel, at which the contents of the
Registration Statement, the Prospectus and related matters were discussed and,
although such counsel is not passing upon, and does not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus and has not made any
independent check or verification thereof, on the basis of the foregoing
(relying as to factual matters upon the statements of officers and other
representatives of the Company), no facts have come to such counsel's attention
that have led them to believe that the Registration Statement (other than
financial statements, the notes thereto and related schedules and other
financial, statistical and accounting data included therein or omitted
therefrom, as to which such counsel need express no belief), as amended or
supplemented, if applicable, at the time such Registration Statement or any
post-effective amendment became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus (other than financial statements, the notes thereto and related
schedules and other financial, statistical and accounting data included therein
or omitted .therefrom, as to which such counsel need express no belief) as
amended or supplemented, if applicable, as of its date and the Closing Date,
contained an untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein not misleading in light of the
circumstances under which they were made.
(4) The favorable opinion, dated as of the Closing Date, of Much Shelist
Freed Denenberg Ament Bell & Rubenstein, P.C., your counsel, with respect to
such matters as you may reasonably require. Such opinion may rely upon the
opinion of counsel to the Company as such counsel deems proper in the
reasonable exercise of its judgment, and as to matters of fact, upon
certificates of officers and directors of the Company delivered pursuant hereto
or as such counsel shall reasonably request.
(5) At the Closing Date, you shall receive a certificate of the Chief
Executive Officer and the Chief Financial Officer of the Company, dated as of
such Closing Date, to the effect that to the best of their knowledge after due
inquiry: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has been no material adverse
change in the financial condition, in the earnings, capital, properties, or
business affairs of the Company or any Subsidiary whether or not arising in the
ordinary course of business; (ii) the representations and warranties in Section
4 are true and correct with the same force and effect as through expressly made
at and as of the Closing Date; (iii) the Company has complied in all material
respects with all agreements and satisfied all conditions on their part to be
performed or satisfied at or prior to the Closing Date under the Agreement, and
all other applicable laws (including state Blue Sky laws), regulations,
decisions and orders, and will comply in all material respects with all
obligations to be
<PAGE> 22
Everen Securities, Inc.
January __, 1997
Page 22
satisfied by them after consummation of the Subscription and Community
Offering; (iv) no stop order suspending the effectiveness of the Registration
Statement has been initiated or, to the best knowledge of the Company,
threatened by the Commission or any state authority; and (v) no order
suspending the Subscription and Community Offering, or the effectiveness of the
Prospectus has been issued and no proceedings for that purpose have been
initiated or threatened by the Commission.
(d) Prior to and at the Closing Date: (i) in the reasonable opinion of the
Agent, there shall have been no material adverse change in the financial
condition, or in the earnings or the business affairs of the Company or any
Subsidiary from the latest dates as of which such condition is set forth in the
Prospectus, except as referred to therein; (ii) there shall have been no
material transaction entered into by the Company or any Subsidiary, from the
latest date as of which the financial condition of the Company is set forth in
the Prospectus other than transactions referred to or contemplated therein;
(iii) the Company or any Subsidiary shall not have received from the OCC, the
FRB, the FDIC or the Illinois Commissioner any direction (oral or written) to
make any material change in the method of conducting their businesses with
which it has not complied in all material respects (which direction, if any,
shall have been disclosed to the Agent) or which materially and adversely would
affect the businesses, operations or financial condition, income or business
affairs of the Company and its Subsidiaries on a consolidated basis or any of
the Significant Subsidiaries considered separately; (iv) neither the Company
nor any Subsidiary shall have been in default (nor shall an event have occurred
which, with notice or lapse of time or both, would constitute a default) under
any provision of any agreement or instrument relating to any outstanding
indebtedness, which default or event would have a material adverse effect on
the business, operations or financial condition of the Company and its
Subsidiaries on a consolidated basis or any of the Significant Subsidiaries
considered separately; (v) no action, suit or proceedings, at law or in equity
or before or by any federal or state commission, board or other administrative
agency, shall be pending or, to the knowledge of the Company, threatened
against the Company or any Subsidiary or affecting any of their properties
wherein an unfavorable decision, ruling or finding would materially and
adversely affect the business, operations, financial condition or income of the
Company and its Subsidiaries on a consolidated basis or any of the Significant
Subsidiaries considered separately; and (vi) the Shares shall have been
qualified or registered for offering and sale under the securities or blue sky
laws of the jurisdiction as set forth in the final Blue Sky memorandum of your
legal counsel.
(e) Concurrently with the execution of this Agreement, the Agent shall
receive a letter from KPMG Peat Marwick LLP dated the date of Agreement, and
addressed to the Agent: (i) confirming that KPMG Peat Marwick LLP is a firm of
independent public accountants within the meaning of the Code of Professional
Conduct of the American Institute of Certified Public Accountants and the 1933
Act and the 1933 Act Regulations and no information concerning its respective
relationship with or interests in the Company is required to be disclosed by
Item 10 of the Form S-1, and (ii) stating in effect that in their opinion the
combined and consolidated financial statements and financial statement
schedules of the Company for the years ended December 31, 1995, 1994 and 1993
as are included in the Prospectus and covered by their opinion included
therein, comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the 1933 Act Regulations, and
generally accepted accounting principles; (iii) stating in effect that, on the
basis of certain agreed upon procedures (but not an audit examination in
accordance with generally accepted auditing standards) consisting of a reading
of the latest available unaudited interim consolidated financial statements of
the Company and its Subsidiaries prepared by the Company, a reading of the
minutes of meetings of the Boards of Directors of the Company
<PAGE> 23
Everen Securities, Inc.
January __, 1997
Page 23
and its Subsidiaries and consultations with officers of the Company responsible
for financial and accounting matters, nothing came to its attention which
caused it to believe that: (A) during the period from the date of the latest
audited financial statements included in the Prospectus to a specified date not
more than five business days prior to the date hereof, there was any material
increase in borrowings by the Company or any Subsidiary, any material increase
in loans greater than ninety days delinquent, any material increases in real
estate owned, any material decrease in deposit accounts or any changes in
principles or methods of accounting whether by adoption or otherwise (except as
disclosed in the Prospectus); or (B) there was any material decrease in
consolidated net assets of the Company at the date of such letter from the
amounts shown in the latest audited statement of condition included in the
Prospectus or there was any material decrease in net interest income, income
before income taxes, or net income of the Company for the period from the date
of the latest audited statement of operations included in the Prospectus and
ended on a specified date not more than five business days prior to the date
hereof as compared to the corresponding period in the preceding year; and (iv)
stating that, in addition to the examination referred to in its opinion
included in the Prospectus and the performance of the procedures referred to in
clause (iii) of this subsection (e), it has compared with the general
accounting records of the Company and/or the Subsidiaries, as applicable, which
are subject to the internal controls of the Company's and/or the Subsidiaries',
as applicable, accounting system and other data prepared by the Company and/or
the Subsidiaries, as applicable, directly from such accounting records, to the
extent specified in such letter, such amounts and/or percentages set forth in
the Prospectus as you may reasonably request; and they have found such amounts
and percentages to be in agreement therewith (subject to rounding).
(f) At the Closing Date, you shall receive a letter from KPMG Peat Marwick
LLP, dated the Closing Date, addressed to the Agent, confirming the statements
made by it in the letter delivered by it pursuant to subsection (e) of this
Section 9, the "specified date" referred to in clause (iii) thereof to be a
date specified in such letter, which shall not be more than five business days
prior to the Closing Date.
(g) At the Closing Date, your counsel shall be furnished with such
documents and opinions as they may reasonably require for the purpose of
enabling them to pass upon the sale of the Shares as herein contemplated and
related proceedings or in order to evidence the occurrence or completeness of
any of the representations or warranties, or the fulfillment of any of the
conditions herein contained; and all proceedings taken by the Company in
connection with the sale of the Shares as herein contemplated shall be
satisfactory in form and substance to you.
(h) The Company or any Subsidiary shall not have sustained since the date
of the latest audited financial statements included in the Registration
Statement and Prospectus any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the Registration
Statement and Prospectus, and since the respective dates as of which
information is given in the Registration Statement and Prospectus, there shall
not have been any material change in the consolidated long-term debt of the
Company or any material change, or any development involving a prospective
material change, in or affecting the general affairs, management, financial
position, shareholders' equity, cash flow or results of operations of the
Company and its Subsidiaries on a consolidated basis or any of the Significant
Subsidiaries considered separately, otherwise than as set forth or contemplated
in the Registration Statement and Prospectus, the effect of which, in any such
case described above, is sufficiently
<PAGE> 24
Everen Securities, Inc.
January __, 1997
Page 24
material and adverse as to make it impracticable or inadvisable to proceed with
the Subscription and Community Offering or the delivery of the Shares on the
terms and in the manner contemplated in Prospectus.
(i) Subsequent to the date hereof, there shall not have occurred any of
the following: (i) any domestic or international event or act or occurrence
which has materially disrupted, or in your sole reasonable opinion will in the
immediate future materially disrupt the securities markets; (ii) trading in
securities on the New York Stock Exchange or the American Stock Exchange shall
have been suspended or limited; (iii) material governmental restrictions shall
have been imposed on trading in securities generally (not in force and effect
on the date hereof); (iv) a banking moratorium shall have been declared by
federal or New York or Illinois State authorities; (v) the Dow Jones Industrial
Average (the "DJIA") shall on any day, from and including the date of this
Agreement, have declined 20% or more from the closing D/IA as reported in The
Wall Street Journal for the business day immediately preceding the effective
date of the Registration Statement; (vi) any outbreak of international
hostilities or other national or international calamity or crisis or change in
economic or political conditions shall have occurred, if the effect of such
outbreak, calamity, crisis or change on the financial markets of the United
States would, in your sole judgment, make the offering of the Shares
impracticable; (vii) the passage by the Congress of the United States or by any
state legislative body of any act or measure, or the adoption or proposed
adoption of any orders, rules, legislation or regulations by any governmental
body, any authoritative accounting institute or board or any governmental
executive which is reasonably believed likely by you to have a material adverse
impact on the business, financial condition or financial statements of the
Company, or the market for the Shares; (viii) any material adverse change shall
have occurred since the respective dates as of which information is given in
the Registration Statement and Prospectus in the financial condition (financial
or other) of the Company or in the earnings, affairs or business prospects of
the Company and its Subsidiaries on a consolidated basis or any of the
Significant Subsidiaries considered separately whether or not arising in the
ordinary course of business; or (ix) the enactment, publication, decree or
other promulgation of any federal or state statute, regulation, rule or order
of any court or other governmental authority or the taking of any action by any
federal, state or local government or agency in respect of its monetary or
fiscal affairs, which, in your sole opinion, materially and adversely affects,
or will materially and adversely affect, the business of the Company and its
Subsidiaries on a consolidated basis or any of the Significant Subsidiaries
considered separately.
If any of the conditions specified in this Section shall not have been
fulfilled when and as required by this Agreement, or by_______________ __, 1997
(unless such date is extended by a written agreement signed by all of the
parties hereto), this Agreement and all of your obligations hereunder may be
canceled by you by notifying the Company of such cancellation in writing
(including facsimile transmissions) or by telegram at any time at or prior to
the Closing Date, and any such cancellation shall be without liability of any
party to any other party except as otherwise provided in Sections 1, 6, 7 and 8
hereof. Notwithstanding the above, if this Agreement is canceled pursuant to
this paragraph, the Company agrees to reimburse you for all of your
out-of-pocket expenses, including without limitation the fees and expenses of
your counsel, provided that such reimbursement shall not exceed $75,000
(excluding Blue Sky counsel fees and expenses), subject to the limits expressed
in Section 6 hereof, reasonably incurred by you, and your counsel, at its
normal rates, in connection with the preparation of the Registration Statement
and the Prospectus, and in contemplation of the proposed Subscription and
Community Offering.
<PAGE> 25
Everen Securities, Inc.
January __, 1997
Page 25
SECTION 10. TERMINATION
(a) In the event the Company elects not to accept any orders for Shares in
the Subscription and Community Offering, this Agreement shall terminate upon
refund by the Company to each person who has ordered any of the Shares the full
amount which it may have received from such persons and no party to this
Agreement shall have any obligation to the other hereunder, except for the
Company's obligations under Sections 1, 6, 7, 8 and 9 hereof.
(b) This Agreement may be terminated by the Agent, with respect to the
Agent's obligations hereunder, by notifying the Company at any time at or prior
to the Closing Date, if any of the conditions specified in Section 9 hereof
shall not have been fulfilled when and as required by this Agreement or if the
services to be performed by the Agent have not been completed by____________
__, 1997 (unless such date is extended by a written agreement signed by all of
the parties hereto).
SECTION 11. SURVIVAL
The respective indemnities, agreements, representations, warranties and
other statements of the Company and you, as set forth in this Agreement, shall
remain in full force and effect, regardless of any investigation (or any
statement as to the results thereof) made by or on behalf of you or any of your
officers or directors or any person controlling you, or the Company or any
officer, director or person controlling the Company, and shall survive
termination of the Agreement and the receipt or delivery of any payment for the
Shares.
SECTION 12. MISCELLANEOUS
Notices hereunder, except as otherwise provided herein, shall be given in
writing or by telegraph, addressed (a) to the Agent at 77 West Wacker Drive,
Chicago, Illinois 60601-1694 (Attention: Barry I. Forrester, Senior Vice
President), with a copy (which shall not constitute notice) to Much Shelist
Freed Denenberg Ament Bell & Rubenstein, P.C. (Attention: Michael J. Gamsky,
Esq.), and (b) to the Company at 727 North Bank Lane, Lake Forest, Illinois
60045-1951 (Attention: Howard D. Adams, Chief Executive Officer), with a copy
(which shall not constitute notice) to Vedder, Price, Kaufman & Kammholz, 222
North LaSalle Street, Chicago, Illinois 60601 (Attention: Jennifer R. Evans,
Esq.).
This Agreement is made solely for the benefit of and will be binding upon
the parties hereto and their respective successors and the controlling persons,
directors and officers referred to in Section 7 hereof and no other person will
have any right or obligations hereunder. The term "SUCCESSOR" shall not
include any purchaser of any of the Shares.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Illinois.
This Agreement may be signed in various counterparts which together will
constitute one agreement.
If the foregoing correctly sets forth the arrangement among the Company
and the Agent, please indicate acceptance thereof in the space provided below
for that purpose, whereupon this
<PAGE> 26
Everen Securities, Inc.
January __, 1997
Page 26
letter and your acceptance shall constitute a binding agreement.
Very truly yours,
WINTRUST FINANCIAL CORPORATION
By:______________________________
Howard D. Adams,
Chief Executive Officer
Accepted as of the date first above written.
EVEREN SECURITIES, INC.
By:__________________________
Barry I. Forrester
Senior Vice President
<PAGE> 27
EXHIBIT A
EVEREN Securities ("EVEREN") will consult with and advise the Company as
to the matters set forth below.
GENERAL SERVICES
Solicit, analyze, and make recommendations on bids from printing, data
processing, and transfer agent firms.
Supervise printing, data processing agent (if any), and transfer agent firms.
Assist in drafting and distribution of press releases as required or
appropriate.
FINANCIAL ADVISORY SERVICES
Conduct such review as we deem appropriate.
Provide intensive financial and marketing input for drafting of offering
circular.
Recommend:
- - The number of shares and range of prices per share of stock to be issued,
- - Subscription priorities among current stockholders, customers, and
community members, and
- - Limitations on amounts individuals and groups of related individuals may
purchase.
SUBSCRIPTION AND DIRECT COMMUNITY OFFERING ENHANCEMENT SERVICES
Design and manage the direct stock sale process:
- - Draft all of the marketing materials, such as cover letters,
question-and-answer brochures, and the stock order form, to be
included in an attractive marketing package along with the prospectus;
- - Arrange for the distribution of marketing packages to those whom you wish
to target;
- - Conduct informational sessions for the Board of Directors, management, and
employees so that everyone in the organization is aware of and
knowledgeable about the Offerings;
1
<PAGE> 28
EXHIBIT A
SUBSCRIPTION AND COMMUNITY OFFERING ENHANCEMENT SERVICES (continued)
- - Set up and manage a Stock Sale Center staffed with non-commissioned
EVEREN Series 7-registered representatives to:
1. Solicit investor interest through a telemarketing campaign,
2. Meet with prospective investors at the Stock Sale Center,
3. Answer telephone inquiries,
4. Track prospective investors,
5. Record stock orders using EVEREN's proprietary scanning and order
management software,
6. Maintain the stock order book and provide transfer agent
instructions,
7. Mail order acknowledgments,
8. Provide senior management with daily reports,
9. Handle special situations as they arise, and
10. Otherwise assist in the sale of stock;
- - Arrange the logistics of investor information meeting(s) as required;
- - Prepare a slide presentation for investor information meeting(s);
- - Prepare a script for presentation by senior management at investor
information meeting(s);
- - Prepare management for the question-and-answer period at investor
information meeting(s); and
- - Attend and address investor information meeting(s) and be available to
answer questions.
BROKER-ASSISTED SALES SERVICES
In the event the Company wishes to utilize an Assisting Broker structure:
- - Arrange logistics of broker information meeting(s) as required,
- - Prepare a slide presentation for broker information meeting(s),
- - Prepare a script for presentation by senior management at broker information
meeting(s),
- - Prepare management for question-and-answer period at broker information
meeting(s),
- - Utilize EVEREN's Syndicate Department to encourage and facilitate the
attendance of EVEREN's registered representatives and, possibly, those of
other broker-dealers at the broker information meetings,
- - Attend and address broker information meeting(s) and be available to answer
questions, and
- - Produce a confidential broker memorandum to assist participating brokers in
selling the stock.
2
<PAGE> 29
EXHIBIT A
UNDERWRITING SERVICES
If sufficient Common Stock remains available after the Subscription and Direct
Community Offerings to effect an Underwritten Public Offering and should any
investigations and inquiries conducted by EVEREN prove satisfactory, EVEREN
would intend to serve as the Lead Managing Underwriter in an Underwritten
Public Offering of the Common Stock. Such underwriting would be subject, among
other things, to the conditions contained in a separate Underwriting Agreement
to be negotiated by the parties (the "Underwriting Agreement").
AFTERMARKET SUPPORT SERVICES
EVEREN will use its best efforts to act as a market maker in the Company's
Common Stock after the Offerings are completed, and to secure a similar
commitment from at least one additional firm. For a minimum period of two
years following completion of the Offerings, EVEREN will include the Company in
its regularly published Banking and Finance equity research program.
3
<PAGE> 30
EXHIBIT B
[SUBJECT TO CLIENT REVIEW AND APPROVAL]
WINTRUST FINANCIAL CORPORATION
(an Illinois corporation)
1,200,000 Shares
of
Common Stock
FORM OF SELECTED DEALER'S AGREEMENT
January __, 1997
Gentlemen:
We have agreed to assist Wintrust Financial Corporation, an Illinois
Corporation (the "COMPANY"), in connection with the Company's offer and sale,
on a best efforts basis, of up to 1,200,000 shares of the Company's common
stock, without par value (the "SHARES"), at a price of $_____. The Shares and
certain of the terms on which they are being offered are more fully described
in the enclosed Prospectus dated ________________, 1997 (the "PROSPECTUS").
In connection with its Subscription and Community Offering, the Company
has offered the Shares concurrently in a Subscription Offering (to shareholders
of the Company and customers of its banking subsidiaries) and in a concurrent
Community Offering to the general public with a preference given to residents
of the communities in which the Company's banking subsidiaries have offices.
The Shares are also being offered in accordance with the Plan by a selling
group of broker-dealers.
We are offering certain selected dealers (of which you are one) the
opportunity to participate in the solicitation of purchase orders for the
Shares and we will pay you a fee in the amount of 2.5% of the dollar amount of
the Shares sold on behalf of the Company by you, as evidenced by the authorized
designation of your firm on the order form or forms of such Shares accompanying
the funds transmitted for payment therefor to the special account established
by the Company for the purpose of holding such funds. It is understood, of
course, that payment of your fee will be made only out of compensation received
by us for the Shares sold on behalf of the Company by you, as evidenced in
accordance with the preceding sentence. As soon as practicable after the
closing date of the offering, we will remit to you, out of our compensation as
provided above, the fees to which you are entitled hereunder.
Each order form for the purchase of Share must set for the identity and
address of each person to whom the certificate for such Shares should be issued
and delivered. Such order form should clearly identify your firm. You shall
instruct any purchaser who elects to send his order form to you to make any
accompanying check payable to "Wintrust Financial Corporation."
This offer is made subject to the terms and conditions herein set forth
and is made only to selected dealers which are (i) members in good standing of
the National Association of Securities
<PAGE> 31
[SELECTED DEALER]
[ ] [ ], 1997
Page 2
Dealers, Inc. ("NASD") which have at least $25,0000 net capital and which are
to comply with all applicable rules of the NASD, including, without limitation,
the NASD's Interpretation with Respect to Free-Riding and Withholding and
Section 24 of Article III of the NASD's Rules of Fair Practice, or (ii) foreign
dealers not eligible for membership in the NASD which have at least $25,000 net
capital who agree (A) not to sell any Shares within the United States, its
territories or possessions or to persons who are citizens thereof or resident
therein and (B) in making other sales to comply with the above-mentioned NASD
Interpretation, Section 8.24 and 36 of the above-mentioned Article III as if
they were NASD members, and Section 25 of such Article III as it applies to
non-member brokers or dealers in a foreign country. By executing this
Agreement, (i) you represent and warrant that you satisfy the standards set
forth in this paragraph for participation in the solicitation of offers to buy
the Shares and (ii) confirm that you will continue to comply with the
requirements of this paragraph until termination of this Agreement.
Purchase Orders for Shares will be strictly subject to confirmation and
we, acting on behalf of the Company, reserve the right in our uncontrolled
discretion to reject any order in whole or in part, to accept or reject orders
in the order of their receipt or otherwise, and to allot. Neither you nor any
person is authorized by the Company or by us to give any information or make
any representations other than those contained in the Prospectus in connection
with the sale of the Shares. No selected dealer is authorized to act as agent
for us when soliciting purchase orders for the Shares from the public or
otherwise. No selected dealer shall engage in any stabilizing (as defined in
Rule 10b-7 promulgated under the Securities Exchange Act of 1934, as amended)
with respect to the Shares during the offering.
We and each selected dealer assisting in selling Shares pursuant hereto
agree to comply with the applicable requirements of the Securities Exchange Act
of 1934, as amended, and applicable state rules and regulations. In addition,
we and each selected dealer confirm that the Securities and Exchange Commission
interprets Rule 15c2-8 promulgated under the Securities Exchange Act of 1934,
as amended, as requiring that a Prospectus be supplied to each person who is
expected to receive a confirmation of sale 48 hours prior to delivery of such
person's order form.
We and each selected dealer further agree to the extent that our customers
desire to pay for shares with funds held by or to be deposited with us, in
accordance with the interpretation of the Securities and Exchange Commission of
Rule 15c2-4 promulgated under the Securities Exchange Act of 1934, as amended,
either (a) upon receipt of an executed order form or direction to execute an
order on behalf of a customer, to forward the Price to Public for the Shares
ordered on or before twelve noon of the business day following receipt or
execution of an order form by us to the Bank designated by Company for deposit
in an escrow account or (b) to solicit indications of interest in which event
(i) we will subsequently contact any customer indicating interest to confirm
the interest and give instructions to execute and return an order form or to
receive authorization to execute the order form on the customer's behalf; (ii)
we will mail acknowledgments of receipt of orders to each customer confirming
interest on the business day following such confirmation; (iii) we will debit
accounts of such customers on the third business day (the "debit date")
following receipt of the confirmation referred to in (i), and (iv) we will
forward completed order forms together with such funds to the Bank designated
by Company on or before 12:00 Noon, Central time, on the next business day
following the debit date for deposit in the escrow account. We and each
selected dealer acknowledge that if the procedure in (b) is adopted, our
customers' funds are not required to be in their accounts until the debit date.
We and each selected dealer agree that no method of payment, other than as set
forth in this paragraph, will be employed for shares of Share sold
<PAGE> 32
[SELECTED DEALER]
[ ] [ ], 1997
Page 3
pursuant to this Agreement.
Unless earlier terminated by us, this Agreement shall terminate upon the
closing date of this offering. We may terminate this Agreement or any
provisions hereof at any time by written or telegraphic notice to you. Of
course, our obligations hereunder are subject to the successful completion of
the offering.
