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As filed with the Securities and Exchange Commission on August 30, 1996 Registration No. 333-6581
====================================================================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933
_________________________
ST. JOSEPH CAPITAL CORPORATION
(Name of small business issuer in its charter)
DELAWARE 6022 35-1977746
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
_________________________
2015 WESTERN AVENUE
SOUTH BEND, INDIANA 46629
(219) 283-0773
(Address and telephone number of principal executive offices)
_________________________
3820 EDISON LAKES PARKWAY
MISHAWAKA, INDIANA 46545
(Address of principal place of business or intended principal place of business)
JOHN W. ROSENTHAL
PRESIDENT & CHIEF EXECUTIVE OFFICER
ST. JOSEPH CAPITAL CORPORATION
2015 WESTERN AVENUE
SOUTH BEND, INDIANA 46629
(219) 283-0773
(Name, address and telephone number of agent for service)
With copies to:
JOHN E. FREECHACK, ESQ. CLAUDIA V. SWHIER, ESQ.
DENNIS R. WENDTE, ESQ. BARNES & THORNBURG
BARACK, FERRAZZANO, KIRSCHBAUM & PERLMAN 1313 MERCHANTS BUILDING
333 WEST WACKER DRIVE, SUITE 2700 11 SOUTH MERIDIAN STREET
CHICAGO, ILLINOIS 60606 INDIANAPOLIS, INDIANA 46204
(312) 984-3100 (317) 231-7231
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Approximate date of proposed sale to the public: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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 statement 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 statement 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. [ ]
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CALCULATION OF REGISTRATION FEE
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Amount to be Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Registered (1) Offering Price Aggregate Registration Fee (3)
Securities to be Registered per Share (2) Offering Price
(2)
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Common Stock, $.01 Par Value 1,265,000 $10.00 $12,650,000 $4,363
shares
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(1) Includes 165,000 shares of Common Stock subject to the Underwriter s
over-allotment option.
(2) Based upon the initial public offering price of the Common Stock.
(3) Of which fee $3,966 was paid with the original filing of this
Registration Statement.
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.
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SUBJECT TO COMPLETION, DATED AUGUST 30, 1996
PROSPECTUS
1,100,000 SHARES
ST. JOSEPH CAPITAL CORPORATION
COMMON STOCK
All of the shares of Common Stock offered hereby are being
sold by St. Joseph Capital Corporation (the "Company"), a Delaware
corporation and a proposed bank holding company organized to own
all of the common stock of St. Joseph Capital Bank, an
Indiana-chartered bank (in organization) to be located in
Mishawaka, Indiana (the "Bank"). Neither the Company nor the Bank
has ever conducted any business operations other than matters
related to their initial organization and the raising of capital.
See "Business." There has been no public trading market for the
Common Stock. The Underwriter has advised the Company that it
anticipates making a market in the Common Stock following
completion of this offering. See "Underwriting" for a discussion
of the factors considered in determining the initial public
offering price. The Company expects that quotations for the Common
Stock will be reported on the OTC Bulletin Board under the symbol
"SJOE." Unless otherwise waived by the Underwriter, shares of
Common Stock will be sold only in minimum lots of 1,000 shares
($10,000)
________________________
THE COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVES A HIGH
DEGREE OF RISK. INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS
OFFERING UNLESS THEY CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS" ON PAGE 7, GENERALLY, AND "RISK FACTORS --
FAILURE TO COMMENCE OPERATIONS," PARTICULARLY.
_________________________
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 COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Price to Public Underwriting Discounts and Proceeds to Company(3)
Commissions(1)(2)
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Per Share . . . . . . . . . . $10.00 $0.70 $9.30
- -----------------------------------------------------------------------------------------------------------------------
Total(4) . . . . . . . . . . $11,000,000 $770,000 $10,230,000
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(1) The Underwriter has agreed with the Company that the Underwriting
Discounts and Commissions will be reduced to $0.30 per share for sales
to certain investors identified to the Underwriter by the Company.
See "Underwriting."
(2) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933,
as amended.
(3) Before deducting estimated offering expenses payable by the Company of
$113,500, which amount does not include certain organizational and
other operating expenses which were $109,426 as of May 31, 1996, and
which will continue to be incurred until the Bank commences
operations.
(4) The Company has granted the Underwriter a 30-day option to purchase up
to 165,000 additional shares of its Common Stock solely to cover
over-allotments, if any. If the Underwriter exercises such option in
full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $12,650,000, $885,500 and
$11,764,500, respectively. See "Underwriting."