You agree that at any time or times prior to the termination of this
Agreement you will, upon our request, report to us the number of Shares sold on
behalf of the Company by you under this Agreement.
Upon application to us, we will inform you as to the states in which we
believe the Shares has been qualified for sale under, or are exempt from the
requirements of, the respective blue sky laws of such states, but we assume no
responsibility or obligation as to your rights to sell Shares in any state.
Additional copies of the Prospectus and any supplements thereto will be
supplied in reasonable quantities upon request.
Any notice from us to you shall be deemed to have been duly given if
mailed, telephoned, or telegraphed to you at the address to which this
Agreement is mailed.
This Agreement shall be construed in accordance with the laws of the State
of Illinois.
Please confirm your agreement hereto by signing and returning the
confirmation accompanying this letter at once to us at EVEREN Securities, Inc.,
77 West Wacker Drive, Chicago, Illinois 60601-1994. The enclosed duplicate
copy will evidence the agreement between us.
Sincerely,
EVEREN SECURITIES, INC.
By:________________________________
<PAGE> 33
[SELECTED DEALER]
[ ] [ ], 1997
Page 4
CONFIRMATION:
We hereby confirm our agreement to participate in the solicitation of
purchase orders for Shares upon the terms and conditions set forth herein and
certify that we are a member in good standing of the National Association of
Securities Dealers, Inc.
[SELECTED DEALER]
By:____________________
Date: [ ] [ ], 1997
<PAGE> 1
EXHIBIT 5.1
[VEDDER, PRICE, KAUFMAN & KAMMHOLZ LETTERHEAD]
January 24, 1997
Wintrust Financial Corporation
727 North Bank Lane
Lake Forest, Illinois 60045-1951
Gentlemen:
Reference is hereby made to the Registration Statement on Form S-1
(Registration No. 333-18699) (the "Registration Statement"), as amended, filed
by Wintrust Financial Corporation, an Illinois corporation (the "Company"),
with the Securities and Exchange Commission in connection with the proposed
public offering of up to 1,300,000 shares of Common Stock, without par value
(the "Common Stock"). Up to an additional 195,000 shares may be sold by the
Company to satisfy unfilled purchase orders in the Subscription and Community
Offering or pursuant to the Selling Agent's over-allotment option (referred to
collectively as the "Oversubscription Option").
We have acted as special counsel for the Company in connection with the
proposed offering.
In rendering this opinion, we have assumed the authenticity, accuracy and
completeness of all documents submitted to us as originals, the conformity to
authentic original documents of all documents submitted to us as certified,
conformed or photostatic copies and the genuineness of all signatures.
It is our opinion that the 1,495,000 shares of Common Stock that may be
sold by the Company in accordance with said Registration Statement (including
the 195,000 shares subject to the Oversubscription Option), if and when so
sold, will be legally issued, fully paid and non-assessable.
<PAGE> 2
Wintrust Financial Corporation
January 24, 1997
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" in the Prospectus included therein.
Very truly yours,
VEDDER PRICE, KAUFMAN & KAMMHOLZ
MCW/sfj
<PAGE> 1
Exhibit 10.27
COMMENCEMENT DATE AND TERMINATION DATE
AGREEMENT
Date: November 26, 1991
This Agreement is a supplement to that certain Lease dated July 12, 1991,
between MATAS CORPORATION as agent for AMERICAN NATIONAL BANK AND TRUST COMPANY
OF CHICAGO, as Trustee under a certain Trust Agreement dated the 31st day of
August, 1983, and known as Trust Number 65110 (hereinafter referred to as
"Landlord"), and First Premium Services, Inc. (hereinafter referred to as
"Tenant"), for 4,558 square feet in the building known as 520 Lake Cook Road,
Deerfield, Illinois.
Landlord and Tenant agree that: The Commencement Date of the Lease Term shall
be December 1, 1991 instead of October 1, 1991, and the Termination Date of the
Lease Term shall be March 31, 1997 instead of January 31, 1997.
MATAS CORPORATION FIRST PREMIUM SERVICES, INC.
By:___________________________ By:___________________________
<PAGE> 2
C O R P O R A T E 5 0 0 C E N T R E
LEASE WITH
FIRST PREMIUM SERVICES, INC.
Tenant
Rental Agent
MATAS CORPORATION
500 Lake-Cook Road
Deerfield, Illinois 60015
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
1. Lease of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
4. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
5. Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6. Security Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7. Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5. Landlord's Services and Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9. Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10. Rights Reserved to Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11. Telephone, Electric and Other Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
12. Landlord's Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
13. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14. Waiver of Certain Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
15. Condition of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
16. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
17. Assignment and Subletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
18. Untenantability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
19. Defaults; Conditional Limitations; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
20. Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
21. Subordination or Superiority of this Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
22. Sprinklers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
23. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
24. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
25. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
26. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
27. Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
28. Exculpatory Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
29. Limitation on Landlord's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
30. Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
EXHIBIT A (Plan of Premises) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT A-1 (Base Rent Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2
EXHIBIT B (Legal Description of the Real Estate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C (Construction Rider) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
Attachment A to Exhibit C (Building Standards) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-7
Attachment B to Exhibit C (Space Plan and Plan Notes) . . . . . . . . . . . . . . . . . . . . . . . . . . . C-8
EXHIBIT D (Lease Estoppel Certificate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
EXHIBIT E (Garage Rider) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
EXHIBIT F (Storage Rider) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
EXHIBIT G (Rules and Regulations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1
EXHIBIT H (Janitor Services) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-1
</TABLE>
<PAGE> 4
LEASE
FOR
CORPORATE 500 CENTRE
This Lease is made as of the 31st day of July, 1991, between Matas
Corporation, as agent for AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO,
not individually, but solely as Trustee under a certain Trust Agreement dated
the 30th day of July, 1985, and known as Trust Number 65110 (the "Landlord"),
and First Premium Services, Inc. (the "Tenant"), as follows:
1. LEASE OF PREMISES. Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord the premises consisting of that certain office space shown
outlined in red or by a heavy line on the plan attached hereto as Exhibit A
(the Premises") located on the third floor in the office building located at
520 Lake Cook Road, Deerfield, IL (the "Building") in the project commonly
known as "Corporate 500 Centre" (the "Project"), and more particularly
described on Exhibit B hereto (the "Real Estate"). The Building, the Project
and the Real Estate together with the vehicular drives, the above and below
ground parking facilities, and all other structures and improvements now or
hereafter located upon the Real Estate are hereinafter sometimes collectively
called the "Property". The Premises contain 4,558 rentable square feet.
2. TERM. The term of the lease (the "Term") is for five (5) years and
four (4) months commencing on the first (1st) day of October (the "Commencement
Date") and ending on the thirty-first (31st) day of January, 1997 (the
"Termination Date"), unless sooner terminated as hereinafter provided.
3. POSSESSION.
A. In the event the Premises shall not be substantially
completed, and ready for occupancy on the Commencement Date this Lease shall
nevertheless continue in full force and effect, but Rent (as hereinafter
defined) shall abate until the Premises are ready for occupancy or until the
Landlord is able to deliver possession, as the case may be, and Landlord shall
have no other liability whatsoever on account hereof; provided, however, there
shall be no abatement of Rent if the Premises are not ready for occupancy
because of failure to complete the installation of special equipment, fixtures
or materials ordered by Tenant, or because of any delays resulting from
Tenant's failure to promptly submit plans in accordance with the Construction
Rider attached hereto as Exhibit C (the "Construction Rider") or resulting from
material changes or additions to Tenant's plans after submission thereof or
from any other tenant delay described in the Construction Rider (all of the
foregoing being herein called "Tenant Delays"). The Premises shall not be
deemed incomplete or not ready for occupancy if only insubstantial details of
construction, decoration or mechanical adjustments remain to be
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<PAGE> 5
done. The Premises shall be deemed substantially complete and fully tenantable
when any uncompleted work or the performance thereof will not hinder, interfere
with, delay or obstruct Tenant in its business operations.
B. If Tenant shall take possession of the Premises or any part
thereof, prior to the Commencement Date (which Tenant may not do without
Landlord's prior written consent), all of the covenants and conditions of this
Lease shall be binding upon the parties hereto with respect to such whole or
part of the Premises as if the Commencement Date had been fixed as the date
when Tenant took possession of such whole or part of the Premises and Tenant
shall pay Rent for the period of such occupancy prior to the Commencement Date
at the rate of the annual Base Rent set forth in Paragraph 4 hereof prorated
for such period of occupancy and, if less than the whole Premises are occupied,
for the proportionate area of the total Premises so occupied.
C. Under no circumstances shall the occurrence of any of the
events described in this Paragraph 3 be deemed to accelerate or defer the
Termination Date.
4. RENT. Tenant shall pay to Landlord's rental agent, MATAS CORPORATION
(the "Rental Agent"), at 500 Lake Cook Road, Deerfield, Illinois 60015, or to
such other persons or at such other places as Landlord may direct from time to
time by written notice to Tenant, by check which at the time of payment is
legal tender for the payment of public and private debts in the United States
of America, the aggregate of the following, all of which are hereby declared to
be "Rent":
A. Base rent (the "Base Rent") at the annual rate set forth on
Exhibit A-I attached hereto and made a part hereof, each payable in advance
promptly on the first day of each and every calendar month during the Term
without demand and without any set-off or deduction whatsoever, except that the
first full month's installment of Base Rent shall be paid by Tenant
concurrently with the execution of this Lease. The annual Base Rent was
determined on the basis of Fifteen and 50/100 Dollars ($15.50) per rentable
square foot in the Premises for the first twelve (12) months of the Term and
increased at the rate of three percent (3%) per annum for years 2-5 compounded
annually. Notwithstanding the foregoing, the first month's payment of Base Rent
shall be abated.
B. The rent payable pursuant to the Garage Rider and Storage
Rider, if entered into as part of this Lease;
C. "Additional Rent" (hereinafter defined) including, without
limitation, all estimated monthly installments of the Expense Adjustment
Amount;
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<PAGE> 6
D. All other sums payable by Tenant to Landlord pursuant to this
Lease; and
E. Interest at the "Default Rate" from the date 10 days after due
date of each payment of Rent until paid. "Default Rate" means the lower of:
(i) the highest lawful rate, or (ii) a rate of interest equal to the sum of
five percent (5%) plus the rate of interest announced from time to time by the
First National Bank of Chicago ("First") as its corporate base rate or if such
rate is unavailable such other similar rate or standard chosen by Landlord in
the exercise of its reasonable discretion (the "Base Rate").
Tenant recognizes that late payment of Base Rent or any other sum due
hereunder will result in administrative expenses to landlord, the extent of
which additional expenses are extremely difficult and economically impractical
to ascertain. Tenant therefore agrees that when Base Rent or any other sum is
due and payable from Tenant to Landlord pursuant to the terms of this Lease,
and such amount remains unpaid 5 business days after such amount is due, the
amount of such unpaid Base Rent or other sum shall be increased by a late
charge to be paid to Landlord by Tenant equal to $100.00.
The provisions of this Paragraph shall in no way relieve Tenant of the
obligation to pay Base Rent or other payments on or before the date on which
they are due, nor shall the collection by Landlord of any amount under either
subparagraph hereof impair (a) the ability of Landlord to collect the amount
charged under subparagraph 4.E hereof or (b) Landlord's Remedies set forth in
Paragraph 23 of this Lease.
If the Term or the obligation to pay Base Rent commences on a day
other than the first day of a calendar month or ends on a day other than the
last day of a calendar month, the Base Rent for such month shall be prorated on
a per diem basis. The prorated Base Rent for the portion of the month in which
the Term or the obligation to pay Base Rent commences shall also be paid at the
time of execution of this Lease.
5. ADDITIONAL RENT. In addition to paying Base Rent specified in
Paragraph 4 hereof, Tenant shall pay as "Additional Rent", the amounts
determined pursuant to subparagraphs B and C of this Section 5. The Base Rent
and the Additional Rent are sometimes herein collectively referred to as the
"Rent".
Without limitation of the other obligations of Tenant which
shall survive the expiration of the Term, the obligation of Tenant to pay
Additional Rent provided in this Section 5 shall survive the expiration of the
Term. For any partial Lease Year, Tenant shall be obligated to pay only a pro
rata share of the Additional Rent based on the number of days of the term
falling within such Lease Year.
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<PAGE> 7
A. Certain Definitions. For the purposes of Sections 4 and 5 of
this Lease, the following terms, words or phrases shall have the meanings and
definitions described in this Subsection 5.A.:
(i) Notwithstanding the foregoing, "Lease Year" means a
calendar year. If the Term commences other than on January 1, Lease Year also
means that period of time from the Commencement Date (or such earlier date as
Tenant takes possession of the premises as provided in Section 3) through the
next succeeding December 31. If the Term ends on a date other than December
31, then "Lease Year" also means that period ending on the date of expiration
of the Term and commencing on the immediately preceding January 1.
(ii) (a) "Operating Expenses" means Taxes (as
hereinafter defined) and all costs, expenses, charges and disbursements of
every kind, nature or description whatsoever (determined for the applicable
calendar year on an accrual basis), paid or incurred by Landlord or its
beneficiaries relating to the ownership, management, operation, maintenance,
replacement, and repair of the Property and of the personal property, fixtures,
machinery, equipment, systems and apparatus located therein or used in
connection therewith.
(b) Operating Expenses shall not include the
following: (1) costs of alterations of any premises or common areas in the
Building for other tenants of the Building, costs of capital improvements to
the Property (except that Operating Expenses shall include (a) the cost during
the Term, as reasonably amortized by Landlord with interest at a rate equal to
the sum of two percent (2%) plus the Base Rate, of any capital improvement
completed after the commencement of the Term which are intended to reduce any
component cost included within Operating Expenses, and (b) the cost of any
capital improvements which Landlord is required to make, or which Landlord
shall deem necessary, to keep the Property in compliance with all applicable
governmental rules and regulations), (2) interest and principal payments on
mortgages, (3) ground rental payments, and (4) leasing commissions or fees, (5)
costs incurred in connection with the construction of the Building; (6) costs
(to the extent such costs constitute capital costs under generally accepted
accounting principles) of defects in or inadequacy of the construction of the
Building, the improvements within the Premises, the premises of other Building
tenants, and any other improvements located in the Building; (7) legal fees
(other than those relating to the general operation of the Building, which
exclusion from Operating Expenses shall include legal fees for specific tenant
matters other than those related to Operating Expenses, space planner's fees,
architectural fees, engineering fees (other than those relating to the general
operation of the Building), marketing and advertising expenses (other than
those relating to the general operation of the Building), incurred in
connection with the development, leasing and
4
<PAGE> 8
construction of the Building or any improvements on the Land; (8) costs for
which Landlord is reimbursed by condemnation proceeds, insurance, by its
carriers or any tenant carrier, or otherwise; (9) any fines, penalties, bad
debt losses, rent losses, or losses or reserves for bad debt or rent losses;
(10) costs associated with the operation of the business of the legal entity
which constitutes Landlord as the same is distinguished from the cost and
operation of the Building, including legal entity formation, internal entity
accounting and legal matters and cost associated with title litigation, land
trustee changes, costs of defending foreclosures, cost of mortgage financing
and defending defaults under ground leases; (11) costs of defending any
lawsuits with Mortgagee (except as the actions of Tenant may be in issue); (12)
costs of selling, syndicating, financing, mortgaging or hypothecating any of
the Landlord's interest in the Building or the other improvements located on
the land; (13) costs of disputes between Landlord and any third party not
relating to the Building; (14) the costs associated with employees who do not
devote the majority of their time to the Building shall be prorated to the
extend that such employee devote their time to the Building; (15) the cost of
utility installation and tap-in charges; (16) income or franchise taxes of
Landlord; and (17) csts of services not rendered to all tenants occurring after
the Commencement Date.
(c) If less than (95%) of the Building's rentable
area is occupied during all or any portion of any Lease Year, Landlord may
elect to make an appropriate adjustment of the "Operating Expenses" for such
year based on Landlord's good faith determination of the amount of "Operating
Expenses" that would have been paid or incurred by Landlord had (95%) or more
of the Building's rentable area been occupied throughout such Lease Year, and
the amount so determined by Landlord shall be deemed to have been the amount of
"Operating Expenses" for such Lease Year. If any Operating Expense, though
paid in one year, relates to more than one Lease Year, at the option of
Landlord, such Operating Expense may be proportionately allocated among such
related Lease Years. If any Operating Expense relates to more than one
Building or parcel of property on the Property, at the option of Landlord, such
Operating Expense may be allocated among all such buildings or parcels of
property to which it relates. If Landlord is not furnishing any particular
work or service (the cost of which if performed by Landlord would constitute an
Operating Expense) to a tenant who has undertaken to perform such work or
service in lieu of the performance thereof by Landlord, Operating Expenses
shall be determined to be increased by an amount equal to the additional
Operating Expense which reasonably would have been incurred during such period
by Landlord if it had at its own expense furnished such work or service to such
tenant.
(iii) "Taxes" means all federal, state and local
governmental taxes, assessments and charges (including transit district taxes
or assessments) of any kind or nature, whether
5
<PAGE> 9
general, special, ordinary or extraordinary, which Landlord or its
beneficiaries shall pay or become obligated to pay because of or in connection
with ownership, leasing, management, control or operation of the Property or of
the personal property, fixtures, machinery, equipment, systems and apparatus
located therein or used in connection therewith, including without limitation,
all ad valorem taxes, the Illinois Replacement Tax, County Impact Fee and any
tax measured or based upon rental or rental receipts. The amount included in
Taxes for any Lease Year shall be the amount indicated by the tax bills
assessed in respect of such Lease Year (e.g., the taxes includable in Taxes for
any calendar year shall be the tax designated as that calendar year's taxes,
regardless of whether they are paid or payable in that calendar year), except
that if the tax bills for such year are not available as of the date of the
statement, the amount of such taxes may be reasonably estimated by the person
preparing the statement. There shall be deducted from Taxes, as determined for
any year, the amount of any refund of Taxes received by Landlord during such
year, but only to the extent such refund relates to Taxes for a period within
the Term. There shall be included in Taxes for any year the amount of all
fees, costs and expenses (including attorneys' fees) paid by Landlord during
such year in seeking or obtaining any refund or reduction of Taxes. If any
special assessment payable in installments is levied against the Property,
Taxes for any year shall include only installments of such assessments and any
interest thereon payable with respect to such year (all without regard to any
right to pay or payment of any such special assessment in a lump sum or single
payment). Taxes shall not include any federal or state franchise, capital
stock, inheritance, income, or estate taxes, except that if a change occurs in
the method of taxation resulting in the substitution of any such taxes for any
Taxes as hereinabove defined, such substituted taxes shall be included in
Taxes. Taxes include legal fees, court costs and expenses charged or payable
by or on behalf of Landlord for the contest of or protest of any Taxes.
(iv) "Tenant's Proportionate Share" means 2.55%, being the
percentage calculated by dividing the square feet of rentable area contained in
the Premises by the number of square feet (being one hundred percent (100%) of
the square feet of rentable area of the Building). Landlord warrants that
Tenant's Proportionate Share will be computed in accordance with the BOMA
Standard.
B. Expense Adjustment.
(i) Tenant shall pay as Additional Rent an amount (the
"Expense Adjustment Amount") equal to Tenant's Share of the Operating Expenses
for each Lease Year, except that Tenant shall be required to pay only a pro
rata amount of the Expense Adjustment Amount for the Lease Years in which the
first and last days of the Term occur prorated on a per diem basis.
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<PAGE> 10
(ii) Prior to the commencement of each Lease Year,
Landlord shall notify Tenant of Landlord's estimate of the Expense Adjustment
Amount for such Lease Year and Tenant shall pay such amount in equal monthly
installments on the first day of each calendar month during such Lease Year.
If at one or more times during such Lease Year Landlord revises its estimate of
the Expense Adjustment Amount for such Lease Year, Landlord may notify Tenant
of such revised estimate and of the increase or decrease in such monthly
payments thereafter payable during such Lease Year necessary to cause the total
monthly payments during such Lease Year to equal Landlord's then current
estimate of the Expense Adjustment Amount for such Lease Year, and Tenant shall
thereafter pay such revised monthly payment amount on the first day of each
calendar month thereafter during such Lease Year. Each such estimate provided
by Landlord shall show separately the amount thereof allocable to Taxes and the
amount thereof allocable to Operating Expenses other than Taxes.
(iii) Following the close of each Lease Year, Landlord
shall furnish to Tenant a statement setting forth the actual Expense Adjustment
Amount for such Lease Year (exclusive of Taxes) and, within thirty (30) days
after receipt of such statement, Tenant shall pay the excess, if any, of such
actual Expense Adjustment Amount (exclusive of Taxes) for such Lease Year as
shown in said statement over the amount of the payments theretofore made by
Tenant with respect to the Expense Adjustment Amount (exclusive of Taxes) for
such Lease Year based upon Landlord's estimates.
(iv) After Landlord receives the relevant tax bills for
each Lease Year, Landlord shall also furnish to Tenant a statement setting
forth the actual amount of Taxes for such Lease Year and, within thirty (30)
days after receipt of such statement, Tenant shall pay the excess, if any, of
such actual amount of Taxes for such Lease Year as shown in said statement over
the amount of the payments theretofore made by Tenant with respect to Taxes for
such Lease Year based upon Landlord's estimates.
(v) If the total estimated monthly payments paid by
Tenant for any Lease Year exceeds the actual Expense Adjustment Amount for such
Lease Year, such excess shall be credited against payments due or next becoming
due hereunder.
(vi) If Tenant requests upon reasonable advance notice to
Landlord, Landlord shall make available to Tenant within thirty (30) days,
following the receipt by Tenant of the Expense Adjustment Amount, Landlord's
books and records maintained with respect to the Operating Expenses or Taxes,
as applicable, for such calendar year. If Tenant wishes to contest any item
written within any Expense Adjustment Amount, Tenant shall do so in a written
notice (the "Contest Notice") received by Landlord within thirty (30) days
following Tenant's receipt of such statement. The
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<PAGE> 11
Contest Notice shall specify in detail the item or items being contested and
specific grounds therefor. If Tenant timely gives a Contest Notice to
Landlord, any dispute with respect to any item or items in such Expense
Adjustment Statement shall be submitted to an independent certified public
accountant ("CPA") mutually agreed upon by both Tenant and Landlord whose
decision shall be binding upon the parties. Tenant shall pay on demand all
fees of the CPA with respect to any such disputes unless the amount of the
Expense Adjustment Amount, as applicable, exceeds the amount of Expense
Adjustment Amount as finally determined by the CPA by more than 5%.
6. INTENTIONALLY OMITTED
7. USE. Tenant shall occupy and use the Premises for general office
purposes only.
8. LANDLORD'S SERVICES AND OBLIGATIONS. So long as Tenant is not in
default hereunder, Landlord shall furnish the following services:
A. Heating-Air Conditioning. Landlord shall furnish heat and air
conditioning to provide a temperature and humidity condition required, in
Landlord's reasonable judgment, for comfortable occupancy of the Premises under
normal business operations, daily from 8:00 a.m. to 6:00 p.m. (Saturday 8:00
a.m. to 1:00 p.m.), Sundays and holidays excepted according to standard usage
in Class A buildings of comparable age and quality in the metropolitan Chicago
area. Tenant will be charged for all heating and cooling requested and
furnished before or after these hours at rates from time to time established by
Landlord as based on Landlord's costs. Wherever heat generating machines or
equipment are used in the Premises which affect the temperature otherwise
maintained by the air conditioning system, Landlord reserves the right to
provide and install supplementary air conditioning units in the Premises and
the cost of providing, installing, operating and maintaining the same shall be
paid by Tenant to Rental Agent as additional Rent. Notwithstanding anything to
the contrary in this Paragraph 8.A. or elsewhere in this Lease, Landlord shall
have the right to institute such policies, programs and measures as may be
necessary or desirable, in Landlord's reasonable judgement, for the
conservation and/or preservation of energy or energy related services, or as
may be required to comply with applicable codes, rules and regulations and
Tenant agrees to fully cooperate with Landlord's institution of such policies,
programs and measures.
B. Water. Landlord shall furnish cold water from regular
Building outlets for drinking, lavatory and toilet purposes drawn through
fixtures installed by Landlord, or by Tenant with Landlord's prior written
consent, and hot water for public lavatory purposes from the regular supply of
the Building. Tenant shall pay Rental Agent at rates fixed by Landlord for
water furnished for any
8
<PAGE> 12
other purpose as additional Rent hereunder. Tenant shall not waste or permit
the waste of water.