_________________________
The shares of Common Stock are offered by the Underwriter subject to
prior sale, when, as and if delivered to and accepted by it, and subject to the
right of the Underwriter to withdraw, cancel or modify such offer and to reject
orders in whole or in part. It is expected that delivery of the shares of
Common Stock will be made on or about ______________, 1996.
ROBERT W. BAIRD & CO.
INCORPORATED
THE DATE OF THIS PROSPECTUS IS ________________ , 1996.
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.
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[INSERT MAP]
_________________________
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, ANY
OTHER GOVERNMENT AGENCY OR OTHERWISE.
_________________________
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER 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 STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
_________________________
AVAILABLE INFORMATION
The Company is not currently a reporting company pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), but will file
the reports required to be filed thereunder for the Company's 1996 fiscal year
and for any other periods for which the Exchange Act's requirements apply to
the Company. The Company, which will use a December 31 fiscal year end,
intends to furnish its stockholders with annual reports containing audited
financial information and, for the first three quarters of each fiscal year,
quarterly reports containing unaudited financial information.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and financial statements appearing elsewhere in this
Prospectus. Unless the context clearly suggests otherwise, references in this
Prospectus to the Company include the Bank. Except as otherwise indicated, all
information in this Prospectus assumes no exercise of the Underwriter's
over-allotment option.
THE COMPANY
The Company is a proposed bank holding company organized in February,
1996, under Delaware law to own all of the common stock of the Bank. The Bank
is organizing as an Indiana-chartered commercial bank with depository accounts
to be insured by the Federal Deposit Insurance Corporation (the "FDIC"). The
Bank intends to offer a full range of commercial and consumer banking services
primarily within a fifteen mile radius of Mishawaka, Indiana. This area
encompasses a substantial portion of the Indiana communities of Mishawaka,
South Bend, Notre Dame, Granger, Osceola and Elkhart, and certain Michigan
communities, including Niles and Edwardsburg. Due to the overlap of this
metropolitan area over state lines, this region is often referred to as
"Michiana." The Company and the Bank have applied for all necessary regulatory
approvals, and assuming the successful completion of this offering, anticipate
commencing business by the first quarter of 1997. The Company currently
maintains its offices at 2015 Western Avenue, South Bend, Indiana 46629. The
Company's telephone number is (219) 283-0773.
The liberalization of the interstate banking laws of Indiana and
surrounding states has led to substantial consolidation in the state of Indiana
and particularly in the Michiana area. Many of the area's financial
institutions have been acquired by large regional organizations headquartered
outside of the Michiana area. As a result of such consolidation, the Company's
management believes that the competitive and economic environment is right for
a new, independent, locally-managed bank to serve the financial needs of
Michiana's residents. The Company intends to implement a strategy which
focuses on providing a superior level of customer service, close attention to
personal needs and quick response times. Although the area has seen the loss
of a number of its community banks within the past several years, no new banks
have commenced operations in north central Indiana within the last 25 years.
ORGANIZERS AND DIRECTORS
The organizers and directors of the Company are all recognized and
established individuals in their local communities. As a group, they have
significant banking and business experience and many close personal ties to the
Michiana area. John W. Rosenthal, the Company's Chairman of the Board,
President and Chief Executive Officer, is a native of, and attended school in,
the Michiana area through his graduation from the University of Notre Dame. He
has 11 years of experience in correspondent banking and working with Indiana
banks. Mr. Rosenthal was most recently a Vice President and Senior Corporate
Banker at The First National Bank of Chicago, with primary account
responsibility for middle market lending in Indiana and downstate Illinois.
While employed at The First National Bank of Chicago, he maintained his primary
residence in the Granger area for the past three years. He is active in
community affairs and currently serves as the President of the Board of
Education at Marian High School in Mishawaka, Indiana.
Three of the Company's directors, Richard Rosenthal, Arthur McElwee
and Jack Matthys, served as executive officers of St. Joseph Bank & Trust
Company ("St. Joseph Bank") and St. Joseph Bancorporation, its parent bank
holding company, in South Bend, Indiana, at various times before their
acquisition in 1986. Richard Rosenthal and Arthur McElwee, as well as Jerry
Hammes, another director of the Company, also served as directors of St. Joseph
Bank and St. Joseph Bancorporation. Richard Rosenthal later served as the
Director of Athletics for the University of Notre Dame from 1987 to 1995, and
Arthur McElwee is currently the President of a manufacturing business located
in Niles, Michigan. After leaving Trustcorp Bank, the successor to St. Joseph
Bank, Mr. Matthys served as President of Krizman, Inc. until the end of 1992.
Jerry Hammes is engaged in real estate development in South Bend, Indiana. His
involvement in the financial services industry began in 1956 when he co-founded
a savings and loan association located in Illinois. He is currently Chairman
and majority stockholder of two bank holding companies and a community bank
which he co-founded in 1962 and which is located in northern Illinois. One of
the other directors of the Company, Robert A. Sullivan, was born and raised in
the South Bend area and is currently the
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President of a bank located near Toledo, Ohio, which he and others began in
1989 and which had grown to over $483 million in assets as of the end of last
year.
The other directors of the Company are all well-established business
people in other areas besides banking. They have lived in the Michiana area
for many years and have developed a number of close commercial and business
relationships which they believe will add to the success of the Company.
Arthur Decio is the Chairman and Chief Executive Officer of Skyline
Corporation, a New York Stock Exchange listed company headquartered in Elkhart,
Indiana. Scott C. Malpass is the Associate Vice President for Finance and
Chief Investment Officer for the University of Notre Dame and Helen Krizman
serves as the Controller of various affiliated manufacturers managed by The
Warrick Corp., based in Elkhart, Indiana. David Eckrich is a recognized
residential real estate developer who lives in Granger, Indiana, and V. Robert
Hepler is the President and Chief Executive Officer of VRH Rental & Sales, a
construction sales and rental company.
The Company's directors believe that their long-standing ties to the
community, coupled with their combined business and banking experience, provide
them with a unique perspective of the area's needs and the desire for a new
independent bank under local control. They further believe that the community
will react favorably to this new enterprise.
MARKET AREA
The Bank's main office will be located in Mishawaka, Indiana, which is
located in the approximate center of the Michiana area. According to Standard
& Poor's August 21, 1995, edition of CreditWeek Municipal, the demographics of
South Bend, Indiana, which comprises a major portion of the Michiana area, are
characterized by a growing and diversifying local economy, average income
levels and strong financial performance. The area's retail, distribution,
convention and tourism, health care and services sectors have expanded to
offset the decrease in manufacturing jobs which has occurred in recent years.
The University of Notre Dame, with over 10,000 students on the northeast side
of the city of South Bend, is the area's largest employer and contributes to
the stability of the local economy. South Bend is also home to eight other
colleges and technical schools providing additional stability and access to a
skilled work force.
The Michiana area has also become a large provider of health care
services. Memorial Hospital and St. Joseph's Medical Center together employed
approximately 4,660 residents at September, 1995. Based upon levels of
employment in the South Bend area, it is estimated that manufacturing still
supplied approximately 17% of the area's total employment in 1995. Allied
Signal, Inc. and A. M. General Corp. are two of the region's largest
manufacturers, but the area is also home to a number of smaller manufacturing,
retail and service businesses. Many major manufacturing companies are also
located in adjacent Elkhart County, including Bayer Corporation, Coachmen
Industries, CTS Corporation, Goshen Rubber Co., Inc., Holiday Rambler, LLC and
Skyline Corporation. Management believes this diverse commercial base provides
significant potential for business banking services, together with personal
banking services for owners and employees of these entities.
STRATEGY
The objective of the Banks organizers and management is to create a
customer-driven financial institution focused on providing high value to
clients by delivering products and services matched directly to their needs.
Management of the Company believes that such a bank can attract those clients
who prefer to conduct business with a locally-managed institution that
demonstrates an active interest in their businesses and personal financial
affairs.
With an experienced staff to provide a superior level of personalized
service, management believes it will be able to generate competitively priced
loans and deposits. The Bank also expects to enter into agreements with
third-party service providers to provide clients with convenient electronic
access to their accounts and to deliver other bank products such as credit
cards, debit cards and home banking services. The use of
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third-party service providers is intended to allow the Bank to remain at the
forefront of technology while minimizing the costs of delivery. This "high
touch-high tech" manner of operations is expected by management to be appealing
to clients who have been receiving banking services in the depersonalized
environment of the Bank's larger competitors. See "Business -- Business
Strategy."