C. Window Washing. Landlord shall furnish window washing of all
exterior windows, weather permitting, at intervals to be determined by Landlord
consistent with other first class office buildings.
D. Janitor Service. Landlord shall furnish daily janitor
services in the Premises as set forth on Exhibit H attached hereto, Saturdays,
Sundays and holidays excepted. Tenant shall not provide janitor services
without the prior written consent of Landlord and then only subject to the
supervision of Landlord and as Tenant's sole responsibility, cost and expense,
by contractors or employees at all times satisfactory to Landlord.
E. Elevator Service. Landlord shall furnish passenger elevator
service (which may be by automatic elevators) in common with Landlord and other
tenants, daily. Daily freight elevator service (subject to scheduling and
charges established by Landlord) shall be available in common with Landlord and
other tenants of the Building and any use of the freight elevator service by
contractors, agents or employees of Tenant shall be at Tenant's sole cost,
responsibility and expense and at all times satisfactory to Landlord. Tenant
shall incur no charge for freight elevator service used during normal business
hours or initial move-in.
F. Electrical Wiring Facilities. Landlord shall furnish
electrical wiring facilities adequate for the Building Standard allowance for
lighting fixtures provided by Landlord and for Tenant's incidental uses.
Tenant shall bear the cost of replacement of all lamps, tubes, ballasts and
starters for lighting fixtures. In respect to such incidental uses, adequate
electrical wiring and facilities will be furnished in the Leased Premises by
Landlord, provided that (a) the connected electrical load of the lighting
equipment does not exceed an average of two (2) watts per square foot of the
Leased Premises and the connected electrical load of the incidental use
equipment does not exceed an average of one (1) watt per square foot of the
Leased Premises; (b) the electricity so furnished for incidental uses will be
at a nominal 120 volts and no electrical circuit for the supply of such
incidental use will have a circuit breaker capacity exceeding 20 amperes; and
(c) such electricity will be used only for equipment and accessories normal to
office usage. If Tenant's requirements for electricity for incidental uses are
in excess of those set forth in the preceding sentence, Landlord reserves the
right to require Tenant to install the conduit, wiring and other equipment
necessary to supply electricity for such excess incidental use requirements at
Tenant's expenses by arrangement with Commonwealth Edison Company or another
approved local utility.
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<PAGE> 13
G. Interruption of Services. Landlord does not warrant that any
service will be free from interruptions caused by labor controversies,
accidents, inability to obtain fuel, steam, water or supplies, governmental
regulations, or other causes beyond the reasonable control of Landlord. No
such interruption of service shall be deemed an eviction or disturbance of
Tenant's use and possession of the Premises or any part thereof, or render
Landlord liable to Tenant for damages, by abatement of rent or otherwise, or
relieve Tenant from performance of Tenant's obligations under this Lease.
Tenant hereby waives and releases all claims against Landlord for damages for
interruption or stoppage of service. Landlord agrees to use reasonable efforts
to cause the restoration of services in the event of any failure, delay or
diminution described above. Notwithstanding the foregoing, in the event any
services called for under the terms of Paragraph G hereof to be provided by
Landlord which materially affect Tenant's business are continuously interrupted
for a period in excess of ten (10) days due to Landlord's sole negligence or
breach of Landlord's obligations hereunder to repair or maintain, Base Rent
hereunder shall be abated until such services are restored. If Landlord
negligence renders the Premises untenantable for thirty (30) consecutive days,
Tenant may terminate this Lease with written notice to Landlord by the 35th day
from the date of lack of service.
H. Billing For Electricity.
(i) Tenant shall pay for the use of all electrical
service to the Premises (other than the electrical service necessary for
Landlord to fulfill its obligation to provide heating and air conditioning as
provided in Paragraph 8.A. hereof) directly to the utility company furnishing
such service provided that Landlord can make satisfactory arrangements with the
utility company supplying the electricity to the Premises for separate metering
and billing. Tenant shall be billed directly by such utility company and
Tenant agrees to pay each bill promptly in accordance with its terms. In the
event that for any reason Tenant cannot be billed directly Landlord shall
forward each bill received by it with respect to the Premises to Tenant and
Tenant shall pay it promptly in accordance with its terms.
(ii) If the Premises cannot be separately metered for any
reason, Tenant shall pay Landlord as Additional Rent, in monthly installments
at the time prescribed for monthly installments of Rent, an annual amount, as
estimated by Landlord from time to time, which Tenant would pay for such
electricity if the same were separately metered to the Premises by the local
electric utility company and billed to Tenant at such utility company's then
current rates.
I. Charges for Services. Charges for any service for which
Tenant is required to pay, from time to time hereunder, including
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but not limited to, hoisting services or after hours heating or air
conditioning shall be due and payable at the same time as the installment of
Rent with which they are billed, or if billed separately, shall be due and
payable within ten (10) days after such billing. If Tenant shall fail to make
payment for any such services, Landlord may, with notice to Tenant, discontinue
any or all of such service and such service discontinuance shall not be deemed
to constitute an eviction or disturbance of the Tenant's use and possession of
the Premises or relieve Tenant from paying Rent or performing any of its
obligations under this Lease.
9. TENANT'S OBLIGATIONS.
A. Repairs. Except for ordinary wear and as otherwise provided
in this Lease, Tenant shall or shall cause Landlord to as hereinafter provided,
at all times during the Term hereof, at Tenant's sole cost and expense, keep
the Premises in good order, repair and condition as existed beginning on the
Commencement Date. Tenant shall promptly arrange with Landlord to have
Landlord make repairs of all damage to the Premises (other than damage to
movable and removable fixtures, the repair of which may be done by Tenant) and
the replacement or repair of all damaged or broken glass (including signs
thereon), fixtures and appurtenances (including hardware and heating, cooling,
ventilating, electrical, plumbing and other mechanical facilities in the
Premises), with materials equal in quality and class to the original materials
damaged or broken, within any reasonable period of time specified by Landlord,
and the amount paid by Landlord for such repairs and replacements shall be paid
by Tenant and deemed additional Rent reserved under this Lease and shall be due
and payable at the same time as the installment of Rent for which it is billed.
Landlord may, but shall not be required to enter the Premises at all reasonable
times to make any repairs, alterations, improvements or additions, including,
but not limited to, ducts and all other facilities for heating and air
conditioning service, as Landlord shall desire or deem necessary for the
safety, preservation or improvement of the Building, or as Landlord may be
required to do by the municipality in which the Building is located or by the
order or decree of any court or by any other proper authority. The cost of all
repairs made by Landlord to the Property which are made necessary as a result
of misuse or neglect by Tenant or Tenant's employees, invitees or agents shall
be immediately paid as additional Rent by Tenant to Landlord upon being billed
for same. Tenant shall not be responsible for repairs of or due to structural
defect or repairs to air conditioning, ventilation, mechanical and plumbing
equipment in the Premises (except if necessitated by Tenant negligence.)
B. Removal Permit. Tenant shall list all furniture, equipment
and similar articles Tenant desires to remove from the Premises or the Building
and deliver a copy to Landlord and procure a removal permit from the Rental
Agent authorizing Building employees to permit such articles to be removed.
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C. Alterations.
(i). Tenant shall not make installations, alterations or
additions in or to the Premises without securing the prior written consent of
Landlord in each instance, which consent shall not be unreasonably withheld,
provided, however, it shall not be deemed unreasonable for Landlord to refuse
its consent to any proposed alteration, addition, or improvement which affects
either the structure, operating systems, insurability, value or cost of
operation of the Building or which would affect the operation of any other
tenant. If Landlord consents to said installations, alterations or additions,
it may impose such conditions with respect thereto as Landlord deems
appropriate, including, without limitation, requiring Tenant to furnish
Landlord with security for the payment of all cost to be incurred in connection
with such work, insurance against liabilities which may arise out of such work,
approval of plans and specifications for such work by Landlord and permits
necessary for such work. Such work shall be done at the sole cost and expense
of Tenant by employees of or contractors employed by Landlord, or with
Landlord's consent in writing given prior to letting of such contract, by
contractors employed by Tenant, but in each case, only under written contract
previously approved in writing by Landlord, and subject to all conditions
Landlord may impose including, without limitation, conditions which will assure
Landlord that all work will be performed lien free under the Mechanics Lien Act
of Illinois. All installations, alterations and additions shall be constructed
in a good and workmanlike manner and only new and good grades of material shall
be used, and shall comply with all insurance requirements, and with all
ordinances and regulations of the Village of Deerfield or any department or
agency thereof, and with the requirements of all statutes and regulations of
the State of Illinois or any department or agency thereof. Tenant shall permit
Landlord to supervise all construction operations within the Premises and shall
pay to Landlord, prior to the commencement of the work, a percentage of the
costs of such work, at a rate from time to time established by Landlord
sufficient to reimburse Landlord for all overhead, general conditions, fees and
other expenses arising from supervision of and involvement with the work. If
alterations are made by Tenant's contractors, Tenant shall furnish to Landlord
prior to commencement thereof, building permits and certificates of appropriate
insurance and bonds, and upon completion of any installation, alteration or
addition, Contractor's Affidavits and full and final Waivers of Lien for all
labor and material expended and used. Tenant shall hold harmless Landlord from
all claims, costs, damages, liens and expenses which may arise out of or be
connected in any way with said installations, alterations or additions. Any
alterations or repairs which are undertaken by Tenant shall be performed by
union labor which is compatible with the union or unions representing the
service employees of Landlord in the Project.
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(ii). All alterations, improvements and additions to the
Premises, whether temporary or permanent in character, made or paid for by
Landlord or Tenant, shall without compensation to Tenant become Landlord's
property at the termination of this Lease by lapse of time or otherwise and
shall, unless Landlord requests their removal (in which case Tenant shall
remove the same as provided in Section 16) be relinquished to Landlord in good
condition, ordinary wear excepted.
D. Holding Over. Tenant shall pay to Landlord for each day
Tenant retains possession of the Premises or any part thereof after termination
of this Lease by lapse of time or otherwise, 150% of the amount of the Rent
(computed on a daily basis) then required by the terms hereof for the last
monthly period prior to the date of such termination and also pay all damages
(including consequential damages) sustained by Landlord by reason of such
retention. Such Holdover rent shall be effective and payable to Landlord only
after Landlord's written notice to Tenant electing to treat Tenant as a tenant
at will: provided, however, that if and only if Landlord and Tenant have been
engaged in good faith negotiations concerning possible extension of the Term
and terms hereof, Landlord agrees that Tenant's obligation to pay Base Rent at
the Holdover rate after termination of the Term shall not become effective
unless and until Landlord notifies Tenant that such negotiations have ceased
and that Landlord demands possession of the Premises.
E. Rules and Regulations. Tenant agrees, for itself, its
employees, agents, clients, customers, invitees, visitors and guests, to
observe the rules and regulations attached hereto as Exhibit H and made a part
hereof. Landlord shall have the right from time to time to prescribe
additional rules and regulations which may be desirable in its judgment for the
use, entry, operation and management of the Premises and Building, each of
which rules and regulations and all amendments thereto shall become a part of
this Lease. Tenants shall comply with all such rules and regulations;
provided, however, that such rules and regulations shall not contradict or
abrogate any right or privilege expressly granted herein to Tenant and further
provided that Landlord shall fairly and equitably enforce such rules and
regulations against all tenants.
10. RIGHTS RESERVED TO LANDLORD. Landlord shall have the following rights
exercisable without notice and without liability to Tenant for damage or injury
to property, person or business (all claims for damage being hereby released),
except damage or injury caused by the negligence of Landlord, its employees or
agents or breach of any of Landlord's obligations and in the absence of Tenant
contributory negligence, and without effecting an eviction or disturbance of
Tenant's use or possession or giving rise to any claim for setoffs, or
abatement of rent;
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A. To change the name or street address of the Building or
Project.
B. To install and maintain signs on the exterior and interior of
the Building (except within the Premises) or anywhere on the Property.
C. To designate all sources furnishing sign painting and
lettering, ice, mineral or drinking water, beverages, foods, towels, vending
machines or toilet supplies used or consumed on the Premises.
D. To have passkeys, including card keys, to the Premises and to
furnish door keys for the entry door(s) in the Premises at the commencement of
the Lease.
E. To decorate, remodel, repair, alter or otherwise prepare the
Premises for reoccupancy any time after Tenant abandons or vacates the
Premises.
F. To enter the Premises at reasonable hours to make inspections,
or to exhibit the Premises to prospective tenants, purchasers or others, or for
other reasonable purposes, provided, however, that Landlord's activities do not
unreasonably interfere with Tenant's business.
G. To have access to all mail chutes according to the rules of
the United States Post office.
H. To require all persons entering or leaving the Building during
such hours as Landlord from time to time reasonably may determine to identify
themselves to a watchman by registration or otherwise and to establish their
right to leave or enter, and to exclude or expel any peddler, solicitor or
beggar at any time from the Premises or the Property.
I. To approve the weight, size and location of safes, computers,
and all other heavy articles in and about the Premises and the Building and to
require all such items and other office furniture and equipment to be moved in
and out of the Property and Premises only at such time and in such manner as
Landlord shall reasonably direct and in all events at Tenant's sole risk and
responsibility.
J. At any time or times, to decorate at its own expense, and to
make repairs, alterations, additions and improvements, structural or otherwise,
in or to the Premises, the Property or any part thereof, and to perform any
acts related to the safety, protection or preservation thereof, and during such
operations to take into and through the Premises or any part of the Property
all material and equipment required and to close or temporarily suspend
operation of entrances, doors, corridors, elevators or other
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facilities, provided that Landlord shall cause as little inconvenience or
annoyance to Tenant as is reasonably necessary in the circumstances, and shall
not do any act which permanently reduces the size of the Premises. Landlord
may do any such work during ordinary business hours and Tenant shall pay
Landlord for overtime and for any other expenses incurred if such work is done
during other hours at Tenant's request.
K. To do or permit to be done any work in or about the Premises
or the Property or any adjacent or nearby building, land, street or alley.
L. To grant to anyone the exclusive right to conduct any business
or render any service on the Property or in the Building, provided such
exclusive right shall not operate to exclude Tenant from the use expressly
permitted by Section 7 of this Lease.
M. To close the Building at 6:00 p.m. or at such other reasonable
time as Landlord may determine, however, subject to Tenant's right to
admittance under such regulations as shall be prescribed from time to time by
Landlord.
N. To prohibit the placing of vending or dispensing machines of
any kind in or about the Premises without the prior written permission of
Landlord, which permission shall not be unreasonably withheld or delayed.
O. To require Tenant to move to other premises on another floor
in the Building or any other office building in Phase II of the Project (herein
referred to as the "New Premises") upon receipt of thirty (30) days' written
notice from Landlord provided that the New Premises shall be substantially
similar, both in finish and location, to the initial Premises, in which event
Landlord shall pay all moving costs and costs for improving the New Premises so
that they are substantially similar to the Premises, including telephone
relocation, new carpeting, wall and window treatment. If Landlord relocates
Tenant as provided above, the Rent per square foot for the new Premises shall
remain the same and Tenant shall not be entitled to any compensation for any
inconvenience or interference with Tenant's business nor to any abatement or
reduction in rent, nor shall Tenant's obligations under this Lease be otherwise
affected, as a result of the substitution, except as otherwise provided in this
subparagraph O. Tenant agrees to cooperate with Landlord so as to facilitate
the prompt completion by Landlord of its obligations under this subparagraph O.
Without limiting the generality of the preceding sentence, Tenant agrees to
promptly provide to Landlord such approvals, instructions, plans,
specifications or other information as may be reasonably requested by Landlord.
P. To designate certain parking areas in the subterranean garage
in the Building and on the Real Estate or adjacent land for
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the exclusive use of one or more tenants of the Building or any other building
now existing or hereafter constructed in the Project, and to make, prescribe
and adopt rules and regulations with respect to the use of such parking areas.
Q. To establish controls and rules for the purpose of regulating
all property and packages, both personal and otherwise, to be moved into or out
of the Building and the Premises.
R. To retain all other rights reserved by Landlord pursuant to
the provisions of this Lease.
11. TELEPHONE, ELECTRIC AND OTHER SERVICES.
A. Tenant shall make arrangements directly with the telephone
companies or multi-tenant communications services companies servicing the
Building for such telephone service in the Premises as may be desired by
Tenant. Tenant shall pay the entire cost of all telephone charges, electricity
consumed within the Premises, maintenance of light fixtures and replacement of
lamps, bulbs, tubes, ballasts and starters.
B. If Tenant desires telegraphic, telephonic, burglar alarm,
computer installations or signal service (which service shall be at Tenant's
sole expense), upon request, Landlord shall direct where and how all
connections and wiring for such service shall be introduced and run. In the
absence of such directions, Tenant shall make no borings, cutting or install
any wires or cables in or about the Premises.
C. In no event shall Landlord be liable or responsible to Tenant
for any loss, damage, or expense which Tenant may sustain or incur if either
the quality or character of electrical service is changed or is no longer
suitable for Tenant's requirements; and also that it shall make no alterations
or additions to the electric equipment and/or appliances without the prior
written consent of Landlord in each instance.
12. LANDLORD'S TITLE. Landlord's title is and always shall be paramount
to the title of Tenant. Nothing herein contained shall empower Tenant to do
any act which can, shall or may encumber the title of Landlord.
13. QUIET ENJOYMENT. Subject to the provisions of this Lease, Landlord
covenants that Tenant, on paying the Rent and performing the covenants of this
Lease on its part to be performed, shall and may peaceably and quietly have,
hold and enjoy the Premises for the Term.
14. WAIVER OF CERTAIN CLAIMS.
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A. To the full extent now or hereafter permitted by law, Tenant
waives and releases all claims against Landlord, its beneficiaries, officers,
directors, shareholders, partners, agents, employees and servants, in respect
of, and they shall not be liable for injury to person or damage to property
sustained by Tenant or by any occupant of the Premises or the Property, or any
other person, occurring in or about the Property, or the Premises resulting
directly or indirectly, from any existing or future condition, defect, matter
or thing in the Premises, the Property or any part of it, or from equipment or
appurtenances therein, or from accidents, or from any occurrence, act, or from
neglect or omission of any tenant or occupant on the Property, or of any other
person including Landlord, its beneficiaries, its officers, directors,
shareholders, partners, agents, employees and servants except for the gross
negligence or willful misconduct of Landlord, its agents or employees. This
Section shall apply especially, but not exclusively, to damage caused as
aforesaid or by the flooding of basements or other subsurface areas or by
refrigerators, sprinkling devices, air conditioning apparatus, water, snow,
frost, steam, excessive heat or cold, falling plaster, broken glass, sewage,
gas, odors or noise, or the bursting or leaking of pipes or plumbing fixtures,
and shall apply equally whether any such damage results from the act or
omission of other tenants, occupants or servants of the Property or of any
other persons including Landlord, its officers, directors, agents, employees
and servants, and whether such damage be caused or result from any thing or
circumstance above mentioned, or any other thing or circumstance whether alike
or wholly different in nature. If any such damage to the Premises or the
Property or any equipment or appurtenance therein, or to tenants thereof,
results from any act or omission or negligence of Tenant, its agents, employees
or invitees, Landlord, at Landlord's option, may repair such damage and Tenant,
upon demand by Landlord, shall reimburse Landlord forthwith for all costs of
such repairs and damages both to the Property and to tenants thereof. All
property on the Property or in the Premises belonging to Tenant, its agents,
employees or invitees, or to any occupant of the Premises shall be there at the
risk of Tenant or other person only, and Landlord shall not be liable for
damage thereto or theft, misappropriation or loss thereof. Tenant shall hold
harmless Landlord and indemnify it against claims and liability for injuries to
all persons and for the damage to, or the theft, misappropriation or loss of
all property occurring in or about the Premises, or due to any act or omission
of Tenant, its agents or employees or invitees.
15. CONDITION OF PREMISES. Tenant's taking possession shall be conclusive
evidence that the Premises were then in good order, repair and satisfactory
condition. Except as may be set forth in Exhibit C hereto, no promise of
Landlord to alter, remodel, improve, repair, decorate or clean the Premises or
any part thereof, and no representation respecting the condition of the
Premises or the Property has been made to Tenant by Landlord.
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16. TERMINATION. At the termination of this Lease, by lapse of time or
otherwise:
A. Surrender of Keys. Tenant shall surrender all keys, including
card keys, of the Premises and Property to Landlord and make known to Landlord
the explanation of all combination locks remaining on the Premises.
B. Surrender of Premises. Tenant shall surrender to Landlord the
Premises and all equipment and fixtures of Landlord in as good a condition and
state of repair as when Tenant originally took possession thereof, subject,
however, to
(i) the provisions of Paragraphs C and D of this Section
16; or
(ii) ordinary wear and loss or damage by fire or other
casualty described in Section 18 hereof, failing which Landlord may restore the
Premises, equipment and fixtures to such condition and state of repair and upon
demand, Tenant shall pay to Landlord the cost thereof.
C. Removal of Additions. All installations, additions, hardware,
non-trade fixtures and improvements, temporary or permanent, except movable
furniture and equipment belonging to Tenant, in or upon the Premises, whether
placed there by Tenant or Landlord, shall be Landlord's property and shall
remain upon the Premises, all without compensation, allowance or credit to
Tenant; provided, however, that if prior to such termination or within ten days
thereafter Landlord so directs by notice, Tenant shall promptly remove the
installations, additions, hardware, non-trade fixtures and improvements, placed
in or upon the Premises by Tenant and designated in the notice and restore the
Premises to its original condition except for the alterations, improvements and
additions consented to by the Landlord, failing which Landlord may remove the
same and upon demand, Tenant shall pay to Landlord the cost of such removal and
of any necessary restoration of the Premises. In addition, Tenant shall remove
its office furniture, trade fixtures, office equipment and all other items of
property on the premises not belonging to Landlord. Tenant shall pay to
Landlord upon demand the cost of repairing any damage to the Premises and to
the Building caused by any such removal.
D. Property Presumed Abandoned. All fixtures, installation, and
personal property belonging to Tenant not removed from the Premises upon
termination of this Lease and not required by Landlord to have been removed as
provided in Paragraph C of this Section 16, shall be conclusively presumed to
have been abandoned by Tenant and title thereto shall pass to Landlord under
this Lease as by a Bill of Sale.
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17. ASSIGNMENT AND SUBLETTING.
A. Without the prior written consent of Landlord in each instance
(which consent may not be unreasonably withheld or delayed) Tenant shall not:
(i) assign, transfer, mortgage, pledge, hypothecate or
encumber, or subject to or permit to exist upon or be subjected to any lien or
charge, this Lease or any interest under it;
(ii) allow to exist or occur any transfer of or lien upon
this Lease or Tenant's interest herein by operation of law;
(iii)sublet the Premises or any part thereof; or
(iv) permit the use or occupancy of the Premises or any
part thereof for any purpose not provided for under Section 7 of this Lease or
by any one other than Tenant and Tenant's employees. Any such action on the
part of Tenant shall be void and of no effect.
Notwithstanding the foregoing, Tenant may, without the Landlord's written
consent, but with prior notification to Landlord, do any of the following from
time to time:
(a) share space in the Premises with its
affiliates without such space sharing being deemed an assignment or sublease;
(b) formally sublet space in the Premises to any
of its affiliates, provided that Tenant shall remain primarily liable under the
Lease; and
(c) assign this Lease, in whole or in part, or
sublet in whole or in part to any corporation into or with which shall be an
affiliate, subsidiary, parent or successor of Tenant.
(d) Together with Landlord, enter into a
Collateral Assignment of Lease in favor of Lasalle National Bank.