BANK PREMISES
The Company anticipates that the Bank's main office will be located in
a leased building at 3820 Edison Lakes Parkway, Mishawaka, Indiana. According
to the Chamber of Commerce of St. Joseph County, this location is in a fast
growing, high income area close to shopping and residential and commercial
development. Management believes that the Bank's main office will be
convenient to potential customers who wish to combine their banking with other
business and personal activities. Under the terms of the proposed lease, the
Company would pay initial annual rent of $67,500, subject to annual increases
during the term of the lease, and the Company, the Bank or an affiliate of
either would have an option to purchase this property at any time during the
term of the lease for a fixed price of $800,000.
The Company expects to begin operations in the leased building during
the second quarter of 1997. Some renovation work, which is expected to be
accomplished within approximately 45 days after it has begun, would be
necessary before the Bank would be able to commence operations from its
permanent main office. The cost of such renovation is expected to be
approximately $125,000. Until that time, the Company anticipates that the Bank
will be located in a temporary modular facility on vacant land that is being
leased by the Company and is adjacent to the Bank's future main office. The
Bank expects to commence operations in such temporary facility by the first
quarter of 1997, at a current estimated cost of $2,000 per month. The Bank s
main office would also serve as the Company's corporate headquarters.
COMPETITION
The banking industry in the Bank's proposed market area has
experienced substantial consolidation in recent years. Many of the area s
locally owned or managed financial institutions have either been acquired by
large regional bank holding companies or have been consolidated into branches.
This consolidation has been accompanied by numerous pricing changes, the
dissolution of local boards of directors, management and branch personnel
changes and, in the perception of the Company's organizers, a decline in the
level of customer service. With recent changes in interstate banking
regulation, this type of consolidation is expected to continue.
Management believes that this competitive situation, when coupled with
the area's growing and diversified economy, creates a favorable opportunity for
a new commercial bank managed by experienced local business people. Management
s experience indicates that a locally managed community bank can attract
customers by providing highly professional personalized attention, responding
in a timely manner to product and service requests and exhibiting an active
interest in customers business and personal financial needs. The Bank will
be the only locally managed independent commercial bank with its main office
located in Mishawaka, Indiana.
Initial reaction from the local community to the formation of the Bank
has been very positive. Many local businesses and consumers have indicated to
the Company's directors their intent to transfer some or all of their banking
relationships to the Bank after it commences operations. This interest appears
to result primarily from the Bank's intent to focus on the local interests of
the Michiana area and from the reputations of the Company's directors within
this community.
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THE OFFERING
Securities offered . . . . 1,100,000 shares of Common Stock
Minimum purchase . . . . . 1,000 shares ($10,000)
Maximum purchase . . . . . 25,000 shares ($250,000)
Common Stock to be
outstanding after this
offering . . . . . . . . . 1,100,000 shares
Use of proceeds by the
Company . . . . . . . . . The net proceeds to the Company from this
offering (assuming no exercise of the
over-allotment option, and excluding
organizational and other operating expenses which
were $109,426 as of May 31, 1996) are estimated
to be $10,116,500. Management believes that these
factors are often lacking at a branch of a large
regional bank. 00. The Company will invest $9
million of the net proceeds of this offering in
the Bank to provide the Bank's initial
capitalization. The Bank will use approximately
$125,000 of these funds to remodel the leased
premises that will serve as its main office,
and approximately $740,000 to purchase
furniture, fixtures and equipment and other
necessary assets for the Bank s operations. It is
currently anticipated that the balance of such
amount received by the Bank will be used to fund
investments in loans and securities and for
payment of operating expenses. The Company, the
Bank or an affiliate of either may also use
$800,000 from this offering to purchase the Bank s
main office. Depending upon the final allocation
of organizational costs and offering expenses
between the Company and the Bank, a total of
$275,000 of the net proceeds of this offering will
be used by the Company and the Bank to pay back
organizational loans made by the Company's
directors. Under the terms of these loans, the
directors may choose to receive payment in full
or in part through their receipt in this
offering of shares of Common Stock valued at the
Price to Public. All of the Company's directors
have indicated their present intention either to
elect such option or to invest at least an
equal amount in direct purchases of Common Stock
in this offering. In addition, $1,000 of such
proceeds will be used by the Company to redeem
the 100 shares of Common Stock issued to
facilitate the Company s organization. Any
remaining funds (including the net proceeds from
an exercise of the Underwriter s over- allotment
option) will generally be used by the Company
for operating purposes and for possible future
capital contributions to the Bank. These funds
would also be available to partially finance
possible acquisitions of other financial
institutions or for expansion into other lines
of business closely related to banking. See "Use
of Proceeds."
Risk factors . . . . . . . The purchase of the securities offered hereby
involves a high degree of risk and should be
considered only by persons who can afford to
sustain the total loss of their investment. See
"Risk Factors."