B. By notice in writing, Tenant shall advise Landlord of its
intention from, on and after a stated date (which shall not be less than sixty
(60) days after date of Tenant's notice) to assign or transfer its interest as
Tenant in this Lease, or sublet any part or all of the Premises for the balance
or any part of the Term. Tenant shall furnish to Landlord, simultaneously with
Tenant's request for consent to assign or sublet, the following: (1) a true and
correct copy of the proposed sublease or assignment, approved by the assignee,
sublessee or transferee, (2) description of the portion of the Leased Premises
to be occupied, (3) nature of the proposed assignee, sublessee or transferee's
business, and (4) current credit reports and financial statements of the
proposed assignee, sublessee or transferee. Landlord shall have the right
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without limitation of its right to consent to an assignment, transfer or
sublease as provided under this Section 17, to be exercised by giving written
notice to Tenant thirty (30) days after receipt of Tenant's notice, to
recapture the space described in Tenant's notice and such recapture notice
shall, if given, cancel and terminate this Lease with respect to the space
therein described as of the date stated in Tenant's notice. Tenant's notice
shall state the name and address of the proposed subtenant and a true and
complete copy of the proposed sublease shall be delivered to Landlord with said
notice. If Tenant's notice shall apply to all of the Premises, and Landlord
shall give the aforesaid recapture notice with respect thereto, the Term of
this Lease shall expire and end on the date stated in Tenant's notice as fully
and completely as if that date had been herein definitely fixed for the
expiration of the Term. If, however, this Lease is canceled pursuant to the
foregoing with respect to less than the entire Premises, the Rent herein
reserved shall be adjusted on the basis of the number of square feet retained
by Tenant in proportion to the number of square feet contained in the Premises,
as described in this Lease, and this Lease, as so amended, shall continue
thereafter in full force and effect. If Landlord, upon receiving Tenant's said
notice with respect to any such space, shall not exercise its right to cancel
as aforesaid, Landlord will not unreasonably withhold its consent to Tenant's
assignment as aforesaid or subletting the space described in its notice. If
this Lease is terminated in whole or in part as aforesaid, Landlord shall be
free to deal directly with any such proposed assignee or sublessee without any
responsibility or liability to Tenant on account thereof. Notwithstanding the
foregoing right of Landlord to terminate the Lease, Tenant shall have the right
to withdraw the requested assignment or sublease giving rise to such Landlord
right to terminate by delivering written notice to Landlord within ten (10)
days after receipt of Landlord's notice of intention to terminate.
C. Any subletting or assignment hereunder shall not release or
discharge Tenant of or from any liability, whether past, present or future,
under this Lease, and Tenant shall continue fully liable thereunder. The
subtenant or subtenants or assignee shall agree to comply with and be bound by
all of the terms, covenants, conditions, provisions and agreements of this
Lease to the extent of the space sublet or assigned, and Tenant shall deliver
to Landlord promptly after execution, an executed copy of each such sublease or
assignment and an agreement of compliance by each such subtenant or assignee.
D. If Tenant shall assign or transfer its interest in this Lease
or sublet the Premises having first obtained Landlord's consent, for a premium
or at a rental in excess of the rent due and payable by Tenant under the
provisions of Section 4 of this Lease, Tenant shall pay 50% of said premium or
excess rent to Landlord
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after deduction of the reasonable expenses of such assignment or sublet.
E. Any sale, assignment, mortgage, transfer or subletting of this
Lease which is not in compliance with the provisions of this paragraph shall be
of no effect and void.
18. UNTENANTABILITY.
A. In the event
(i) all or a substantial portion of the Premises are made
untenantable by fire or other casualty and Landlord shall decide not to restore
or repair same, or
(ii) the Building is so damaged by fire or other casualty
that Landlord shall decide to demolish or not rebuild the same, then, in any of
such events, Landlord shall have the right to terminate this Lease by notice to
Tenant within one hundred twenty (120) days after the date of such fire or
other casualty and the Rent shall be apportioned on a per diem basis and paid
to the date of such fire or other casualty. In the event that all or a
substantial portion of the Premises are made untenantable by fire or other
casualty and Landlord shall decide to rebuild and restore the same, this Lease
shall not terminate and Landlord shall repair and restore the Premises at
Landlord"s expense and with due diligence, however, subject to reasonable
delays for insurance adjustments and delays caused by forces beyond Landlord's
reasonable control, but Landlord shall not be obligated to expend therefor an
amount in excess of the proceeds of insurance recovered with respect thereto.
In such event, the Rent due hereunder shall abate in proportion to the
nonusability of the Premises during the period of reconstruction and repair.
B. Subject to the preceding paragraph, and subject to the last
sentence of this paragraph, if the Premises are damaged by fire or other
casualty but such damage does not render all or a substantial portion of the
Premises or Building untenantable, then Landlord shall proceed with all due
diligence to repair and restore the Premises, however, subject to
(i) reasonable delays for insurance adjustments, and
(ii) delays caused by forces beyond Landlord's reasonable
control. In such event, the Rent shall abate in proportion to the nonusability
of the Premises during the period while repairs are in progress unless such
partial damages are due to the fault or neglect of Tenant. If the partial
damage is the result of the fault or neglect of Tenant, Rent shall not abate
during said period. If the Premises are made partially untenantable as
aforesaid during the last two (2) years of the Term, Landlord shall have the
right to terminate this Lease as of the date of fire or
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other casualty, in which event, the Rent shall be apportioned on a per diem
basis and paid to the date of such fire or other casualty. If Landlord fails
to restore the Premises to full tenantability in as good condition and quality
as prior to the casualty within 180 days of the casualty, Tenant may terminate
this Lease by written notice to Landlord.
C. In the event the Premises or the Building is damaged by fire
or other casualty resulting from the act or neglect of Tenant, its agents,
contractors, employees or invitees and if this Lease shall not be terminated by
Landlord as a result of such damage, Tenant shall not be released from any of
its obligations hereunder, including, without limitation, its duty to repair
the Premises and its liability to Landlord for damages caused by such fire or
other casualty and its duty to pay Rent, which Rent shall not be abated.
Tenant acknowledges that Landlord shall be entitled to the full proceeds of any
insurance coverage, whether carried by Landlord or Tenant, for damage to
alterations, additions, improvements or decorations provided by Landlord either
directly or through an allowance to Tenant.
D. Notwithstanding anything to the contrary herein set forth,
Landlord shall have no duty pursuant to this Section 18 to repair or restore
any portion of the alterations, additions or improvements in the Premises or
the decorations thereto except to the extent that such alterations, additions,
improvements and decorations were provided by Landlord, at Landlord's cost,
either directly or through an allowance to Tenant, at the beginning of the
Term. If Tenant desires any other or additional repairs or restoration and if
Landlord consents thereto, which consent shall not be unreasonably withheld or
delayed, the same shall be done at Tenant's sole cost and expense subject to
all of the provisions of Section 9.D. hereof. Tenant acknowledges that
Landlord shall be entitled to the full proceeds of any insurance coverage,
whether carried by Landlord or Tenant, for damage to alterations, additions,
improvements or decorations provided by Landlord either directly or through an
allowance to Tenant.
19. DEFAULTS; CONDITIONAL LIMITATIONS; REMEDIES.
A. Each of the following events shall be an "Event of Default"
hereunder:
(i) Failure of Tenant to pay any installment of Rent or
any part thereof or any other payments of money, costs, or expenses herein
agreed to be paid by Tenant, when due; and if such failure shall continue for a
period of 5 days after Landlord's notice thereof to Tenant.
(ii) Failure of Tenant to observe or perform one or more
of the other terms, conditions, covenants or agreements of this Lease and the
continuance of such failure for a period of 30 days
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after written notice by Landlord specifying such failure (unless such failure
requires work to be performed, acts to be done, or conditions to be removed
which cannot by their nature reasonably be performed, done or removed, as the
case may be, within such 30 day period, in which case no default shall be
deemed to exist so long as Tenant shall have commenced curing the same within
such thirty (30) day period and shall diligently and continuously prosecute the
same to completion);
(iii) Any hazardous condition which is not cured by Tenant
immediately upon written notice by Landlord specifying such hazardous
condition;
(iv) (a) The filing of an application by Tenant for a
consent to the appointment of a receiver, trustee or liquidator of itself or of
all of its assets; or
(b) The filing by Tenant of a voluntary petition
in bankruptcy or the filing of a pleading in any court of record admitting in
writing its inability to pay its debts as they become due; or
(c) The making by Tenant of a general assignment
for the benefit of creditors; or
(d) The filing by Tenant of an answer admitting
the material allegations of or consenting to or defaulting in answering a
petition filed against it in any bankruptcy proceeding;
(v) The entry of an order, judgment or decree by any
court of competent jurisdiction adjudging Tenant a bankrupt or appointing a
receiver, trustee or liquidator for Tenant, or all of its assets, and such
order, judgment or decree continuing unstayed and in effect for any period of
sixty (60) consecutive days;
(vi) If Tenant shall abandon or vacate the Premises for
any period for which it has not paid its Rent in full;
(vii) If this Lease or the estate of Tenant hereunder shall
be transferred to or assigned to or subleased to or shall pass to or devolve
upon, any person or party, except in a manner herein expressly permitted;
(viii) If a levy under execution or attachment shall be made
against Tenant or its property and such execution or attachment shall not be
vacated or removed by court order, bonding or otherwise within a period of
thirty (30) days;
B. If an Event of Default shall occur, at any time there after,
at its option Landlord may:
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(i) give written notice to Tenant stating that this
Lease, and the Term shall expire and terminate on the date specified in such
notice, and upon the date specified in such notice, this Lease, the Term
hereunder, and all rights of Tenant shall expire and terminate as if that date
were the date herein definitely fixed for the termination of the Term, and
Tenant shall quit and surrender the Premises but Tenant shall remain liable as
hereinafter provided. After any such termination Landlord at its option may
file a written declaration of termination in the official records of the county
in which the Premises are located which written declaration shall be deemed a
conclusive determination of the termination of this Lease.
(ii) re-enter and repossess the Premises, and Tenant shall
nevertheless remain liable as hereinafter provided for the remainder of the
Term. If Landlord shall so re-enter, Landlord, at its option, may repair and
alter the Premises in such manner as the Landlord may deem necessary or
advisable, and/or let or relet the Premises or any parts thereof for the whole
or any part of the remainder of the Term or for a longer period, in Landlord's
name or as agent of Tenant, and out of any rent collected or received as a
result of such letting or reletting Landlord shall first, pay to itself the
reasonable cost and expense of retaking, repossessing, repairing and/or
altering the Premises, and the reasonable cost and expense of removing all
persons and property therefrom; second, pay to itself the reasonable cost and
expense sustained in securing any new tenants (including any broker's
commission), and if Landlord shall maintain and operate the Premises, the cost
and expense of operating and maintaining the Premises; and, third, pay to
itself any balance remaining on account of the liability of Tenant to Landlord.
No re-entry by Landlord, whether had or taken under summary proceedings or
otherwise, shall absolve or discharge Tenant from liability hereunder.
Landlord shall in no way be responsible or liable for any failure to relet the
Premises or any part thereof, or for any failure to collect any rent due on any
such reletting. Should any rent so collected by Landlord after the
aforementioned payments be insufficient to fully pay to Landlord a sum equal to
all such Rent and other payments and charges reserved herein, the deficiency
shall be paid by Tenant on the rent days herein specified.
(iii) in any of the circumstances hereinabove mentioned in
which Landlord shall have the right to hold Tenant liable as above provided,
Landlord shall have the right to elect, in place and instead of holding Tenant
so liable, forthwith to recover against Tenant as damages for loss of the
bargain and not as a penalty, in addition to any other damages becoming due
hereunder, an aggregate sum which, at the time of such termination of this
Lease or of such recovery of possession of the Premises by Landlord, as the
case may be, represents the then present worth of the excess, if any, of the
aggregate of the Rent and all other payments and charges payable by Tenant
hereunder that would have
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accrued for the balance of the Term over the aggregate rental value of the
Premises (such rental value to be computed on the basis of a Tenant paying not
only a rent to Landlord for the use and occupation of the Premises, but also
the Taxes and other payments and charges as are required to be paid by Tenant
under the terms of this Lease) for the balance of the Term.
(iv) Landlord, at Landlord's election from time to time
may bring a suit or suits for the recovery of such deficiency or damages, or
for a sum equal to any installment or installments of Rent and other charges
hereunder. Nothing herein contained shall be deemed to require Landlord to
await the Termination Date.
(v) nothing in this Section 19. contained shall limit or
prejudice the right of Landlord to prove and obtain as liquidated damages in
any bankruptcy, insolvency, receivership, reorganization or dissolution
proceeding an amount equal to the maximum allowed by any statute or rule of law
governing such proceeding and in effect at the time when such damages are to be
proved, whether or not such amount be greater, equal to or less than the amount
of the damages referred to in any of the preceding paragraphs of this Section.
C. No receipt of monies by Landlord from Tenant after termination
of this Lease, or after the giving of any notice of termination of this Lease,
shall reinstate, continue or extend the term or affect any notice theretofore
given to Tenant, or operate as a waiver of the right of Landlord to enforce the
payment of Rent and other sum or sums of money and other charges herein
reserved and agreed to be paid by Tenant then due or thereafter falling due, or
operate as a waiver of the right of Landlord to recover possession of the
Premises by proper remedy, except as herein otherwise expressly provided, it
being agreed that after the service of notice to terminate this Lease or the
commencement of suit or summary proceedings, or after final order or judgment
for the possession of the Premises, Landlord may demand, receive and collect
any monies due or thereafter falling due without in any manner affecting such
monies collected being deemed payments on account of the use and occupation of
said Premises, or at the election of Landlord, on account of Tenant's liability
hereunder.
D. To the extent permitted by law, Tenant hereby expressly waives
the service of any notice of intention to re-enter the Premises, including any
and every form of demand and notice provided for in any statute or other law,
or of the institution of legal proceedings to that end, and Tenant, for and on
behalf of itself and all persons claiming through or under Tenant, also waives
any and all right of redemption provided by any law or statute now in force or
hereafter enacted or otherwise, or re-entry or repossession or to restore the
operation of this Lease in case Tenant shall be dispossessed by a judgment or
by warrant of any court or judge or in case of re-entry or repossession by
Landlord or in case of any expiration or termination of this Lease. The
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terms "enter", "re-enter", "entry" or "re-entry", as used in this Lease are
not restricted to their technical legal meaning.
E. No failure by Landlord to insist upon the strict performance
of any covenant, agreement, term or condition of this Lease or to exercise any
right or remedy consequent upon a breach thereof, and no acceptance of full or
partial Rent during the continuance of any such breach shall constitute a
waiver of any such breach or of such covenant, agreement, term or condition.
No covenant, agreement, term or condition of this Lease to be performed or
complied with by Tenant, and no breach thereof, shall be waived, altered or
modified except by a written instrument executed by Landlord. No waiver of any
breach shall affect or alter this Lease, but each and every covenant,
agreement, term and condition of this Lease shall continue in full force and
effect with respect to any other then existing or subsequent breach thereof.
F. If any breach or threatened breach by Tenant of any of the
covenants, agreements, terms or conditions contained in this Lease shall occur,
Landlord shall be entitled to enjoin such breach or threatened breach and shall
have the right to invoke any right and remedy allowed at law or in equity or by
statute or otherwise as though re-entry, summary proceedings, and other
remedies were not provided for in this Lease.
G. Each right and remedy of Landlord provided for in this Lease
shall be cumulative and shall be in addition to every other right or remedy
provided for in this Lease or now or hereafter existing at law or in equity or
by statute or otherwise, and the exercise or beginning of the exercise by
Landlord of any one or more of the rights or remedies provided for in this
Lease or now or hereafter existing at law or in equity or by statute or
otherwise shall not preclude the simultaneous or later exercise by Landlord of
any or all other rights or remedies provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise.
H. Tenant shall pay to the Landlord all costs and expenses,
including reasonable attorneys' fees, incurred by Landlord in any action or
proceeding to which Landlord may be made a party by reason of any act or
omission of Tenant. Tenant shall also pay to Landlord all costs and expenses,
including reasonable attorneys' fees, incurred by Landlord in enforcing any of
the covenants and provisions of this Lease or incurred in any action brought by
Landlord against Tenant on account of the provisions hereof, and all such
costs, expenses and attorneys' fees may be included in and form a part of any
judgment entered in any proceeding brought by Landlord against Tenant on or
under this Lease. All of the sums paid or obligations incurred by Landlord as
aforesaid with interest and costs shall be paid by Tenant to Landlord five (5)
business
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days after the rendition by Landlord to Tenant of any bill or statement
therefor.
I. The Rent hereunder and each and every installment thereof, and
all costs, reasonable attorneys' or solicitors' fees or other expenses which
Landlord may incur in enforcing the provisions of this Lease, or on account of
any delinquency of Tenant in carrying out the provisions of this Lease, shall
be and are hereby declared to constitute a valid lien and security interest
upon the interest of Tenant in this Lease and the personal property of Tenant
located in the Premises to secure the payment and performance of all of
Tenant's obligations hereunder.
20. EMINENT DOMAIN. If the Property, or any portion thereof which
includes a substantial part of the Premises, shall be taken or condemned by any
competent authority for any public or quasi-public use or purpose, the Term
shall end upon, and not before, the date when the possession of the part so
taken shall be required for such use or purpose, and without apportionment of
the award. Rent shall be apportioned as of the date of such termination. If
any condemnation proceeding shall be instituted in which it is sought to take
or damage any part of the Property, or if the grade or configuration of any
street, highway, alley, bridge, elevated transit or other transit structure on
or adjacent to the Property is changed or constructed by any competent
authority and such change of grade makes it necessary or desirable to remodel
the Property to conform to the changed grade or configuration, Landlord shall
have the right to cancel this Lease upon not less than ninety (90) days' notice
prior to the date of cancellation designated in the notice. Under no
circumstances shall any money or other consideration be payable by Landlord to
Tenant for any cancellation or termination of this Lease as a result of an
eminent domain proceeding, nor shall Tenant have any right to share in any
condemnation award or in any judgment for damages resulting from an eminent
domain proceeding. In the event a partial taking or conveyance materially
diminishes Tenant's rights under the Lease, Tenant may terminate the Lease upon
90 days prior written notice to Landlord.
21. SUBORDINATION OR SUPERIORITY OF THIS LEASE.
A. Landlord heretofore has and hereafter from time to time may
execute and deliver a mortgage or trust deed in the nature of a mortgage senior
to all other mortgages or trust deeds, both referred to herein as "First
Mortgage" against the Real Estate and Building, or any interest therein, and
may sell and lease back the Real Estate. In addition, Landlord hereafter from
time to time may execute and deliver one or more mortgages or deeds of trust
junior to the First Mortgage or may subordinate the lien of the First Mortgage
to another mortgage or deed of trust, collectively referred to herein as
"Second Mortgage". The First Mortgage and Second Mortgage are herein
collectively called "Mortgage". If
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requested by the mortgagee or trustee under any Mortgage, or the lessor of any
ground or underlying lease ("ground lessor"), Tenant will either
(i) subordinate its interest in this Lease to the
Mortgage, and to any and all advances made thereunder and to the interest
thereon, and to all renewals, replacements, supplements, amendments,
modifications and extensions thereof, or to said ground or underlying lease or
to both, provided, however that such requesting party agree not to disturb
Tenant's quiet possession so long as
(a) Tenant is not in default hereunder and
(b) Tenant agrees to attorn in mode and manner
as set forth below, or
(ii) make Tenant's interest in this Lease superior
thereto; and Tenant promptly will execute and deliver such agreement or
agreements as reasonably may be required by such mortgagee or trustee under any
Mortgage. Not withstanding the foregoing, Tenant covenants it will not
subordinate this Lease to any mortgage or trust deed other than a First
Mortgage (as defined in this Section 21) without the prior written consent of
the holder of the First Mortgage.
B.
(i) If any Mortgage shall be foreclosed, or any party
shall take title to the Premises by deed in lieu of foreclosure (collectively
"foreclosure") or if any ground or underlying lease be terminated,
(a) the liability of the mortgagee or trustee
hereunder or purchaser or other taker of title at such foreclosure or any other
subsequent owner designated as Landlord under this Lease (collectively,
"subsequent owner") shall exist only so long as such trustee, mortgagee,
purchaser, taker of title or owner is the owner of the Building or Land and
such liability shall not continue or survive after further transfer of
ownership; and
(b) upon request of the subsequent owner, if the
Mortgage shall be subjected to foreclosure, Tenant will attorn, as Tenant under
this Lease, to the purchaser at any foreclosure sale under any Mortgage or upon
request of the ground lessor, if any ground or underlying lease shall be
terminated, Tenant will attorn as Tenant under this Lease to the ground lessor,
and Tenant will execute such instruments as may be necessary or appropriate to
evidence such attornment provided, however, that Tenant shall not attorn to any
subsequent owner other than a subsequent owner holding by reason of foreclosure
of a First Mortgage without the prior written consent of the holder of the
First Mortgage; and,
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(ii) this Lease may not be modified or amended so as to
reduce the rent or shorten the term provided hereunder, or so as to adversely
affect in any other respect the rights of the Landlord, nor shall this Lease be
canceled or surrendered, without the prior written consent, in each instance,
of the mortgagee or trustee under any Mortgage and of any ground lessor.
C. Should any prospective mortgagee or ground lessor require a
modification or modifications of this Lease, which modification or
modifications will not cause an increased cost or expense to Tenant or in any
other way materially and adversely change the rights and obligations of Tenant
hereunder in the reasonable judgment of Landlord, then this Lease may be so
modified and Tenant agrees to promptly execute whatever documents are required
therefor and deliver same to Landlord within ten (10) days following the
request therefor.
D. Tenant agrees to give any holder of any Mortgage (as defined
in this Section 21), by registered or certified mail, a copy of any notice of
default served upon Landlord by Tenant, provided that prior to such notice
Tenant has been notified in writing (by way of service on Tenant of a copy of
Assignment of Rents and Leases, or otherwise) of the address of such Mortgage
holder. Tenant further agrees that if Landlord shall have failed to cure such
default within twenty (20) days after such notice to Landlord (or if such
default cannot be cured or corrected within that time, then such additional
time as may be necessary if Landlord has commenced within such twenty (20) days
and is diligently pursuing the remedies or steps necessary to cure or correct
such default), then the holder of any Mortgage shall have an additional thirty
(30) days within which to cure or correct such default (or if such default
cannot be cured or corrected within that time, then such additional time as may
be necessary if such holder of any Mortgage has commenced within such thirty
(30) days and is diligently pursuing the remedies or steps necessary to cure or
correct such default). Until the time allowed, as aforesaid, for the holder of
any Mortgage to cure such default has expired without cure, Tenant shall have
no right to, and shall not, exercise any right it may have to terminate this
Lease on account of Landlord's default.
22. SPRINKLERS. If the "sprinkler system" or any of its appliances
installed in the Building or on the Property shall be damaged or injured or not
in proper working order by reason of any act or omission of Tenant, Tenant's
agents, servants, employees, licensees or visitors, Landlord shall restore the
same to good working condition at Tenant's sole expense; and if the Board of
Fire Underwriters or Fire Insurance Exchange or any bureau, department or
official of the state, county or village, requires or recommends that any
changes, modifications, alterations or additional sprinkler heads or other
equipment be made or supplied by reason of Tenant's business or the location of
trade fixtures,
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or other contents of the premises, at Tenant's expense, Landlord promptly shall
make and supply such changes, modifications, alterations, additional sprinkler
heads or other equipment.
23. NOTICES. In every instance where it shall be necessary or desirable
for Tenant to serve any notice or demand upon Landlord, such notice or demand
shall be sent by United States Registered or Certified Mail, postage prepaid,
addressed to landlord at the place where rental under this Lease is then being
paid. Any notice or demand to be given by Landlord to Tenant shall be
effective if mailed or delivered to the Premises, or to such other address as
may appear on the records of Landlord. Notice mailed as aforesaid shall be
conclusively deemed to have been served at the close of the second business
date following the date the notice was mailed.
24. SUCCESSORS AND ASSIGNS. Each provision hereof shall extend to and
shall, as the case may require, bind and inure to the benefit of Landlord and
Tenant and their respective heirs, legal representatives, successors and
assigns, provided that this Lease shall not inure to the benefit of any
assignee, heir, legal representative, transferee or successor of Tenant except
upon the prior written consent or election of Landlord, as provided in Section
17. The term "Landlord", as used in this Lease, means only the owner, or the
mortgagee in possession, for the time being, of the Property, so that if any
sale or sales of the Property shall occur, Landlord shall be and hereby is
entirely free and relieved of all covenants and obligations of Landlord
hereunder, and it shall be deemed and construed without further agreement
between the parties or their successors in interest, or between the parties and
the purchaser at any such sale, that the purchaser has assumed and agreed to
carry out any and all covenants and obligations of Landlord hereunder.
25. INSURANCE.
A. Landlord and Tenant agree to have all property insurance
policies which may be carried by either of them endorsed with a clause
providing that any release from liability of or waiver of claim for recovery
from the other party entered into in writing by the insured thereunder prior to
any loss or damage shall not affect the validity of said policy or the right of
the insured to recover thereunder. Without limiting any release or waiver of
liability or recovery contained in any other paragraph of this Lease but rather
in confirmation and furtherance thereof, Landlord and Tenant each hereby waive
any and every claim for recovery from the other for any and all loss of or
damage to the Building or Premises or to the contents thereof, which loss or
damage is insured by valid and collectible fire and extended coverage insurance
policies, to the extent that such loss or damage is recoverable under said
insurance policies. Inasmuch as this mutual waiver will preclude the
assignment of any such claim by subrogation (or otherwise) to an insurance
company (or any other person), Landlord and Tenant each
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agree to give to each insurance company which has issued, or in the future may
issue, policies of fire and extended coverage insurance, written notice of the
terms of this mutual waiver, and to have said insurance policies properly
endorsed, if necessary to prevent the invalidation of said insurance coverage
by reason of said waiver.
B. At all times during the Term, at its sole cost and expense
Tenant shall maintain in full force and effect insurance protecting Tenant and
Landlord and Landlord's beneficiaries and their respective agents and any other
parties designated by Landlord from time to time, with terms, coverages and in
companies at all times satisfactory to Landlord and with such increases in
limits as from time to time, Landlord may reasonably request. Initially, such
limits shall be in the following amounts:
(i) Comprehensive General Liability Insurance, including
Contractual Liability insuring the indemnification provisions contained in this
Lease, with limits of not less than Three Million Dollars ($3,000,000.00)
combined single limit per occurrence for Bodily Injury, Death and Property
Damage.
(ii) Insurance against
(a) "All Risks" of physical loss to movable
fixtures, office equipment, furniture, trade fixtures, merchandise and all
other items of Tenant's property on the Premises, and
(b) loss of use of the Premises in an amount
equal to the full replacement cost thereof, without definition.
(iii) Comprehensive Automobile Insurance covering all
owned, non-owned and hired automobiles of Tenant including the loading and
unloading of any automobile with limits of liability not less than Five Hundred
Thousand Dollars ($500,000.00).
Prior to the commencement of the Term and prior to the expiration of any
policy, Tenant shall furnish Rental Agent certificates evidencing that all
required insurance is in force and providing that such insurance may not be
canceled or changed without at least thirty (30) days' prior written notice to
Landlord and Tenant (unless such cancellation is due to nonpayment of premiums,
in which event ten (10) days' prior written notice shall be provided). Such
certificate shall name as additional insureds (i) Landlord and the partners in
Landlord; (ii) the beneficiary or beneficiaries of Landlord, if Landlord is a
Land Trust, (iii) Landlord's agent, and (iv) such other persons as Landlord may
from time to time designate.
C. Tenant shall comply with all applicable laws and ordinances,
all orders and decrees of court, all requirements of other governmental
authorities, and requirements and recommendations of insurance rating agencies
with respect to
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Tenant's use of the Leased Premises, and shall not, directly or indirectly,
make any use of the Leased Premises which may thereby be prohibited or be
dangerous to person or property, which may jeopardize any insurance coverage,
increase the cost of insurance or require additional insurance coverage. If
Tenant fails to comply with the provisions of this subparagraph C, Landlord, in
addition to any other rights or remedies available to landlord, shall have the
option to terminate this Lease and may require Tenant to make immediate payment
of any increase in Landlord's insurance costs.
26. MISCELLANEOUS.
A. Wherever there is provided in this Lease a time limitation for
performance by Landlord of any construction, repair, maintenance or service,
the time provided for shall be extended for as long as and to the extent that
delay in compliance with such limitation is due to an act of God, strikes,
governmental control, adverse weather or other factors beyond the reasonable
control of Landlord.
B. If any provision of this Lease or application to any party or
circumstances shall be determined by any court of competent jurisdiction to be
invalid and unenforceable to any extent, the remainder of this Lease or the
application of such provision to such person or circumstances, other than those
as to which it is so determined invalid or unenforceable to any extent, shall
not be affected thereby, and each provision hereof shall be valid and shall be
enforced to the fullest extent permitted by law.
C. The headings of Sections and paragraphs are for convenience
only and do not define, limit or construe the contents of such Sections or
paragraphs. References made in this Lease to numbered sections and paragraphs
shall refer to the numbered Sections or paragraphs of this Lease, unless
otherwise indicated.
D. Each of the parties agrees, at the request of the other, to
execute such instruments or documents as any party may reasonably request,
acknowledging: the date of completion of the Premises; the date of acceptance
of possession of the same; the commencement and expiration dates of this Lease;
the Operating Expenses; Taxes and Consumer Price Index for any Lease Year; the
Estimated Rent Adjustment Payments for any Lease Year; the number of rentable
square feet demised to Tenant; Annual Base Rental amount; and the compliance or
noncompliance by any party with any of the terms or provisions of this Lease;
and to evidence any other or further matters as may be so reasonably requested.
E. Tenant represents that except for Frain Camins & Swartchild
(the Broker), it has not dealt with any real estate broker in connection with
this Lease and, no broker other than the Broker initiated or participated in
the negotiation of this Lease,
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submitted or showed the Premises to Tenant or is entitled to any commission in
connection with this Lease. Tenant hereby indemnifies, defends, and holds
Landlord harmless from and against any and all claims of any real estate broker
for commissions in connection with this Lease other than the Broker.
F. No waiver of default of Tenant shall be implied, and no
express waiver shall affect any default other than the one default specified in
such waiver and that one only for the time and to the extent therein stated.
G. Clauses, plats and riders, if any, signed by Landlord and
Tenant and endorsed on or affixed to this Lease are a part hereof.
H. This Lease shall be governed and construed under the laws of
the State of Illinois.
I. Intentionally Omitted
J. This Lease is to be executed in copies, each of which executed
copy shall constitute an original. If a conflict between the provisions of any
original lease with the provisions of any other original lease shall arise,
then the provisions of Landlord's original lease will govern and control.
K. Submission of this instrument for examination or signature by
Tenant does not constitute a reservation of or option for lease, and it is not
effective as a lease or otherwise until execution and delivery by both Landlord
and Tenant.
L. Neither this Lease, nor any memorandum, affidavit or other
writing with respect thereto, shall be recorded by Tenant or by anyone acting
through, under or on behalf of Tenant, and the recording thereof in violation
of this provision shall make this Lease null and void at Landlord's election.
M. If Tenant is a corporation or partnership, each signatory of
tenant personally represents and warrants that he is a duly authorized
signatory for and on behalf of the Tenant, and agrees that if the
representation and warranty contained in this paragraph is false, each
signatory shall be personally liable under this Lease.
27. ESTOPPEL CERTIFICATES. From time to time upon request by Landlord,
Tenant will deliver to Landlord a statement in writing certifying;
(i) that this Lease is unmodified and in full force and
effect (or if there have been modifications that the Lease, as modified, is in
full force and effect);
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(ii) the dates to which Rent and other charges have been
paid;
(iii) that Landlord is not in default under any provision of
this Lease, or, if in default, the nature thereof in detail, and
(iv) such other matters relating to this Lease as are
requested by Landlord or the holder of any mortgage or trust deed on the
Premises, it being intended that any such statement may be relied upon by any
prospective purchaser or tenant of the Property and any mortgagees or
prospective mortgagees. Without limiting the above, upon request of Landlord,
Tenant shall promptly fill out, execute and deliver at the direction of
Landlord a statement in the form attached hereto as Exhibit D. Tenant shall
execute and deliver whatever instruments may be required for such purposes, and
if Tenant fails so to do within fifteen (15) days after demand in writing, such
failure shall be an Event of Default hereunder and Tenant hereby irrevocably
appoints Landlord as attorney-in-fact for Tenant with full power and authority
to execute and deliver in the name of Tenant any such instruments or
certificates.
Landlord hereby agrees to execute an Estoppel Certificate in
form satisfactory to LaSalle National Bank upon execution of this Lease.
28. EXCULPATORY CLAUSE. This Lease is executed by American National Bank
and Trust Company of Chicago, not personally but as Trustee as aforesaid, in
the exercise of the power and authority conferred upon and vested in it as such
Trustee, and under the express direction of the beneficiaries of a certain
Trust Agreement dated July 30, 1985, and known as Trust Number 65110 at said
Bank. Nothing in this Lease contained shall be construed as creating any
liability whatsoever against said Trustee personally or said beneficiaries, and
in particular, without limiting the generality of the foregoing, there shall be
no personal liability to perform any covenant, either express or implied,
herein contained, to keep, preserve or sequester any property of said Trust,
and that all personal liability of said Trustee (and said beneficiaries, to the
extent permitted by law), of every sort, if any, is hereby expressly waived by
Tenant, and by every person now or hereafter claiming any right or security
hereunder; and that so far as the parties hereto are concerned the owner of any
indebtedness or liability accruing hereunder shall look solely to the Trust
Estate from time to time subject to the provisions of said Trust Agreement for
the payment thereof. The Trustee has no agents or employees and merely holds
naked title to the property herein described and has no control over the
management thereof or the income therefrom and has no knowledge respecting
rentals, leases or other factual matters with respect to the Premises, except
as represented to it by the beneficiary or beneficiaries of the Trust.
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29. LIMITATION ON LANDLORD'S LIABILITY. It is expressly understood and
agreed by Tenant that none of Landlord's covenants, undertakings or agreements
are made or intended as personal covenants, undertakings or agreements by
Landlord or the partners in Landlord, and any liability of Landlord or the
partners in Landlord for damages or breach or nonperformance by Landlord or
otherwise arising under or in connection with this Lease or the relationship of
Landlord and Tenant hereunder, shall be collectible only out of Landlord's
interest in the Land and Building (or if Landlord is the beneficiary of a land
trust, Landlord's right, title and interest in such land trust), in each case
as the same may then be encumbered, and no personal liability is assumed by,
nor at any time may be asserted against, Landlord or the partners in Landlord
or any of its or their officers, agents, employees, legal representatives,
successors or assigns, all such liability, if any, being expressly waived and
released by Tenant. Tenant further expressly understands and agrees that
Landlord's Agent executes this Lease, not in its own right but solely as
Landlord's Agent and that nothing in this Lease shall be construed as creating
any liability whatsoever against such Landlord's agent, its shareholders,
directors, officers or employees and in particular, without limiting the
generality of the foregoing, there shall be no liability to pay any
indebtedness or sum accruing hereunder or to perform any covenant or agreement
whether express or implied herein contained, it being agreed that Landlord
shall have sole responsibility therefor.
30. LETTER OF CREDIT. As additional security for faithful and prompt
performance of its obligations hereunder, concurrently with the execution of
this Lease, Tenant shall deliver to Landlord an unconditional and irrevocable
Letter of Credit ("Letter of Credit") in the principal amount of One Hundred
Fifty-Eight Thousand and no/100 Dollars ($158,000.00) ("Original Principal
Amount") to cover the cost of the constructing the Premises and secure Tenant's
obligations hereunder. Landlord may draw upon the Letter of Credit by reason
of:
(i) any Rent or other sums of money which Tenant may not
have paid when due,
(ii) any sum expended by Landlord on Tenant's behalf in
accordance with the terms of this Lease and/or
(iii) Any sum which Landlord may expend or be required to
expend by reason of Tenant's default.
Drawing on the Letter of Credit, or any portion thereof, by Landlord shall not
prevent Landlord from exercising any other right or remedy provided by this
Lease or by law (it being understood that Landlord shall not be required to
first proceed against the Letter of Credit) and shall not operate as a
limitation on any other recovery which Landlord may otherwise be entitled. The
35
<PAGE> 39
Letter of Credit shall be renewed annually during the Term at a declining
principal amount equal to the Original Principal Amount less Thirty Thousand
and no/100 Dollars ($30,000) per annum, commencing on the second year during
the Term.
IN WITNESS WHEREOF, this instrument has been duly executed by the
parties hereto, as of the date first above written.
LANDLORD TENANT
MATAS CORPORATION, AS AGENT FOR FIRST PREMIUM SERVICES, INC.
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO, not
individuall, but solely and
only as Trustee aforesaid.
BY:___________________________ BY:___________________________
Its: Vice President Its: President
ATTEST________________________ ATTEST________________________
Its: Vice President Its: Secretary
36
<PAGE> 40
EXHIBIT A
[BLUEPRINT DIAGRAM INTENTIONALLY OMITTED FROM EDGAR VERSION]
Third Floor South
4,558 Rentable Square Feet
<PAGE> 41
EXHIBIT A-I
Base Rent Schedule
------------------
Monthly Annual
------- ------
First Month Free
Next 11 months $5,887.42 $70,649.00
Next 12 months $6,064.04 $72,768.47
Next 12 months $6,245.96 $74,951.52
Next 12 months $6,433.34 $77,200.07
Next 12 months $6,626.34 $79,516.07
Next 4 months $6,825.13 ------
<PAGE> 42
EXHIBIT B
LEGAL DESCRIPTION
LOT 2 IN CORPORATE 500 SUBDIVISION, A SUBDIVISION OF PART OF THE SOUTHWEST 1/4
OF SECTION 33, TOWNSHIP 43 NORTH, RANGE 122, EAST OF THE THIRD PRINCIPAL
MERIDIAN, ACCORDING TO THE PLAT THEREOF RECORDED FEBRUARY 4, 1988, AS DOCUMENT
2654362, IN LAKE COUNTY, ILLINOIS.
<PAGE> 43
EXHIBIT C
(Construction Rider)
Construction of the Premises: Landlord and Tenant agree that their
respective rights and obligations in reference to the construction of the
Premises shall be as follows:
1. A. Tenant hereby agrees to cause to be prepared and
submitted to Landlord, at Tenant's expense, a detailed space plan ("Space
Plan") showing the location and details of all improvements to be constructed
on the Premises. Based on said Space Plan, Landlord's architect shall prepare
Architectural and Mechanical Drawings at Landlord's sole cost and expense.
B. Landlord hereby agrees to cause to be prepared at
it's expense and submitted to Tenant after Tenant's submission under clause
A(i) above, for Tenant's approval (which approval shall not be unreasonably
withheld), mechanical (sprinkler, air conditioning, heating, electric and
plumbing) drawings (the "Mechanical Drawings"), provided that Tenant and
Tenant's architect shall be responsible for coordinating the Mechanical
Drawings with the Architectural Drawings to the extent the same relate to work
which is in addition to or exceeds Building Standard Work. Tenant shall notify
Landlord of its approval or disapproval (specifying the reasons therefor) of
such submission of same. It is expressly understood and agreed that any delay
caused by Tenant's or its architect's failure to coordinate the Mechanical
Drawings with the Architectural Drawings as required above, or by Tenant's
failure to timely notify Landlord of its approval or disapproval of any
Mechanical Drawings submitted by Landlord and any delay caused by changes to
said drawings necessitated by changes to Tenant's plans, specifications and
drawings shall be "Tenant Delays" hereunder. The approved Architectural
Drawings and Approved Mechanical Drawings are herein together referred to as
the ("Drawings").
2. Performance of Work.
A. Landlord, at Landlord's sole cost and expense, shall
do or cause to be done the work on a turnkey basis to the extent provided in
the Space Plan C7 and Plan Notes prepared by Otis Associates, Inc. and attached
hereto as Attachment B. All other work provided for in the Drawings and in any
changes thereto made in accordance with Paragraph B below, and any other work
which Landlord agrees to perform at Tenant's request and upon submission by
Tenant of all necessary amendments or additions to the Drawings (all of such
foregoing nonstandard work, including, without limitation, the work provided
for in Paragraph 7 below, being herein called "Tenant's Extra Work") shall be
done as a Tenant's extra, at Tenant's sole cost and expense as provided in
Paragraph 3 below. Without limitation of the foregoing, Tenant and Tenant's
architect shall cooperate with Landlord and Landlord's contractor
1
<PAGE> 44
to enable Landlord's contractor to obtain all required building and other
permits with respect to the Premises prior to commencement of construction or
as soon as possible thereafter and shall, in any event, meet with Landlord's
contractor and the Building Department of the Village of Deerfield or other
governmental authorities having jurisdiction thereover from time to time upon
one (1) day's notice from Landlord or Landlord's contractor and shall
immediately make such changes to the Drawings as are required by the Building
Department in connection with the issuance of the building and other permits.
B. If Tenant shall require any Tenant's Extra Work in
addition to that incorporated in the Drawings, Tenant shall deliver to Landlord
for its approval, which approval shall not be unreasonably withheld, the
necessary additional drawings and specifications (the "Additional Drawings")
for the Additional Work. If Landlord does not approve of the Additional
Drawings as delivered by Tenant, Landlord, shall within seven (7) business days
of submission thereof, advise Tenant of the changes required in the Additional
Drawings so that they will meet with Landlord's approval. Tenant shall cause
the Additional Drawings to be revised and delivered to Landlord for its final
review and approval within seven (7) business days after Tenant's receipt of
such advise or Tenant shall be deemed to have abandoned its request for such
Tenant's Extra Work. Landlord shall furnish Tenant with written estimates of
the cost of the Tenant's Extra Work. Landlord shall in no event be obligated
to perform any particular portion of Tenant's Extra Work (whether provided for
in the Drawings or in any Additional Drawings) unless and until (i) Tenant has
approved the written estimates of the cost of such Tenant's Extra Work
submitted by Landlord to Tenant and (ii) paid to Landlord an amount equal to
twenty-five percent (25%) of such cost as set forth in said estimate. If
Tenant shall fail to approve any such estimates and make such payment to
Landlord within seven (7) business days from the receipt of such estimate by
Tenant, the same shall be deemed disapproved by Tenant, Landlord shall not be
required to proceed thereon and Tenant shall be deemed to have abandoned its
request therefor. Subject to the provisions of the next succeeding sentence,
the cost for Tenant's Extra Work performed by Landlord shall be paid by first
applying the deposit made by Tenant in accordance with the foregoing provisions
and the balance of said costs shall be paid from time to time based upon the
percent of completion of Tenant's Extra Work within ten (10) days of Landlord's
request for payment. All retainage (which shall not exceed five percent (5%),
less an amount necessary for the payment of the costs required to be incurred
to complete any punch list items shall be paid with the monthly payment request
submitted by Landlord after substantial completion of the work in the Premises
to be performed by Landlord. Final payment shall be made within fifteen (15)
days after completion of all punch list items. In any event, Landlord shall be
paid an amount equal to fifteen percent (15%) of the cost of all work to be
performed whether such work was
2
<PAGE> 45
performed by Landlord or others, for Landlord's overhead (which overhead is in
addition to the general contractor's overhead and profit).
3. Except as expressly set forth in the Lease (including, without
limitation, in this Construction Rider), Landlord has no other agreement with
Tenant and has no other obligation to do any other work or pay any amounts with
respect to the Premises. Any other work in the Premises which may be permitted
by Landlord pursuant to the terms and conditions of the Lease shall be done at
Tenant's sole cost and expense and in accordance with said terms and conditions
of the Lease.
4. The number of days of delay in substantially completing the
Premises arising, directly or indirectly, out of or on account of any of the
following events shall constitute "Tenant Delays" hereunder and under the
Lease:
(a) Tenant's failure to approve any plans, drawings
and/or specifications in accordance with Paragraph 1B hereof; or
(b) Tenant's failure to approve cost estimates within the
time specified in Paragraph 2 hereof; or
(c) Tenant's request for materials, finishes or
installations other than Building Standard; or
(d) Tenant's changes in the work or the approved drawings
and or specifications therefor (notwithstanding Landlord's approval of such
changes); or
(e) The performance of any work by Tenant or any person,
firm or corporation employed by Tenant; or
(f) Any other default by Tenant or failure by Tenant or
its agents or contractors to perform their respective obligations as and when
required under this Work Letter.
5. Landlord shall permit Tenant and Tenant's agents and
contractors which have been approved by Landlord to enter said Premises prior
to the Commencement Date in order that Tenant may do such other work as may be
required by Tenant to make said Premises ready for Tenant's use and occupancy
thereof and, in connection therewith, Landlord shall allow Tenant to have use
of the hoist, if any, serving the Building; provided that Tenant's agents and
contractors shall reimburse Landlord or Landlord's contractor for the cost of
the use of said hoist after normal operating hours and for the cost of the use
of said hoist by Landlord's contractors in the Building (whether performing
work for Tenant or others) after normal operating hours to the extent the use
by said other contractors of the hoist after normal operating hours resulted
from the use of the hoist by Tenant's contractors during normal
3
<PAGE> 46
operating hours. Said cost shall be determined at Landlord's reasonable
discretion. Scheduling of the use of said hoist shall be at the reasonable
discretion of Landlord or its contractor. If Landlord permits such entry prior
to commencement of the Term, then such permission is conditioned upon Tenant
and Tenant's agents, contractors, workmen, mechanics, suppliers and invitees,
working in harmony and not interfering with Landlord and Landlord's agents and
contractors in doing Landlord's work in said Premises or for other tenants and
occupants of the Building. Without limitation of the foregoing, Tenant agrees
that all services and work performed on the Premises, including telephone
installation, carpeting, materials and personal property delivered to the
Premises on behalf of or for the account of Tenant shall be performed or
delivered, as the case may be, only by persons covered by a collective
bargaining agreement with the appropriate trade union. In the event Tenant
wishes to assign its contract with one of its separate contractors to
Landlord's general contractor, such assignment shall be subject to Landlord's
approval and the payment by Tenant of all applicable fees for the Landlord's
general contractor and Landlord's coordination. If at any time such entry
shall cause or threaten to cause such disharmony or interference, Landlord
shall have the right to withdraw such permission upon twenty-four (24) hours
written notice. Tenant agrees that any such entry into and occupation of the
Premises shall be deemed to be under all of the terms, covenants, conditions
and provisions of the Lease except as to the covenant to pay Rent, and further
agrees that in connection therewith Landlord shall not be liable in any way for
any injury, loss or damage which may occur to any of Tenant's work and
installations made in said Premises or to properties placed therein prior to
the commencement of the Term of the Lease, the same being at Tenant's sole
risk. In addition, Tenant shall require all entities performing work on behalf
of Tenant to provide protection for existing improvements to an extent that is
satisfactory to Landlord and shall allow Landlord access to the Premises, for
inspection purposes, at all times during the period when only the Tenant is
undertaking construction activities on Tenant's own behalf. In addition to the
foregoing, Tenant shall not permit Tenant's contractors to commence any work
until all required insurance has been obtained by Tenant's contractors and
certificates evidencing such coverage have been delivered to Landlord.
Tenant's contractors shall secure, pay for and maintain during the continuance
of their respective work within the Premises, insurance, which shall be
endorsed in all policies to include Landlord (and Landlord's beneficiaries) and
its contractor and their respective employees and agents as additional insured
parties and which shall provide thirty (30) days' prior written notice of any
alteration or termination of coverage, in the amounts and insuring such risks
as Landlord may reasonably require.
6. Tenant, at the time it submits to Landlord its Architectural
Drawings, shall designate its representative with respect to the matters set
forth in this agreement and such person
4
<PAGE> 47
shall have full authority and responsibility to act on behalf of Tenant as
required herein. Changes to the Drawings may be made only by written direction
from Tenant to Landlord on a form approved by Landlord, which direction must be
signed by Tenant's representative. Tenant's architect shall not be deemed the
authorized representative of Tenant unless Tenant specifically advised Landlord
in writing of such appointment. Tenant shall inform Landlord in writing of any
change in its representative.
7. Landlord shall give Tenant or shall cause its architect to
give Tenant seven (7) days' prior written notice of the date on which the work
to be performed by Landlord hereunder shall be substantially completed. Tenant
shall then have the obligation to conduct an inspection of the Premises with
Landlord and its representatives within seven (7) days of such notice and to
give Landlord, within said seven (7) day period, a punchlist of all items to be
completed and/or corrected ("Punch List Items"). Any items not on such
punchlist shall be deemed accepted by Tenant, except for latent defects which
exception, as to latent defects, shall be effective for one (1) year following
the Commencement Date (unless such defect was caused by Tenant or its agents,
contractors or suppliers).
8. The failure by Tenant to pay any monies due Landlord pursuant
to this Construction Rider within the time period herein stated shall be deemed
a default under the terms of the Lease. All late payments shall bear interest
pursuant to the Default Rate.
LANDLORD'S INITIALS TENANT'S INITIALS
______________________________ ______________________________
5
<PAGE> 48
Attachment A to Exhibit C
BUILDING STANDARDS
a. Partitions.
(1) Interior dry wall partitions with 2-1/2"
metal studs, 24 inches on center and 5/8" gypsum board on both sides on the
basis of one lineal foot of partition for every 18 square feet of rentable
area, outside of the building core. Partitions shall be to the underside of
ceiling height. There shall be no jogs, curves or angles in any partition.