SUMMARY FINANCIAL DATA
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MAY 31, 1996
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BALANCE SHEET DATA: ACTUAL AS ADJUSTED (1)
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Cash and securities . . . . . . . . . . . . . . . . . . . . . $ 244,042 $10,084,542
Total assets . . . . . . . . . . . . . . . . . . . . . . . . 246,364 10,086,864
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 354,790 79,760
Stockholders equity . . . . . . . . . . . . . . . . . . . . $(108,426) $10,007,074
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____________________
(1) Adjusted to reflect the application of the estimated net proceeds
from the shares offered hereby. See "Use of Proceeds."
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RISK FACTORS
The Common Stock offered hereby is speculative, involves a high degree
of risk and should be considered only by persons who can afford the loss of
their entire investment. The following constitute some of the potential risks
of an investment in the Common Stock and should be carefully considered by
prospective investors prior to purchasing shares of Common Stock. The order of
the following is not intended to be indicative of the relative importance of
any described risk nor is the following intended to be inclusive of all risks
of investment in the Common Stock.
LACK OF OPERATING HISTORY; SIGNIFICANT INITIAL LOSSES EXPECTED
Neither the Company nor the Bank has any operating history. The
business of the Company and the Bank is subject to the risks inherent in the
establishment of a new business enterprise. Because the Company is only
recently formed, the Company and the Bank have only recently applied for the
necessary regulatory approvals and the Bank has not commenced banking
operations as of the date hereof, prospective investors do not have access to
all of the information that, in assessing their proposed investment, is
available to the purchasers of securities of a financial institution with a
history of operations. The Company's profitability will depend primarily upon
the Bank's operations and there is no assurance that the Bank will ever operate
profitably. As a result of the substantial start-up expenditures that must be
incurred by a new bank, the Bank (and thus the Company) can be expected to
incur significant operating losses during its initial years of operations.
FAILURE TO COMMENCE OPERATIONS
Although the Company and the Bank expect to commence operations in its
temporary modular facility by the first quarter of 1997, there can be no
assurance as to when, if at all, this will occur. As of July 31, 1996 the
Company's accumulated deficit was $224,741 ($109,426 as of May 31, 1996), and
the Company will continue to incur pre-opening expenses until the Bank
commences operations. Any delay in commencing operations will increase
pre-opening expenses and postpone realization by the Bank of potential revenues
and income. Absent the commencement of profitable operations, the Company's
accumulated deficit will continue to increase (and book value per share
decrease) as operating expenses such as rent on the Bank's proposed premises,
salaries and other administrative expenses continue to be incurred. In
addition, the proceeds from this offering may be considered part of general
corporate funds of the Company and therefore may be subject to claims of
creditors of the Bank and/or the Company. On a liquidation basis, the Company
is unlikely to recover its full investment in furniture, fixtures and
equipment. As a result, if a liquidation of the Company were to occur,
investors in this offering would likely realize substantially less than the $10
per share public offering price and would suffer a significant loss.
FAILURE TO LEASE MAIN OFFICE
The Company has entered into a commitment to lease with the owner of
the building that the Company expects to use as the Bank's permanent main
office. The Company and the owner of the building are currently negotiating
the terms of the lease. There can be no assurance that the parties will be
able to reach a final agreement for the lease of such building. In that event,
the Company would need to obtain alternative office space for the main office
of the Bank. Although the Company generally believes that alternative office
space is available in the area, the Company may not be able to lease such space
on as favorable economic terms or it may be located in a less desirable section
of the Bank's proposed market area.
REGULATORY APPROVALS
Although the Company and the Bank have applied for all regulatory
approvals required to commence operations, and have received approval from the
Indiana Department of Financial Institutions ("DFI") to establish the Bank,
subject to its capitalization of $9 million, no assurances can be given that
such other approvals required will be granted in a timely manner if at
all. Management believes that all such regulatory approvals will be obtained
after a reasonable period, subject to the satisfaction of certain conditions.
Such conditions may include, among other things that: (i) beginning paid-in
capital of the Bank be not less than $7 million; (ii) the Tier 1
capital-to-total-assets ratio of the Bank be not less than 8.0% for the first
three years of operations; and (iii) without the prior approval of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"), no debt
will be incurred by the Company for five years from the date the
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Company acquires 100% of the Bank stock. If such regulatory approvals are
substantially delayed, the Company's accumulated deficit will continue to
increase. If such regulatory approvals are not obtained, the Company would not
be able to commence its banking activities and would probably be liquidated and
dissolved. Upon liquidation, investors would likely realize a substantial
loss on their investment. See "-- Failure to Commence Operations."