Partitions terminating at the building walls shall meet either a mullion, a
column or a partition enclosure.
b. Doors and Bucks. One entry door per Tenant per
floor. Entry doors and interior doors will be 3'0" x 8'10" x 1-3/4" solid
core, full height, plain sliced mahogany, including metal frames. Interior
door(s) supplied on a basis of one door for every 400 square feet of rentable
area.
c. Hardware. Latch sets, butts and door stops for all
interior doors. Lock sets, closer, butts and door stops for entrance doors.
Lever hardware to be polished chrome.
d. Ceilings. Modular 24" x 24" Armstrong Tegular
Fissured Minatone tile with revealed accent suspension system.
e. Flooring. Floors will be finished to accept carpet
with 2-1/2" vinyl base as required for Building Standard partitions.
f. Electrical.
(1) 208/120 volt, 3 phase, 4 wire for lighting,
receptacles and miscellaneous power. 480/277 volt, 3 phase, 4 wire for
heating, ventilating and air-conditioning power.
(2) Recessed, fluorescent lighting fixtures, size
24" x 48", with high intensity parabolic lens; not more than one such fixture
per 90 square feet of rentable area.
(3) Single pole toggle switches one per
450 square feet of rentable area.
(4) Landlord shall initially install lamps.
(5) One 110V duplex wall receptacle outlet for
every 240 square feet of rentable area and one wall telephone outlet for every
250 square feet of rentable area to be located on partitions.
6
<PAGE> 49
(6) Exit signs and emergency lighting as required
per Code.
(7) Circuits required by Code to connect items
above to the panel board, as determined by Landlord's engineers.
g. Heating, Ventilation and Air Conditioning. Variable
Air Volume System with perimeter heating supplied by electric radiant panels
above the window line. (Heating and cooling specifications subject to
adjustment pursuant to relevant laws and government regulations.)
Design conditions:
Summer: Outside dry bulb 91 degrees F, wet bulb 75 degrees F; inside
76 degrees F; 50% relative humidity.
Winter: Outside -10 degrees F, inside 70 degrees F.
h. Painting and Wall Coverings.
(1) Walls shall receive one prime coat and one
finish coat of latex flat paint. Colors to be selected by Tenant from building
standard color chart, not to exceed one color per room.
(2) Vinyl or paper wall coverings to be furnished
and installed at Tenant's expense.
i. Blinds. Building standard horizontal thinline blinds
will be provided at all exterior windows.
j. Sprinkler Heads. One concealed head, flush mounted
with finished cap, per 225 square feet of rentable area.
k. Landlord's Work does not include hardware, 2-1/2"
vinyl base or painting for any door or partition supplied as Extra Work.
7
<PAGE> 50
[BLUEPRINT DIAGRAM INTENTIONALLY OMITTED FROM EDGAR VERSION]
PLAN C7
--------
#88045.v
<PAGE> 51
ATTACHMENT B TO EXHIBIT C
PLAN NOTES:
DOORS: 1. Building std full height
2. Entrance doors to be full ht. glass
GLASS: 1. Glass partitions are clear in hollow metal frame
2. Glass in conference room to receive levelor mini-blinds
3. Perimeter glass to receive building standard blinds
CEILING: 1. Bldg. std 2x2 grid and tile
LIGHTING: 1. Bldg. std 2x4 light fixtures w/"paracube" lens throughout
office space
2. Conference room to receive:
(a) (2) Two downlights @ glass wall
(b) (6) Six wall washers
3. Undercabinet task lighting at:
(a) Both reception stations
(b) (2) Two kitchen counter locations
4. Downlighting in soffit above file area adjacent to work
stations
1, 2, 3 and 4-(6) six total
FLOORING: 1. Porcelain tile - 8" x 8" at entrance corridor
2. 4" x 4" ceramic tile in kitchen
3. All rooms carpeted (unless noted otherwise)
4. Carpet border in: reception, conference room, pres. and
dir. offices
WALLS: 1. All walls to receive vinyl wall covering
2. Closet interior to be paint
MISC.: 1. Provide for paging intercom system w/music sound system
ROOM NOTES:
RECEPTION: 1. Reception counters to be plastic laminate
2. Front reception counter to have top shelf @ 42" H.,
counter at 30" H.
3. Planter to be 12" H. pl. lam. box w/galv. sheet
metal liner
CONFERENCE
ROOM: 1. Corner cabinet to have doors w/one (1) shelf
2. Conf. table to be priced as an alternate in
construction documents
<PAGE> 52
KITCHEN: 1. Pl. lam. upper and lower cabinets
2. Include following:
(a) Upright refrigerator
(b) Dishwasher
(c) Stainless steel double sink and faucet
(d) Food disposer
(e) Ice maker
(f) Cold water line to coffee maker
(g) Coffee maker
STORAGE RM: 1. (5) Five adjustable 12" shelves where noted
2. Mail and fax area to receive pl. lam. upper
and lower cabinets as noted
3. Provide blocking in wall at "mail" area for mail
bins provided by tenant
COMP. RM: 1. Pl. lam. countertop (30") w/(2) adj. shelves above
MISC: 1. Low-ht. partition cap @ sec. station to be plastic
laminate
2. Low-ht. partition to be drywall
3. Continuous countertop (adjacent to work stations
1, 2, 3, 4) to be plas. lam.
4. Work stations provided by tenant. Provide power as
req'd.
5. Furniture provided by tenant
<PAGE> 53
EXHIBIT D
LEASE ESTOPPEL CERTIFICATE
Lease Date:
Landlord: American National Bank and Trust Company of Chicago, not
personally, but as Trustee under Trust No. 65110.
Tenant:
Premises: Corporate 500 Centre, Building No._, ______Floor
Area: _______________Sq. Ft.
The undersigned Landlord and Tenant of the above-referenced lease (the "Lease")
hereby ratify the Lease and certify to Connecticut General Life Insurance
Company (the "Lender") as mortgagee of the Real Property of which the premises
demised under the Lease (the "Premises") is a part, as follows:
1. That the term of the Lease commenced on _______________, 19__
and the Tenant is in full and complete possession of the
Premises and has commenced full occupancy and use of the
Premises, such possession having been delivered by the
original landlord and having been accepted by the Tenant or if
the term has not commenced that it will commence on
_______________, 19__ and Tenant will take occupancy on
_______________, 19__.
2. That the Lease calls for monthly rent installments of
$_______________ to date. Abatement of Base Rent under the
Lease runs through _______________, 19__ and thereafter the
Tenant is paying monthly installments of Base Rent of
$______________ which commence on the ____day of
_______________, 19__.
3. That no advance rental or other payment has been made in
connection with the Lease, except rental for the current month
and the rent has been paid to and including _______________,
19__.
4. That a security deposit in the amount of $_______________ is
being held by Landlord, which amount is not subject to any
set-off or reduction or to any increase for interest or other
credit due to Tenant.
<PAGE> 54
5. That all obligations and conditions under said Lease to be
performed to date by Landlord or Tenant have been satisfied,
free of defenses and set-offs including all construction work
in the Premises.
6. That the Lease is a valid lease and in full force and effect
and represents the entire agreement between the parties; that
there is no existing default on the part of the Landlord or
the Tenant in any of the terms and conditions thereof and no
event has occurred which, with the passing of time or giving
of notice or both, would constitute an event of default; and
that said Lease has: (initial one)
( ) not been amended, modified, supplemented, extended, renewed
or assigned.
( ) been amended, modified, supplemented, extended, renewed or
assigned as follows by the following described agreements:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
7. That the Lease provides for a primary term of ______ months;
the term of the Lease expires on the ____ day of
_______________, 19__; and that: (initial one)
( ) neither the Lease nor any of the documents listed in
Paragraph 6, (if any), contain an option for any additional
term or terms.
( ) the Lease and/or the documents listed under Paragraph 6,
above, contain an option for _____ additional term(s) of _____
year(s) and month(s) (each) at a rent to be determined as
follows:_______________________________________________________
_______________________________________________________________
_______________________________________________________________
8. That there are no actions, voluntary or involuntary, pending
against the Tenant under the bankruptcy laws of the United
States or any state thereof.
9. That this certification is made knowing that Lender and
_________________________ are relying upon the representations
herein made.
LANDLORD'S INITIALS TENANT'S INITIALS
______________________________ ______________________________
<PAGE> 55
EXHIBIT E
(Garage Rider)
Landlord hereby leases to Tenant and Tenant hereby accepts the lease
of two (2) spaces in the subterranean garage in the Building for the entire
term of the Lease. The rental with respect to each of the aforesaid spaces
shall equal the fair market rental per space as reasonably established by
Landlord on an annual basis (which need not be for the same period as the Lease
Years hereunder) . The initial rate for such spaces shall be $80 per month with
a rate not to exceed $100 during the term of the Lease. Tenant shall pay rent
for such spaces to Landlord's Rental Agent on the first day of each month
during the term, without any set-off or deduction whatsoever, except that rent
for such spaces during the first six (6) months of the Term shall be abated.
Failure to pay such sums shall give Landlord the same remedies it would have in
the case of failure to pay the Rent specified in Section 4. Tenant shall use
such parking spaces only for parking purposes and shall not use any other
parking spaces in the garage.
Landlord shall perform all maintenance of said garage and any costs so
incurred by Landlord shall be part of Operating Expenses.
This lease of the garage space(s) identified above shall extend for
the same period of time as the term of this Lease, and upon termination of this
Lease or Tenant's right to possession of the Premises, this Lease of said
garage space(s) shall also terminate. Upon any such termination, Tenant
immediately shall surrender any passkeys to the garage and remove all vehicles
from said parking spaces, failing which Landlord may remove same at Tenant's
expense.
LANDLORD'S INITIALS TENANT'S INITIALS
______________________________ ______________________________
<PAGE> 56
EXHIBIT F
(Storage Rider)
Landlord hereby leases to Tenant and Tenant hereby accepts the lease
of _______________storage space in the basement of the Building. Tenant shall
pay to Landlord's Rental Agent on the first day of each month during the Term
the sum of $_______________ as additional Rent for such space(s). Failure to
pay such sums shall give Landlord the same remedies it would have in the case
of failure to pay the Rent specified in Section 4. Tenant shall use the storage
spaces only for storing office supplies and shall comply with all rules and
regulations adopted from time to time by Landlord with respect to such storage
spaces. Tenant shall securely lock the storage spaces at all times (and give
Landlord duplicates of all keys) and Landlord shall have no responsibility for
any theft of Tenant's property so stored.
Landlord shall perform all maintenance of said storage spaces and any
costs so incurred by Landlord shall be paid by Tenant.
This lease of the storage spaces identified above shall extend for the
same period of time as the term of this Lease, and upon termination of this
Lease, or Tenant's right to possession of the Premises, this lease of said
storage spaces shall also terminate. Upon any such termination, Tenant
immediately shall surrender the keys to said spaces and remove all its property
from said spaces, failing which Landlord may remove same and dispose of same as
it deems fit.
LANDLORD'S INITIALS TENANT'S INITIALS
______________________________ ______________________________
1
<PAGE> 57
EXHIBIT G
RULES AND REGULATIONS
RULES AND REGULATIONS. Tenant agrees to observe the rights reserved
to Landlord in the Lease and agrees, for itself, its employees, agents,
clients, customers, invitees and guests, to comply with the following rules and
regulations and with such reasonable modifications thereof and additions
thereto as Landlord may make, from time to time, for the Building.
1. Before leaving the Premises unattended, Tenant shall close and
securely lock all doors and shut off all utilities in the Premises. Any damage
resulting from failure to do so shall be paid by Tenant.
2. Tenant shall not paint, display, inscribe or affix any sign,
trademark, picture, advertising, notice, lettering or direction on any part of
the outside or inside of the Building, or on the Premises, except on the public
hallways of the Premises, and then only such name or names or matter and of
such color, size, style, character and material as shall be first approved by
Landlord in writing. Landlord reserves the right to remove any other matter,
without notice to Tenant and at the sole cost and expense of Tenant.
3. Tenant shall not advertise the business, profession or
activities of Tenant in any manner which violates the letter or spirit of any
code of ethics adopted by any recognized association or organization pertaining
thereto or use the name of the Building for any purpose other than that of the
business address of Tenant, or use any picture or likeness of the Building or
"Corporate 500 Centre" or any other name by which the Building from time to
time may be known, on any letterhead, envelope, circular, notice,
advertisement, container or wrapping material, without the prior written
consent of Landlord.
4. Tenant shall not use or permit to be brought into or kept in
the Premises or on the Property any inflammable oils or fluids, or any
explosive or other articles deemed hazardous to person or property.
5. Tenant shall not: install or operate any refrigerating,
heating or air conditioning apparatus without the prior written consent of
Landlord; use the Premises for housing, lodging or sleeping purposes or for any
immoral or illegal purposes; or permit preparation or warming of food in the
Premises (warming of coffee and individual meals of employees excepted) without
the prior written consent of Landlord. In its sole discretion, Landlord may
refuse such permission or impose any conditions in granting it, and revoke it
at will. Tenant shall not occupy or use the Premises or permit the Premises to
be occupied or used for any purpose, act or
1
<PAGE> 58
thing which is in violation of any public law, ordinance or governmental
regulation or which may be dangerous to persons or property, or which may
invalidate any policy of insurance carried on the Building or insuring its
operation or violate the terms thereof; if any additional amounts of insurance
premiums are caused by Tenant's occupancy or use of the Premises, Tenant shall
pay to Landlord said additional amounts. At its sole expense, Tenant shall
comply with all rules, regulations and requirements of and shall not do or
permit anything to be done upon the Premises, or bring or keep anything thereon
which is in violation of rules, regulations or requirements of the Deerfield
Fire Department, Illinois inspection and Rating Bureau, Fire Insurance Rating
Organization, or any other similar authority having jurisdiction over the
Building. Tenant shall not do or permit the manufacture, sale or purchase, of
any spirituous, fermented, intoxicating or alcoholic liquors.
6. Tenant shall not place any radio or television antenna aerial
wires or other equipment on the roof or on or in any part of the inside or
outside of the Building other then the inside of the Premises; operate or
permit to be operated any musical or sound producing instrument or device
inside or outside the Premises which may be heard outside the Premises; or
operate any electrical device from which may emanate electrical waves which may
interfere with or impair radio or television broadcasting or reception from or
in the Building or elsewhere.
7. Tenant shall not bring or permit to be in the Building any
bicycle or other vehicle, or dog (except in the company of a blind person) or
other animal; make or permit any noise, vibration or odor to emanate from the
Premises; do anything therein tending to create, or maintain, a nuisance;
disturb, solicit or canvass any occupant of the Building, or do any act tending
to injure the reputation of the Building.
8. Tenant shall not: place anything or allow anything to be
placed near the glass of any door, partition, or window which may be unsightly
and may be seen from outside the Premises; take or permit to be taken in or out
of other entrances of the Building, or take or permit on other elevators, any
items normally taken in or out through the trucking concourse or service doors
or in or on freight elevators; or, whether temporarily, accidentally, or
otherwise, allow anything to remain in, place or store anything in, or obstruct
in any way, any passageway, exit, stairway, elevator shipping platform, or
truck concourse. Tenant fully shall cooperate to keep such areas free from all
obstruction and in a clean and sightly condition and move all supplies,
furniture and equipment as soon as received directly to the Premises and move
all such items and waste, other than waste customarily removed by employees of
the Building, being taken from the Premises, directly to the shipping platform
at or about the time arranged for removal therefrom.
2
<PAGE> 59
9. Tenant shall not attach or permit to be attached additional
locks or similar devices to any doors, transom or window; change existing locks
or the mechanism thereof; or make or permit to be made any keys for any door
other than those provided by Landlord. (If more than two keys for one lock are
desired, Landlord will provide them upon payment therefor by Tenant.)
10. Tenant shall not overload any floors.
11. Tenant shall not do any painting or decorating in the
Premises; or mark, paint, cut or drill into, drive nails or screws into, or in
any way deface any part of the Premises or the Building, outside or inside,
without the prior written consent of Landlord. (If Tenant desires signal,
communication, alarm or other utility or service connections installed or
changed, the same shall be made by and at the expense of Tenant, with the
approval and under direction of Landlord.)
12. Tenant shall not make any room-to-room canvass to solicit
business from other tenants in the Building, and shall not exhibit, sell or
offer to sell, use, rent or exchange any item or services in or from the
Premises unless ordinarily embraced within the Tenant's use of the Premises as
specified in its lease.
13. Tenant shall not waste electricity or water and agrees to
cooperate fully with Landlord to assure the most effective operation of the
Building's heating and air conditioning and shall refrain from attempting to
adjust any controls. Tenant shall keep public corridor doors closed.
14. Tenant assumes full responsibility for protecting its space
from theft, robbery, and pilferage, which includes keeping doors locked and
other means of entry to the Premises closed and secured.
15. No person or contractor not employed by Landlord shall be used
to perform window washing, cleaning, decorating, repair or other work in the
Premises.
16. Bicycles shall not be permitted in the Building in other than
Landlord designated locations.
17. Tenant shall cooperate and participate in all security
programs affecting the Building.
18. In the event Landlord allows one or more tenants in the
Building to do any act prohibited herein, Landlord shall not be precluded from
denying any other tenant the right to do any such act.
3
<PAGE> 60
EXHIBIT H
JANITOR SERVICES
GENERAL, PRIVATE OFFICES, LOBBY, LOUNGE
DAILY:
1. Empty and damp clean ash trays. Wash as required.
2. Dust all furniture including desks, chairs, tables.
3. Dust all exposed filing cabinets, bookcases and shelves.
4. Dust all telephones.
5. Clean and sanitize drinking fountains.
6. Spot clean desk tops. (Client paper on desks, drafting tables, filing
cabinets, etc. are not to be disturbed.)
7. Spot clean to remove dirt, fingermarks, etc....from doors, switch
plates, light switches, wall areas adjacent to doors, handles,
railings, etc....
8. Clean and service sand urns.
9. Completely clean glass doors and any entryway glass.
10. Clean and polish stainless steel and bright metal.
WEEKLY:
1. Clean and sanitize telephones.
2. Low dust all horizontal surfaces to hand height including sills,
ledges, moldings, shelves, picture frames, ducts, radiators.
5. Wipe clean and rub down interior building metal.
QUARTERLY:
1. High dust above hand height all horizontal surfaces, including
shelves, moldings, ledges, pipes, ducts, heating outlets, etc.
2. Dust pictures, frames, charts and wall hangings.
3. Dust exterior lighting fixtures.
4. Dust venetian blinds and window frames.
5. Vacuum draperies.
TRASH PICK-UP
DAILY:
1. Empty and clean wastepaper receptacles.
2. Remove all waste and transport to designated area.
<PAGE> 61
FURNITURE
ONCE EVERY SIX WEEKS:
1. Vacuum (Fabric)
2. Damp Clean (Plastic)
3. Damp Clean (Leather)
WASHROOMS
DAILY:
1. Clean, sanitize and polish all vitreous fixtures including toilet
bowls, urinals, hand basins, showers.
2. Clean and sanitize all flush rings, drain and overflow outlets.
3. Clean and polish all chrome fittings.
4. Clean and sanitize toilet seats.
5. Clean and polish all glass and mirrors.
6. Empty all containers and disposals, insert liners as required.
7. Wash and sanitize exterior of all containers.
8. Empty and sanitize interior of sanitary container.
9. Dust metal partitions.
10. Remove spots, stains, splashes from wall adjacent to hand basins.
11. Refill all dispensers to maximum limits--soap, tissue,
tissue, towels and sanitary napkin dispensers.
MONTHLY:
1. Wash and sanitize metal partitions.
2. High dust above hand height all horizontal surfaces including shelves,
ledges, moldings, pipes, ducts, heating outlets.
3. Machine scrub flooring.
AS REQUIRED:
1. Remove hard water deposits.
<PAGE> 62
FLOORS-RESILIENT AND HARD
DAILY:
1. Dry dust or sweep.
2. Sanitize washrooms
3. Damp mop surfaced flooring.
WEEKLY:
1. Clean marble flooring, buff as necessary.
MONTHLY:
1. Wash and spray buff tile floors.
QUARTERLY:
1. Strip, clean, refinish and machine polish.
2. Clean and polish baseboards.
CARPET
DAILY:
1. Vacuum open areas.
WEEKLY:
1. Detail vacuum (edges, corners, etc.....)
AS REQUIRED:
1. Inspect for spots and stains. Remove if possible.
<PAGE> 63
LUNCHROOM
DAILY:
1. Wash and sanitize table tops, damp clean seats and backs or chairs.
2. Clean, polish and refill napkin holders.
3. Empty and damp clean ash trays. Wash as required.
4. Empty all containers and disposals. Sanitize interior.
5. Wash and sanitize exterior of all containers.
6. Clean and sanitize drinking fountain.
WEEKLY:
1. Wash pedestals or legs.
2. Remove fingerprints from doors, frames, light switches, kick and push
plates, handles.
3. Low dust all horizontal surfaces to hand height including sill,
moldings, ledges, shelves, frames, ducts, heating outlets.
MONTHLY:
1. High dust above hand height all horizontal surfaces including shelves,
ledges, moldings, pipes, ducts, heating outlets.
2. Wash and sanitize chairs.
TRASH PICK-UP
DAILY:
1. Remove all waste and transport to designated area.
<PAGE> 64
EXHIBIT I
COMMENCEMENT DATE AND TERMINATION DATE
AGREEMENT
Date: _______________, 19__
Supplement to Lease dated ___________________ __, 19__,
between AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Trustee under a
certain Trust Agreement dated the 31st day of August, 1983, and known as Trust
Number 65110 (hereinafter referred to as "Landlord"), and
_________________________ (hereinafter referred to as "Tenant"), for _____
square feet in the building known as Corporate 500 Centre, 500 Lake Cook Road,
Deerfield, Illinois.
Pursuant to the provisions of Paragraph A in Section 3, of the Lease, Landlord
and Tenant agree as follows: The Commencement Date of the Lease Term is
_______________, 19__, and the Termination Date of the Lease Term is
_______________, 19__.
LANDLORD'S INITIALS TENANT'S INITIALS
______________________________ ______________________________
<PAGE> 65
FIRST AMENDMENT TO THE LEASE
WITH
FIRST PREMIUM SERVICES, INC.
This First Amendment (the "Amendment") made this 13th day of July
1993, by and between Matas Corporation as agent for AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO, not individually, but solely as Trustee under a
certain Trust Agreement dated the 30th day of July, 1985, and known as Trust
Number 65110 (the "Landlord"), and First Premium Services, Inc. (the "Tenant")
dated July 12, 1991, (the "Lease") amends that certain Lease as follows:
1. ADDITIONAL PREMISES
Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord additional premises consisting of that certain office space
shown outlined in red or by a heavy line on the plan attached as
Exhibit A (the "Additional Premises") located on the third floor of
the Building at Corporate 500 Centre, 520 Lake Cook Road, Deerfield,
IL. The Additional Premises contains three thousand two hundred
twenty (3,220) rentable square feet. Upon execution of this
Amendment, the Additional Premises and the Premises shall become and
be deemed to be a part of the Premises and where appropriate in this
Amendment, Premises shall refer to both the Premises and the
Additional Premises.
2. TERM
Section 2 TERM of that certain Lease is deleted in its entirety and
the following is inserted in lieu thereof:
2. TERM. The term of the lease (the "Term") is for seven (7)
years and four (4) months commencing on the first (1st) day of
October, 1991, (the "Commencement Date") and ending on the
thirty-first (31st) day of January, 1999, (the "Termination Date"),
unless sooner terminated as hereinafter provided.
3. BASE RENT
A. Section 4 Rent is amended by inserting after the last sentence
of subparagraph 4A the following:
Effective October 1, 1993, the Monthly Base Rent for the Additional
Premises shall be payable at the same rate and on the same terms and
conditions as the Monthly Base Rent for the Premises. A Base Rent
Schedule for the Premises consisting of seven thousand seven hundred
seventy-eight (7,778) rentable square feet is attached as Exhibit B.
<PAGE> 66
B. Section 5(vi) is amended by inserting after the last sentence
of Section 5(vi) the following:
Effective October 1, 1993, "Tenant's Proportionate Share" shall mean
four and three hundred twenty-two thousandths percent (4.322%).
C. Notwithstanding any other provision in this Amendment, Tenant
will be deemed to take possession of the Additional Premises as of
October 1, 1993. If for any reason whatsoever the Additional Premises
is not substantially completed on or before October 1, 1993, the Lease
Amendment shall remain in full force and effect, and no liability
shall arise against Landlord because of any such delay.
D. In the event that the Additional Premises are not
substantially completed as of October 1, 1993, as a result of
Landlord's actions or inactions, as the case may be, and only as a
result of Landlord's actions, Rent for the Additional Premises shall
abate until the Additional Premises is ready for occupancy.
4. CONSTRUCTION OF PREMISES
A. Without limitation of the other terms and provisions of this
Amendment or the Lease, Landlord, at Landlord's sole cost and expense,
shall construct the Additional Premises in accordance with the space
plan dated June 28, 1993, attached as Exhibit C, and approved
simultaneously by Tenant with this First Amendment.
The Additional Premises shall be constructed using materials
of like or similar quality to those used or incorporated in the
Premises and the type, appearance and quantity of materials used or
incorporated in the Additional Premises shall be used in proportion to
the type, appearance or quantity used or incorporated in the Premises.
B. Except as expressly set forth in the Lease, Landlord has no
other agreement with Tenant and has no other obligation to do any
other work or pay any amounts with respect to the Premises. Any other
work in the Premises which may be permitted by Landlord pursuant to
the terms and conditions of the Lease shall be done at Tenant's sole
cost and expense and in accordance with said terms and conditions of
the Lease.
C. The number of days of delay in substantially completing the
Additional Premises arising, directly or indirectly, out of or on
account of any of the following events shall constitute "Tenant
Delays" hereunder and under the Lease:
<PAGE> 67
(i) Tenant's failure to approve any plans, drawings
and/or specifications within five (5) business days of submission to
Tenant for approval; or
(ii) Tenant's request for materials, finishes or
installations other than those specified in subparagraph 4A; or
(iii) Tenant's changes in the work or the approved
drawings, specifications or both (notwithstanding Landlord's approval
of such changes);
(iv) The performance of any work by Tenant or any person,
firm or corporation employed by Tenant; or
(v) Any other default by Tenant or failure by Tenant or
its agents or contractors to perform their respective obligations as
and when required.
D. Notwithstanding anything to the contrary, Tenant shall be
entitled to immediate possession for the sole purpose of planning,
construction and installation of equipment. Any and all activities of
Tenant for the sole purpose of planning, construction and installation
of equipment shall not in any manner whatsoever interfere, restrict,
obstruct or otherwise hinder Landlord's performance of construction or
completion of improvements, and Landlord, in its sole discretion, may
request that any work by Tenant cease. Tenant shall coordinate all
such work to be performed by Tenant with Landlord.
5. CANCELLATION OPTION
A. Subject to the rights of Landlord hereinafter set forth,
Tenant shall have the right to cancel this Lease (the "Cancellation
Option") effective as of (a) January 31, 1997, (b) July 31, 1997 and
(c) January 31, 1998 (individually the "Cancellation Date"). In the
event Tenant desires to exercise the Cancellation Option, Tenant shall
give Landlord written notice (the "Cancellation Notice") of its
election on or before the date which is two hundred seventy (270) days
prior to the Cancellation Date. If Tenant does not give Landlord the
Cancellation Notice prior to said date, Tenant shall conclusively be
deemed to have elected not to exercise such Cancellation Option with
respect to that certain date and shall have no further rights
hereunder with respect to such Cancellation Option with respect to
that certain date and said Cancellation Notice shall be deemed to be
for the immediately following Cancellation Date, if any, provided the
two hundred seventy day period is satisfied.
<PAGE> 68
B. As a condition precedent to the effectiveness of the
Cancellation Option and concurrently with the delivery of the
Cancellation Notice, Tenant shall pay to Landlord an amount equal to
the unamortized cost of the improvements and construction of the
Additional Premises with interest computed at a rate of eight percent
(8%) as follows: (i) cancellation date of January 31, 1997, in the
amount of Fifty-Seven Thousand Five Hundred Forty-Nine Dollars and
Sixty-Seven Cents ($57,549.67); cancellation date of July 31, 1997, in
the amount of Forty-Four Thousand Ten Dollars and Eighty-Six Cents
($44,010.86); cancellation date of January 31, 1998, in the amount of
Twenty-Nine Thousand Nine Hundred Twenty-One Dollars and Forty Cents
($29,921.40). If Tenant shall fail to timely make such payment, the
exercise by Tenant of the Cancellation Option shall be deemed null and
void and of no further force and effect, and Tenant shall forfeit any
and all further rights and options under this Paragraph and an Event
of Default (as defined) shall be deemed to have occurred hereunder and
Landlord shall have all rights and remedies on account hereof provided
in the Lease.
6. RIGHT OF FIRST OFFER
A. Subject to (1) rights of current tenants of the Building and
(2) and the rights of the Landlord set forth in that certain Lease and
this Section, and provided that an Event of Default is not then
existing hereunder beyond the expiration of the applicable grace
period, Tenant shall have a right of first offer ("Offer Option")
during the Term to lease additional contiguous rentable square feet on
the third floor in the Building, on the following terms and
conditions:
(a) Prior to leasing any contiguous space to another bona
fide prospect, Landlord shall notify Tenant that it is offering said
space for lease. Tenant, not later than seven (7) business days after
the date of Landlord's notice, shall notify Landlord in writing that
Tenant desires to exercise the Offer Option for the contiguous space.
If Tenant fails to exercise the Offer Option within the seven-day
period, the offer option shall be null and void and of no further
force and effect.
(b) Without limitation of the other terms and provisions
hereof, the contiguous space shall be offered to Tenant "as is" and at
the then same rate of Monthly Base Rent as applies to the original
Premises. The term of the lease for said space shall be coterminous
with the Term.
(c) If Tenant exercises the Offer Option and an Event of
Default is then existing beyond the expiration of the applicable grace
period, Landlord shall have the right to
<PAGE> 69
cancel such exercise. In such event, the space shall not be added to
the Premises.
(d) At such time as the right to possession of the
contiguous space is delivered to Tenant, it shall become part of the
Premises hereunder, the aggregate Base Rent shall be appropriately
increased with payment of the additional Base Rent and Tenant's
Proportionate Share shall be appropriately adjusted. Rent payments
with respect to the contiguous space shall commence the earlier of (i)
the date Tenant occupies the contiguous space or (ii) upon substantial
completion of the contiguous space. If the date on which the Base
Rent payments for the contiguous space is to commence is other than on
the first (1st) day of a calendar month, such Base Rent shall be
appropriately adjusted and if the date on which Tenant's Proportionate
Share is to change is other than the first day of a calendar year,
Tenant's Proportionate Share shall be increased only for that portion
of the calendar year commencing with the date of delivery of the space
to Tenant.
B. Landlord and Tenant agree to execute and deliver to each other
a certificate and an amendment to that certain Lease confirming the
terms and conditions of the exercise of the Offer Option and such
other documents as may be necessary or desirable.
7. OTHER PROVISIONS
Except as specifically provided in this Amendment, any and all other
provisions of the Lease, as amended remain and continue in full force
and effect and are not modified, altered or amended.
LANDLORD TENANT
MATAS CORPOPTION FIRST PREMIUM SERVICES, INC.
By:________________________ By:_________________________
Its: Vice President Its: President
<PAGE> 70
EXHIBIT A
[BLUEPRINT DIAGRAM intentionally omitted
from EDGAR version]
Third Floor South
Corporate 500 Centre
520 Lake Cook Road
<PAGE> 71
EXHIBIT B
BASE RENT
<TABLE>
<Capiton>
Monthly Annual
-------------------------------- -------------------------------
Period Initial Expansion Total Initial Expansion Total
- -------------- -------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Month Free Free Free Free Free
Next 11 months 5,887.42 5,887.42 64,761.62 64,761.62
Next 12 months 6,064.04 6,064.04 72,768.47 72,768.47
Next 12 months 6,245.96 4,412.46 10,658.42 74,951.52 52,949.52 127,901.04
Next 12 months 6,433.34 4,544.83 110,978.17 77,200.07 54,537.96 131,738.03
Next 12 months 6,626.34 4,681.17 11,307.51 79,516.07 56,174.04 135,690.11
Next 12 months 6,825.13 4,821.61 11,646.74 81,901.56 57,859.32 139,760.88
Next 12 months 7,029.88 4,966.26 11,996.14 84,358.56 59,595.12 143,953.68
Next 4 months 7,240.78 5,115.25 12,356.03 28,963.12 20,461.00 49,424.12
</TABLE>
<PAGE> 72
EXHIBIT C
[BLUEPRINT DIAGRAM intentionally omitted
from EDGAR version]
First Premium Services Inc.
Matas Corporation Lieber Architects Inc.
<PAGE> 73
SECOND AMENDMENT TO THE LEASE
WITH
FIRST PREMIUM SERVICES, INC,
This Second Amendment (the "Amendment") made this 31st day of March,
1995, by and between Matas Corporation as agent for AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO, not individually, but solely as Trustee under a
certain Trust Agreement dated the 30th day of July, 1985, and known as Trust
Number 65110 (the "Landlord"), and First Premium Services, Inc. (the "Tenant")
dated July 12, 1991, and amended by an Amendment to Lease dated July 13, 1993
(the "Lease") amends that certain Lease as follows:
1 . ADDITIONAL PREMISES
Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord additional premises consisting of that certain office space
shown outlined in red or by a heavy line on the plan attached as
Exhibit A (the "Additional Premises") located on the third floor of
the Building at Corporate 500 Centre, 520 Lake Cook Road, Deerfield,
IL. The Additional Premises contains four thousand three hundred
sixty (4,360) rentable square feet. On April 1, 1995 the Additional
Premises shall become and be deemed to be a part of the Premises.
2. TERM
Section 2 TERM of that certain Lease is deleted in its entirety and
the following is inserted in lieu thereof:
2. TERM. The term of the lease (the "Term") is for eight (8)
years and nine (9) months commencing on the first (1st) day of
October, 1991, (the "Commencement Date") and ending on the thirtieth
(30th) day of June, 2000, (the "Termination Date"), unless sooner
terminated as hereinafter provided.
3. BASE RENT
A. Section 4 Rent is amended by inserting after the last sentence
of subparagraph 4A the following:
Effective April 1, 1995, the Monthly Base Rent for the Additional
Premises and for the premises previously delineated in the First
Amendment To The Lease, dated July 13, 1993, shall be payable as set
forth in the Base Rent Schedule, as revised to include the Additional
Premises, attached as Exhibit B.
B. Section 5(vi) is amended by inserting after the last sentence of
Section 5(vi) the following:
Effective April 1, 1995, "Tenant's Proportionate Share" shall mean six
and seven hundred forty-five thousandths percent (6.745%).
<PAGE> 74
C. Tenant will be deemed to take possession of the Additional Premises as
of April 1, 1995. If for any reason whatsoever the Additional
Premises is not substantially completed on or before April 1, 1995,
the Lease Amendment shall remain in full force and effect, and no
liability shall arise against Landlord because of any such delay.
4. CONSTRUCTION OF PREMISES
A. Without limitation of the other terms and provisions of this
Amendment or the Lease, Landlord, at Tenant's sole cost and expense,
shall construct the Additional Premises in accordance with the space
plan dated , 1995, to be provided by Tenant. Specifications
and cost estimate to be attached as Exhibit C, and approved by Tenant.
B. Except as expressly set forth in the Lease, Landlord has no
other agreement with Tenant and has no other obligation to do any work
or pay any amounts with respect to the Premises. Any work in the
Premises which may be permitted by Landlord pursuant to the terms and
conditions of the Lease shall be done at Tenant's sole cost and
expense and in accordance with said terms and conditions of the Lease.
5. CANCELLATION OPTION
A. Cancellation Options set forth in the First Amendment To The
Lease, effective as of (a) January 31, 1997, (b) July 31, 1997 and (c)
January 31, 1998 are hereby terminated and are null and void and of no
further force and effect.
6. OTHER PROVISIONS
Except as specifically provided in this Amendment, any and all other
provisions of the Lease, as amended remain and continue in full force
and effect and are not modified, altered or amended.
This Amendment is subject to the cancellation of another tenant's
lease for the Additional Premises.
LANDLORD TENANT
MATAS CORPORATION FIRST PREMIUM SERVICES, INC.
By:______________________ By:______________________
Its: Vice President Its: President
<PAGE> 75
EXHIBIT A
[BLUEPRINT DIAGRAM intentionally
omitted from EDGAR version]
Floor Plan
<PAGE> 76
EXHIBIT B
BASE RENT
<TABLE>
<CAPTION>
Monthly Annual
------------------------------- ----------------------------------
Dates Period Initial Expansion Total Initial Expansion Total
- ----------------- -------------- --------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10/01/91-10/31/91 .......... First Month Free Free Free Free
11/01/91-09/30/92 .......... Next 11 months $ 5,887.42 $ 5,887.42 $ 64,761.62 $ 64,761.62
10/01/92-09/30/93 .......... Next 12 months 6,064.04 6,064.04 72,768.47 72,768.47
10/01/93-09/30/94 .......... Next 12 months 10,658.42 10,658.42 127,901.04 127,901.04
10/01/94-03/31/95 .......... Next 6 months 10,978.17 10,978.17 65,869.02 65,869.02
04/01/95-06/30/95 .......... Next 3 months 10,978.17 $8,792.10 19,770.27 32,934.51 $26,376.30 59,310.81
07/01/95-09/30/95 .......... Next 3 months 10,978.17 9,055.86 20,034.03 32,934.51 27,167.58 60,102.09
10/01/95-06/30/96 .......... Next 9 months 11,307.51 9,055.86 20,363.37 101,767.58 81,502.74 183,270.32
07/01/96-09/30/96 .......... Next 3 months 11,307.51 9,327.54 20,635.05 33,922.52 27,982.62 61,905.14
10/01/96-06/30/97 .......... Next 9 months 11,646.74 9,327.54 20,974.28 104,820.66 83,947.86 188,768.52
07/01/96-09/30/97 .......... Next 3 months 11,646.74 9,607.37 21,254.11 34,940.22 28,822.11 63,762.33
10/01/97-06/30/98 .......... Next 9 months 11,996.14 9,607.37 21,603.51 107,965.26 86,466.33 194,431.59
07/01/98-09/30/98 .......... Next 3 months 11,996.14 9,895.59 21,891.73 35,988.42 29,686.77 65,675.19
10/01/98-06/30/99 .......... Next 9 months 12,356.03 9,895.59 22,251.62 111,204.27 89,060.31 200,264.58
07/01/99-09/30/99 .......... Next 3 months 12,356.03 10,192.46 22,548.49 37,068.09 30,577.38 67,645.47
10/01/99-06/30/00 .......... Next 9 months 12,726.71 10,192.46 22,919.17 114,540.39 91,732.14 206,272.53
</TABLE>
<PAGE> 1
Exhibit 10.28
OFFER TO LEASE
LESSOR THE CITY OF LAKE FOREST
220 East Deerpath
Lake Forest, Illinois 60045
On this 7th day of November, 1996.
LESSEE LAKE FOREST BANK AND TRUST COMPANY
727 North Bank Lane
Lake Forest, Illinois 60045
(hereinafter called "Lessee") hereby offers and agrees to
lease from The City of Lake Forest, whose address is shown
above (hereinafter called "Lessor"), the subject real estate
LOCATION totaling approximately 2,000 square feet (hereinafter called
"the premises") situated in the Telegraph Road Metra Train
Station located at 911 South Telegraph Road in The City of
Lake Forest, County of Lake, and State of Illinois shown
outlined in yellow on the map marked "Exhibit A" attached
hereto and made a part hereof, for and during the term of
TERM December 1, 1996, ending November 30, 2006, unless
terminated sooner as provided herein.
Upon acceptance by the Lessor of Lessee's OFFER TO
LEASE, said OFFER TO LEASE shall become a lease binding upon
the parties hereto.
This lease is made upon express covenants and
agreements, each of which is made an express condition
hereof:
RENT 1. Lessee covenants and agrees to pay Lessor as
rent for the premises Forty Thousand One Hundred Dollars
($40,100.00) per year payable in advance each year of the
ten year fixed term lease.
2. The premises shall be used for the following
purpose(s) only: drive-up and walk-up bank facility.
Lessee agrees to handle only such articles as are
appropriate to this type of business, occupancy or use.
TAXES 3. (a) The premises is currently exempt from
payment of real estate taxes. If at any time in the future
the premises are assessed and real estate taxes are due,
Lessee shall pay all real estate taxes or other charges
applicable to or assessed against that portion of the
premises which is the subject of this lease, even though
such taxes may not become due and payable until after the
expiration or termination of this lease.
<PAGE> 2
Lease Agreement Page 2
(b) If any such taxes or charges shall have been
paid by Lessor, Lessee agrees to reimburse Lessor within 20
days after presentation of a bill therefor. In default of
such reimbursements, all sums so paid by Lessor shall be
deemed an addition to rent and recoverable as such.
4. Lessee shall at all times keep the premises
clean and in good condition and repair, including the
HOUSE- painting thereof. Lessee shall not post, paint or place, or
KEEPING permit others to post, paint, or place, on the premises any
advertisement or sign not related directly to Lessee's
business.
5. (a) Lessee shall not use or permit upon the
COMPLIANCE: premises (1) anything that will invalidate any policy of
INSURANCE insurance now or hereafter carried on the premises or any
AND LEGAL building or thereon, or (2) anything that will increase the
rate of such insurance. Lessee shall maintain the premises
and buildings and structures thereon in accordance with the
requirements of all local ordinances, and state and federal
laws in effect during the term of this lease.
(b) Lessee further agrees to comply with all
ordinances, laws, rules or regulations enacted by any
governmental body or agency relating to the control,
abatement, or emission of air and water contaminants and/or
the disposal of refuse, solid wastes or liquid wastes or any
other ordinances, laws, rules or regulations which may be
applicable to him or his activities on the leased premises.
Lessee shall bear all costs and expenses arising from
compliance with said ordinances, laws, rules or
POLLUTANTS regulations, and shall indemnify and save harmless Lessor
& from all liability, including without limitation, fines,
CONTAMINANTS forfeitures and penalties arising in connection with failure
by Lessee to comply with such ordinances, laws, rules or
regulations. Lessee will provide to Lessor tangible
evidence of his compliance with all ordinances, laws, rules
or regulations upon the commencement date of this lease.
6. Lessee accepts the premises subject to rights
of any party, including Lessor, in and to any existing
RELOCATION conduits, sewers, waterlines, gas lines, power lines,
OF UTILITIES drainage facilities, telephone, telegraph or other wires,
OR FACILITIES and policies and utilities or facilities of any kind
whatsoever, whether or not of record. Should it at any time
become necessary to relocate any of same by reason of this
lease Lessee shall bear and pay the cost of so doing.
7. (a) Lessee accepts the premises subject to
EASEMENTS rights of any party, including Lessor, in an to any existing
easements, permits or licenses.
<PAGE> 3
Lease Agreement Page 3
(b) Lessor reserve the right to maintain or
relocate its existing facilities, or to construct and
thereafter maintain new facilities, on or in the vicinity of
EXISTING the premises with no liability for damages to Lessee's
FACILITIES interests or property resulting from such activities.
TITLE 8. Lessor makes no covenant for quiet enjoyment
of the premises. Lessee assumes any damages Lessee may
sustain as a result of, or in connection with, any want or
failure at any time of Lessor's title, if any, to the
premises.
9. (a) Lessee accepts this lease of the premises
with the knowledge of the existence of railroad tracks in
the vicinity of the premises and of all the risks of damage
or injury which might or could occur to properties or
persons upon or in the vicinity of the premises from or in
connection with the operation, use, maintenance, or
improvement of said tracks. It is therefore agreed, as one
of the material considerations of this lease and without
which this lease would not be granted, that Lessee assumes
such risks and agrees to indemnify and hold harmless and
INDEMNI- defend Lessor from any against any and all liability and
FICATION expenses whatsoever, to the extent permitted by law, for
bodily injury or death, including without limitation, injury
or death to agents, employees, servants, or invitees of the
Lessor, or Lessee or loss or damage to the property of the
Lessor or Lessee, their agents, employees, servants or
invitees, and to the person or property of any person of
corporation, arising directly or indirectly, out of the
occupancy of, presence on, or use of said leased premises or
any structures thereon by Lessee, its employees, agents, or
invitees, regardless of the negligence of Lessor.
(b) Lessee further agrees that if in any case
the release and indemnity provided in this Section 9 shall
INSURANCE not be valid, Lessor shall in such case have the full
benefit of any insurance effected by Lessee upon the
property injured, destroyed, or damaged and/or against the
hazard involved.
10. Lessee agrees to have all insurance policies
NO issued to it, or for or upon the Lessee's account, covering
SUBROGATION any injuries to persons or any loss or damage to property so
written that the insurer shall have no claim or resources
any kind whatsoever against Lessor or the premises.
11. Lessee agrees not to suffer or permit any lien
of mechanics or materialmen to be placed upon the premises
LIENS or any part thereof and, in case of any such lien attaching,
to immediately pay off and remove the same. It is further
agreed by the parties hereto that Lessee has no authority or
power to cause or permit any lien or encumbrance of any kind
whatsoever, whether created by act of
<PAGE> 4
Lease Agreement Page 4
Lessee, operation of law or otherwise, to attach to or be
placed on Lessor's title or interest, if any, in the
premises, and any and all liens and encumbrances created or
suffered by Lessee shall attach to Lessee's interest only.
12. It is further agreed that in case Lessee, with
the consent of Lessor, holds possession of the premises
HOLD-OVER beyond the term of this lease such action of the parties
shall have the effect of extending the term of this lease on
a month to month basis, subject in all respects to all of
the terms, conditions, covenants and agreements of this
lease, including all rights of termination in all respect as
herein provided.
13. If the whole or any part of the premises shall
be taken or condemned by any competent Authority for any
public use or purpose this lease shall, as to the part so
taken terminate as of the date when taken, or shall cease if
all of the premises be so taken. Rent shall abate
proportionately as to the part so taken, or shall cease if
all the premises be so taken. The entire amount of damages
or compensation payable or paid for the part taken and for
EMINENT- the remainder if any shall be paid to and retained by the
DOMAIN Lessor as its own property without apportionment. Lessee
hereby assigns to Lessor any claim which Lessee would have
to such damages. Lessee shall look solely to the said
Authority for any compensation or damages on account of
damage to Lessee's leasehold interest, Lessee's business
interests, Lessee's cost and expense of removing Lessee's
personal property from the premises and for the cost and
expense of moving any building or structure placed upon the
premises by Lessee and which Lessee would have the right to
remove as a lessee of the premises.
14. It is agreed that upon the happening of any of
the following: (1) if Lessee defaults in any of any
Lessee's undertakings in this lease or (2) if any voluntary
or involuntary petition or similar pleading under any
bankruptcy act be filed by or against Lessee, or (3) if the
leasehold interests of Lessee are levied upon or attached by
process of law, or (4) if Lessee makes an assignment for the
CAUSES FOR benefit of creditors, or (5) if a receiver be appointed for
BREACH any property of Lessee thereupon ipso facto and without
entry or other action by Lessor, or if the Lessee installs
signage without the previous express approval of the Lessor,
or (6) if Lessee does not comply with all local, county or
state regulations and health requirements, then such event
or action shall be deemed to constitute a breach of this
lease and this lease shall cease and determine.
15. All payments becoming due under this lease
UNPAID BILLS shall (1) be considered as rent and, if unpaid when due,
shall bear interest at 18% per annum until paid, (2)
constitute a lien upon any buildings or other property owned
by Lessee located upon the premises, and the lien may be
foreclosed according to law.
<PAGE> 5
Lease Agreement Page 5
TERMINATION 16. Either party may be any time terminate
REFUND this lease by giving 30 days notice of its intention to do
so. Upon any such termination if rent shall have
been paid in advance Lessor shall refund to Lessee the
unearned portion thereof for the period extending beyond
such date of termination.
SURRENDER 17. (a) Upon the termination of this lease by
OF PREMISES any manner, means, or contingency whatsoever, Lessee shall
without further notice or demand deliver possession of the
premises to Lessor in as good condition as when entered
upon. Lessee hereby agrees to remove all materials, signs,
debris, or any other articles, structures or facilities
owned by Lessee or permitted to be placed on the premises by
Lessee before the termination of this lease. Notwithstanding
that this paragraph shall not apply to major structural or
utility improvements to the area. Such improvements shall
remain in the area leased.
CLEARANCE (b) If Lessee shall fail to so remove such
OF PREMISES property, such failure shall constitute an abandonment of
such property and title thereto shall pass to Lessor
immediately, without any costs either by set-off, credit
allowance, or otherwise. Lessor may retain, tear down,
remove, or sell such property, or any part thereof, without
any liability for damage therefor in any respect whatsoever
and Lessee shall promptly pay Lessor for any and all
expenses incurred by Lessor in tearing down, removing or
selling such property.
FAILURE 18. Lessee shall pay Lessor as liquidated damages
TO VACATE and not as a penalty for forfeiture, $100 per day for all
the times Lessee shall retain possession of the premises or
any part thereof, after the termination of this lease
whether by lapse of time or otherwise. "Possession of the
premises" shall include, but shall not be limited to
continued placement of materials, signs, debris, or other
articles or facilities owned by lessee or permitted to be
placed on the premises by Lessee.
RE-ENTRY 19. If Lessee shall breach or default in any of
the terms of this lease, or if this lease shall expire or
terminate in any manner, it shall be lawful for Lessor then
or at any time thereafter to reenter the premises and take
possession thereof, with or without process of law, and to
use any reasonable or necessary force for regaining
possession. However, Lessee shall have the right to remove
certain of Lessee's properties as herein provided.
WAIVER OF 20. (a) No waiver of any default of Lessee
REMEDIES shall be implied from failure or omission by Lessor to take
any action or account of such default. No express waiver
shall effect any default other than the default specified in
the express waiver and that only for the time and to the
extent therein stated. No receipt of money by the Lessor
from Lessee (1) after any default by Lessee, (2) after the
<PAGE> 6
Lease Agreement Page 6
termination of this lease, (3) after the service of any
notice or demand or after the commencement of suit, or
(4) after final judgment for possession of the premises,
shall waive such default or reinstate, continue or extend
the term of this lease or effect in any way any such notice
or suit as the case may be.
(b) The erection of buildings or other
improvements on the premises shall not constitute a waiver
or affect in any way the right of either party to terminate
this lease.
NO 21. Any sale, assignment, transfer, or underletting
ASSIGNMENT of this lease by the Lessee without the previous written
consent of Lessor or Lessor shall be void. No act for
Lessor including acceptance of money by Lessor by any other
party, shall constitute a waiver of this position.
RIGHTS ARE 22. All rights and remedies of Lessor and Lessor
CUMULATIVE shall be cumulative and none shall exclude any other rights
and remedies allowed by law.
NOTICES 23. All notices, demands, elections, and other
instruments required or permitted to be given or made by
either party upon the other by the terms of this lease or
any statute shall be in writing. They shall be deemed to
have been sufficiently served if sent by certified or
registered mail with proper postage prepaid to Lessor or
Lessee at the respective address first above shown. Such
notices, demands, elections and other instruments shall be
considered as delivered to recipient on the first business
day after deposit in the U.S. Mail.
ENTIRE 24. All of the representations and obligations of
AGREEMENT Lessor are contained herein. No modification, waiver, or
amendment of this lease, or any of its terms, shall be
binding upon Lessor unless such are in writing and signed by
a duly authorized Officer of the Lessor.
RAIL SERVICES 25. Lessor make no warranties or representations
expressed or implied, as to continued rail service to the
premises.
JOINT 26. In the event that Lessee embraces two or more
OBLIGATION individuals or corporations, the covenants and agreements
herein contained shall be the joint and several obligations
of each of such persons or corporations.
MAINTENANCE 27. Lessee has examined and knows the conditions of
the premises and shall enter upon and take the same in their
condition at the commencement of the term of this lease.
Lessee will at its own cost and expense make any necessary
alterations required, and/or at the request of the Lessor,
subject to the review and approval of the City Manager or
his designee in advance of construction. Also, no other
alternations shall be made without the express consent of
Lessor.
<PAGE> 7
Lease Agreement Page 7
Lessee will make all repairs necessary to keep the premises
in at least as good a condition as when entered upon.
Repairs necessitated by ordinary wear and tear, by storm,
fire and wind shall be the sole responsibility of the Lessee.
Lessee agrees to indemnify, save, keep harmless Lessor and
Lessor and defend from all claims, demands, liability,
judgments, costs and expense, including attorney's fees,
arising or growing out of loss or damage to any property
whatsoever, other than property of Lessor, which is in,
upon, or about any part of the premises, from any cause
whatsoever.
INSURANCE 28. The Lessee agrees to obtain, at his own
expense and cost, and to keep full force and effect during
the term of this lease General Liability Insurance for a
combined single limit of not less than $1,00,000 in any one
occurrence for personal injury and/or property damage
liability. The insurance so afforded shall be written in
favor of Lessee and shall include coverage for liability and
indemnification assumed under the lease. Written evidence of
such insurance shall be filed with Lessor, and the insurance
policy and/or certificate of insurance MUST show the
following:
(a) The policy will not be canceled or materially
changed unless 30 days prior written notice is given to The
City of Lake Forest, 220 East Deerpath, Lake Forest,
Illinois 60045.
(b) This insurance policy covers the contractual
obligations of this lease. Nothing contained in this
section shall limit the liability of Lessee under Sections
10 and 29 hereunder.
SIGNAGE 29. No exterior signage will be permitted without
the written approval of The City of Lake Forest. Interior
signs will be designed and provided by the Lessee subject to
approval by the Lessor.
UTILITIES 30. The Lessee agrees that the electric utility
serving the premises will be separately metered and shall
pay all electrical utility charges applicable to the
operation of the business herein described and any other
utilities which are separately metered and used solely by
the Lessee.
SECURITY 31. Video cameras must be provided for each lobby
teller position, each drive-up teller position, and the
lobby entrance doors. Video surveillance should be provided
on a 24-hour basis.
There must be a direct alarm connection to the Public
Safety Building for all doors, windows and for teller
hold-ups as well as an alarm to indicate where a signal
originates. There must be high security deadbolts on all
doors, floor and ceiling rods in double doors, and
polycarbonate instead of glass in doors and teller windows.
<PAGE> 8
Lease Agreement Page 8
The Police Department must be provided with an updated
keyholder list indicating the nearest person to be first
contacted and must be promptly notified of changes to the
list.
OPTION TO 32. Lessee shall have the option to extend the
EXTEND lease, subject to reasonable agreement by Lessor, upon six
(6) months prior written notice to Lessor. The term of the
extension shall be for five (5) years. Lessor reserves the
right to review and revise the rent applicable to this lease
at the time of extension so as to adjust the rent equivalent
to (1) the average increase in rent for commercial space in
the West Lake Forest Tax Increment Financing District, (2)
any change in usage of the premises, (3) any assignment of
the lease, or (4) any underletting of the whole or any part
of the premises.
IN WITNESS WHEREOF, the parties hereto have executed these presents the
day and year first above written.
THE CITY OF LAKE FOREST
By /s/ Robert R. Kerf Jr.
ATTEST: -----------------------------
/s/ Barbara S. Douglas
- -----------------------------
(For Lessor)
LAKE FOREST BANK & TRUST COMPANY
By /s/ ???
----------------------------
ATTEST:
- -----------------------------
(For Lessee)
[SEAL]
<PAGE> 9
Exhibit A
LAKE FOREST TELEGRAPH ROAD TRAIN STATION
[BLUEPRINT DIAGRAM]
<PAGE> 10
EXHIBIT A-I
Base Rent Schedule
------------------
Monthly Annual
------- ------
First Month Free
Next 11 months $5,887.42 $70,649.00
Next 12 months $6,064.04 $72,768.47
Next 12 months $6,245.96 $74,951.52
Next 12 months $6,433.34 $77,200.07
Next 12 months $6,626.34 $79,516.07
Next 4 months $6,825.13 ------
<PAGE> 11
EXHIBIT B
LEGAL DESCRIPTION
LOT 2 IN CORPORATE 500 SUBDIVISION, A SUBDIVISION OF PART OF THE SOUTHWEST 1/4
OF SECTION 33, TOWNSHIP 43 NORTH, RANGE 122, EAST OF THE THIRD PRINCIPAL
MERIDIAN, ACCORDING TO THE PLAT THEREOF RECORDED FEBRUARY 4, 1988, AS DOCUMENT
2654362, IN LAKE COUNTY, ILLINOIS.
<PAGE> 12
EXHIBIT C
(Construction Rider)
Construction of the Premises: Landlord and Tenant agree that their
respective rights and obligations in reference to the construction of the
Premises shall be as follows:
1. A. Tenant hereby agrees to cause to be prepared and
submitted to Landlord, at Tenant's expense, a detailed space plan ("Space
Plan") showing the location and details of all improvements to be constructed
on the Premises. Based on said Space Plan, Landlord's architect shall prepare
Architectural and Mechanical Drawings at Landlord's sole cost and expense.
B. Landlord hereby agrees to cause to be prepared at
it's expense and submitted to Tenant after Tenant's submission under clause
A(i) above, for Tenant's approval (which approval shall not be unreasonably
withheld), mechanical (sprinkler, air conditioning, heating, electric and
plumbing) drawings (the "Mechanical Drawings"), provided that Tenant and
Tenant's architect shall be responsible for coordinating the Mechanical
Drawings with the Architectural Drawings to the extent the same relate to work
which is in addition to or exceeds Building Standard Work. Tenant shall notify
Landlord of its approval or disapproval (specifying the reasons therefor) of
such submission of same. It is expressly understood and agreed that any delay
caused by Tenant's or its architect's failure to coordinate the Mechanical
Drawings with the Architectural Drawings as required above, or by Tenant's
failure to timely notify Landlord of its approval or disapproval of any
Mechanical Drawings submitted by Landlord and any delay caused by changes to
said drawings necessitated by changes to Tenant's plans, specifications and
drawings shall be "Tenant Delays" hereunder. The approved Architectural
Drawings and Approved Mechanical Drawings are herein together referred to as
the ("Drawings").
2. Performance of Work.
A. Landlord, at Landlord's sole cost and expense, shall
do or cause to be done the work on a turnkey basis to the extent provided in
the Space Plan C7 and Plan Notes prepared by Otis Associates, Inc. and attached
hereto as Attachment B. All other work provided for in the Drawings and in any
changes thereto made in accordance with Paragraph B below, and any other work
which Landlord agrees to perform at Tenant's request and upon submission by
Tenant of all necessary amendments or additions to the Drawings (all of such
foregoing nonstandard work, including, without limitation, the work provided
for in Paragraph 7 below, being herein called "Tenant's Extra Work") shall be
done as a Tenant's extra, at Tenant's sole cost and expense as provided in
Paragraph 3 below. Without limitation of the foregoing, Tenant and Tenant's
architect shall cooperate with Landlord and Landlord's contractor
1
<PAGE> 13
to enable Landlord's contractor to obtain all required building and other
permits with respect to the Premises prior to commencement of construction or
as soon as possible thereafter and shall, in any event, meet with Landlord's
contractor and the Building Department of the Village of Deerfield or other
governmental authorities having jurisdiction thereover from time to time upon
one (1) day's notice from Landlord or Landlord's contractor and shall
immediately make such changes to the Drawings as are required by the Building
Department in connection with the issuance of the building and other permits.
B. If Tenant shall require any Tenant's Extra Work in
addition to that incorporated in the Drawings, Tenant shall deliver to Landlord
for its approval, which approval shall not be unreasonably withheld, the
necessary additional drawings and specifications (the "Additional Drawings")
for the Additional Work. If Landlord does not approve of the Additional
Drawings as delivered by Tenant, Landlord, shall within seven (7) business days
of submission thereof, advise Tenant of the changes required in the Additional
Drawings so that they will meet with Landlord's approval. Tenant shall cause
the Additional Drawings to be revised and delivered to Landlord for its final
review and approval within seven (7) business days after Tenant's receipt of
such advise or Tenant shall be deemed to have abandoned its request for such
Tenant's Extra Work. Landlord shall furnish Tenant with written estimates of
the cost of the Tenant's Extra Work. Landlord shall in no event be obligated
to perform any particular portion of Tenant's Extra Work (whether provided for
in the Drawings or in any Additional Drawings) unless and until (i) Tenant has
approved the written estimates of the cost of such Tenant's Extra Work
submitted by Landlord to Tenant and (ii) paid to Landlord an amount equal to
twenty-five percent (25%) of such cost as set forth in said estimate. If
Tenant shall fail to approve any such estimates and make such payment to
Landlord within seven (7) business days from the receipt of such estimate by
Tenant, the same shall be deemed disapproved by Tenant, Landlord shall not be
required to proceed thereon and Tenant shall be deemed to have abandoned its
request therefor. Subject to the provisions of the next succeeding sentence,
the cost for Tenant's Extra Work performed by Landlord shall be paid by first
applying the deposit made by Tenant in accordance with the foregoing provisions
and the balance of said costs shall be paid from time to time based upon the
percent of completion of Tenant's Extra Work within ten (10) days of Landlord's
request for payment. All retainage (which shall not exceed five percent (5%),
less an amount necessary for the payment of the costs required to be incurred
to complete any punch list items shall be paid with the monthly payment request
submitted by Landlord after substantial completion of the work in the Premises
to be performed by Landlord. Final payment shall be made within fifteen (15)
days after completion of all punch list items. In any event, Landlord shall be
paid an amount equal to fifteen percent (15%) of the cost of all work to be
performed whether such work was
2
<PAGE> 14
performed by Landlord or others, for Landlord's overhead (which overhead is in
addition to the general contractor's overhead and profit).
3. Except as expressly set forth in the Lease (including, without
limitation, in this Construction Rider), Landlord has no other agreement with
Tenant and has no other obligation to do any other work or pay any amounts with
respect to the Premises. Any other work in the Premises which may be permitted
by Landlord pursuant to the terms and conditions of the Lease shall be done at
Tenant's sole cost and expense and in accordance with said terms and conditions
of the Lease.
4. The number of days of delay in substantially completing the
Premises arising, directly or indirectly, out of or on account of any of the
following events shall constitute "Tenant Delays" hereunder and under the
Lease:
(a) Tenant's failure to approve any plans, drawings
and/or specifications in accordance with Paragraph 1B hereof; or
(b) Tenant's failure to approve cost estimates within the
time specified in Paragraph 2 hereof; or
(c) Tenant's request for materials, finishes or
installations other than Building Standard; or
(d) Tenant's changes in the work or the approved drawings
and or specifications therefor (notwithstanding Landlord's approval of such
changes); or
(e) The performance of any work by Tenant or any person,
firm or corporation employed by Tenant; or
(f) Any other default by Tenant or failure by Tenant or
its agents or contractors to perform their respective obligations as and when
required under this Work Letter.
5. Landlord shall permit Tenant and Tenant's agents and
contractors which have been approved by Landlord to enter said Premises prior
to the Commencement Date in order that Tenant may do such other work as may be
required by Tenant to make said Premises ready for Tenant's use and occupancy
thereof and, in connection therewith, Landlord shall allow Tenant to have use
of the hoist, if any, serving the Building; provided that Tenant's agents and
contractors shall reimburse Landlord or Landlord's contractor for the cost of
the use of said hoist after normal operating hours and for the cost of the use
of said hoist by Landlord's contractors in the Building (whether performing
work for Tenant or others) after normal operating hours to the extent the use
by said other contractors of the hoist after normal operating hours resulted
from the use of the hoist by Tenant's contractors during normal
3
<PAGE> 15
operating hours. Said cost shall be determined at Landlord's reasonable
discretion. Scheduling of the use of said hoist shall be at the reasonable
discretion of Landlord or its contractor. If Landlord permits such entry prior
to commencement of the Term, then such permission is conditioned upon Tenant
and Tenant's agents, contractors, workmen, mechanics, suppliers and invitees,
working in harmony and not interfering with Landlord and Landlord's agents and
contractors in doing Landlord's work in said Premises or for other tenants and
occupants of the Building. Without limitation of the foregoing, Tenant agrees
that all services and work performed on the Premises, including telephone
installation, carpeting, materials and personal property delivered to the
Premises on behalf of or for the account of Tenant shall be performed or
delivered, as the case may be, only by persons covered by a collective
bargaining agreement with the appropriate trade union. In the event Tenant
wishes to assign its contract with one of its separate contractors to
Landlord's general contractor, such assignment shall be subject to Landlord's
approval and the payment by Tenant of all applicable fees for the Landlord's
general contractor and Landlord's coordination. If at any time such entry
shall cause or threaten to cause such disharmony or interference, Landlord
shall have the right to withdraw such permission upon twenty-four (24) hours
written notice. Tenant agrees that any such entry into and occupation of the
Premises shall be deemed to be under all of the terms, covenants, conditions
and provisions of the Lease except as to the covenant to pay Rent, and further
agrees that in connection therewith Landlord shall not be liable in any way for
any injury, loss or damage which may occur to any of Tenant's work and
installations made in said Premises or to properties placed therein prior to
the commencement of the Term of the Lease, the same being at Tenant's sole
risk. In addition, Tenant shall require all entities performing work on behalf
of Tenant to provide protection for existing improvements to an extent that is
satisfactory to Landlord and shall allow Landlord access to the Premises, for
inspection purposes, at all times during the period when only the Tenant is
undertaking construction activities on Tenant's own behalf. In addition to the
foregoing, Tenant shall not permit Tenant's contractors to commence any work
until all required insurance has been obtained by Tenant's contractors and
certificates evidencing such coverage have been delivered to Landlord.
Tenant's contractors shall secure, pay for and maintain during the continuance
of their respective work within the Premises, insurance, which shall be
endorsed in all policies to include Landlord (and Landlord's beneficiaries) and
its contractor and their respective employees and agents as additional insured
parties and which shall provide thirty (30) days' prior written notice of any
alteration or termination of coverage, in the amounts and insuring such risks
as Landlord may reasonably require.
6. Tenant, at the time it submits to Landlord its Architectural
Drawings, shall designate its representative with respect to the matters set
forth in this agreement and such person
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shall have full authority and responsibility to act on behalf of Tenant as
required herein. Changes to the Drawings may be made only by written direction
from Tenant to Landlord on a form approved by Landlord, which direction must be
signed by Tenant's representative. Tenant's architect shall not be deemed the
authorized representative of Tenant unless Tenant specifically advised Landlord
in writing of such appointment. Tenant shall inform Landlord in writing of any
change in its representative.
7. Landlord shall give Tenant or shall cause its architect to
give Tenant seven (7) days' prior written notice of the date on which the work
to be performed by Landlord hereunder shall be substantially completed. Tenant
shall then have the obligation to conduct an inspection of the Premises with
Landlord and its representatives within seven (7) days of such notice and to
give Landlord, within said seven (7) day period, a punchlist of all items to be
completed and/or corrected ("Punch List Items"). Any items not on such
punchlist shall be deemed accepted by Tenant, except for latent defects which
exception, as to latent defects, shall be effective for one (1) year following
the Commencement Date (unless such defect was caused by Tenant or its agents,
contractors or suppliers).
8. The failure by Tenant to pay any monies due Landlord pursuant
to this Construction Rider within the time period herein stated shall be deemed
a default under the terms of the Lease. All late payments shall bear interest
pursuant to the Default Rate.
LANDLORD'S INITIALS TENANT'S INITIALS
______________________________ ______________________________
5
<PAGE> 17
Attachment A to Exhibit C
BUILDING STANDARDS
a. Partitions.
(1) Interior dry wall partitions with 2-1/2"
metal studs, 24 inches on center and 5/8" gypsum board on both sides on the
basis of one lineal foot of partition for every 18 square feet of rentable
area, outside of the building core. Partitions shall be to the underside of
ceiling height. There shall be no jogs, curves or angles in any partition.
Partitions terminating at the building walls shall meet either a mullion, a
column or a partition enclosure.
b. Doors and Bucks. One entry door per Tenant per
floor. Entry doors and interior doors will be 3'0" x 8'10" x 1-3/4" solid
core, full height, plain sliced mahogany, including metal frames. Interior
door(s) supplied on a basis of one door for every 400 square feet of rentable
area.
c. Hardware. Latch sets, butts and door stops for all
interior doors. Lock sets, closer, butts and door stops for entrance doors.
Lever hardware to be polished chrome.
d. Ceilings. Modular 24" x 24" Armstrong Tegular
Fissured Minatone tile with revealed accent suspension system.
e. Flooring. Floors will be finished to accept carpet
with 2-1/2" vinyl base as required for Building Standard partitions.
f. Electrical.
(1) 208/120 volt, 3 phase, 4 wire for lighting,
receptacles and miscellaneous power. 480/277 volt, 3 phase, 4 wire for
heating, ventilating and air-conditioning power.
(2) Recessed, fluorescent lighting fixtures, size
24" x 48", with high intensity parabolic lens; not more than one such fixture
per 90 square feet of rentable area.
(3) Single pole toggle switches one per
450 square feet of rentable area.
(4) Landlord shall initially install lamps.
(5) One 110V duplex wall receptacle outlet for
every 240 square feet of rentable area and one wall telephone outlet for every
250 square feet of rentable area to be located on partitions.
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(6) Exit signs and emergency lighting as required
per Code.
(7) Circuits required by Code to connect items
above to the panel board, as determined by Landlord's engineers.
g. Heating, Ventilation and Air Conditioning. Variable
Air Volume System with perimeter heating supplied by electric radiant panels
above the window line. (Heating and cooling specifications subject to
adjustment pursuant to relevant laws and government regulations.)
Design conditions:
Summer: Outside dry bulb 91 degrees F, wet bulb 75 degrees F; inside
76 degrees F; 50% relative humidity.
Winter: Outside -10 degrees F, inside 70 degrees F.
h. Painting and Wall Coverings.
(1) Walls shall receive one prime coat and one
finish coat of latex flat paint. Colors to be selected by Tenant from building
standard color chart, not to exceed one color per room.
(2) Vinyl or paper wall coverings to be furnished
and installed at Tenant's expense.
i. Blinds. Building standard horizontal thinline blinds
will be provided at all exterior windows.
j. Sprinkler Heads. One concealed head, flush mounted
with finished cap, per 225 square feet of rentable area.
k. Landlord's Work does not include hardware, 2-1/2"
vinyl base or painting for any door or partition supplied as Extra Work.
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ATTACHMENT B TO EXHIBIT C
PLAN NOTES:
DOORS: 1. Building std full height
2. Entrance doors to be full ht. glass
GLASS: 1. Glass partitions are clear in hollow metal frame
2. Glass in conference room to receive levelor mini-blinds
3. Perimeter glass to receive building standard blinds
CEILING: 1. Bldg. std 2x2 grid and tile
LIGHTING: 1. Bldg. std 2x4 light fixtures w/"paracube" lens throughout
office space
2. Conference room to receive:
(a) (2) Two downlights @ glass wall
(b) (6) Six wall washers
3. Undercabinet task lighting at:
(a) Both reception stations
(b) (2) Two kitchen counter locations
4. Downlighting in soffit above file area adjacent to work
stations
1, 2, 3 and 4-(6) six total
FLOORING: 1. Porcelain tile - 8" x 8" at entrance corridor
2. 4" x 4" ceramic tile in kitchen
3. All rooms carpeted (unless noted otherwise)
4. Carpet border in: reception, conference room, pres. and
dir. offices
WALLS: 1. All walls to receive vinyl wall covering
2. Closet interior to be paint
MISC.: 1. Provide for paging intercom system w/music sound system
ROOM NOTES:
RECEPTION: 1. Reception counters to be plastic laminate
2. Front reception counter to have top shelf @ 42" H.,
counter at 30" H.
3. Planter to be 12" H. pl. lam. box w/galv. sheet
metal liner
CONFERENCE
ROOM: 1. Corner cabinet to have doors w/one (1) shelf
2. Conf. table to be priced as an alternate in
construction documents
<PAGE> 20
KITCHEN: 1. Pl. lam. upper and lower cabinets
2. Include following:
(a) Upright refrigerator
(b) Dishwasher
(c) Stainless steel double sink and faucet
(d) Food disposer
(e) Ice maker
(f) Cold water line to coffee maker
(g) Coffee maker
STORAGE RM: 1. (5) Five adjustable 12" shelves where noted
2. Mail and fax area to receive pl. lam. upper
and lower cabinets as noted
3. Provide blocking in wall at "mail" area for mail
bins provided by tenant
COMP. RM: 1. Pl. lam. countertop (30") w/(2) adj. shelves above
MISC: 1. Low-ht. partition cap @ sec. station to be plastic
laminate
2. Low-ht. partition to be drywall
3. Continuous countertop (adjacent to work stations
1, 2, 3, 4) to be plas. lam.
4. Work stations provided by tenant. Provide power as
req'd.
5. Furniture provided by tenant
<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 as amended.
KPMG PEAT MARWICK LLP
Chicago, Illinois
January 21, 1997
<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
January 23, 1997