NEED FOR CAPITAL
Although the Company does not currently anticipate the need for
additional capital in the foreseeable future to commence its planned business
activities, additional capital beyond that which will be provided by this
offering and any amounts likely to be generated by the Bank's operations over
the next four years would probably be necessary before the Company could
undertake any significant acquisitions or other expansion of its operations.
There can be no assurance that any funds necessary to finance such acquisitions
or expansion will be available. Regulatory capital requirements and borrowing
restrictions which will apply to the Bank and the Company may have the effect
of constraining future growth. To the extent the Company relied upon the sale
of additional equity securities to finance future expansion, such sale could
result in significant dilution to the interests of persons purchasing shares in
this offering.
GOVERNMENT REGULATION AND MONETARY POLICY
The Company and the Bank will be subject to extensive state and
federal government supervision and regulation. Existing state and federal
banking laws will subject the Bank to substantial limitations with respect to
loans, purchase of securities, payment of dividends and many other aspects of
its banking business. There can be no assurance that future legislation or
government policy will not adversely affect the banking industry or the
operations of the Bank. Federal economic and monetary policy may affect the
Bank's ability to attract deposits, make loans and achieve satisfactory
interest spreads. See "Supervision and Regulation."
NO ASSURANCE OF DIVIDENDS
It is anticipated that no dividends will be paid on the Common Stock
for the immediately foreseeable future. It is likely that the Company will be
largely dependent upon dividends paid by the Bank for funds to pay dividends on
the Common Stock, if and when such dividends are declared. The Bank does not
anticipate paying dividends during at least the first three years of its
operations. No assurance can be given that future earnings of the Bank, and
any resulting dividends to the Company, will be sufficient to permit the legal
payment of dividends to Company stockholders at any time in the future. Even
if the Company may legally declare dividends, the amount and timing of such
dividends will be at the discretion of the Company's Board of Directors. The
Board may in its sole discretion decide not to declare dividends. For a more
detailed discussion of other regulatory limitations on the payment of cash
dividends by the Company, see "Dividend Policy."
COMPETITION
The Company and the Bank will face strong competition for deposits,
loans and other financial services from numerous Indiana and out-of-state
banks, thrifts, credit unions and other financial institutions as well as other
entities which provide financial services. Some of the financial institutions
and financial services organizations with which the Bank will compete are not
subject to the same degree of regulation as the Bank. As of December 31, 1995,
approximately 93 branch bank offices, 17 thrift offices and numerous credit
union offices were located within 15 miles of the Bank's proposed main office.
Many of these financial institutions aggressively compete for business in the
Bank's proposed market area. Most of these competitors have been in business
for many years, have established customer bases, are larger, have substantially
higher lending limits than the Bank and will be able to offer certain services,
including multiple branches and international banking services, that the Bank
can offer only through correspondents, if at all. In addition, most of these
entities have greater capital resources than the Bank, which, among other
things, may allow them to price their services at levels more favorable to the
customer and to provide larger credit facilities than could the Bank. See
"Business -- Market Area" and "Business -- Competition." Additionally, recently
passed federal and Indiana legislation regarding interstate branching and
banking may act to
8
<PAGE> 10
increase competition in the future from larger out-of-state banks. See
"Supervision and Regulation -- Recent Regulatory Developments."
DEPENDENCE ON MANAGEMENT
The Company and the Bank are, and for the foreseeable future will be,
dependent upon the services of John Rosenthal, the Chairman of the Board,
President and Chief Executive Officer of the Company and the Bank, and other
senior managers retained by the Company and the Bank. The loss of any of these
individuals could adversely affect the operations of the Company and the Bank.
The Company has entered into an employment agreement (which includes certain
non-competition covenants) with Mr. Rosenthal, in an effort to assure the
continued availability of his services to the Bank and the Company. In light
of the Company's dependence upon the banking expertise of its chief executive
officer, the Company has obtained a policy of key person life insurance on Mr.
Rosenthal in the amount of $1.5 million payable to the Company. See "Business
- -- Employees" and "Management."
LENDING RISKS AND LENDING LIMITS
The risk of nonpayment of loans is inherent in commercial banking, and
such nonpayment, if it occurs, may have a material adverse effect on the
Company's earnings and overall financial condition as well as the value of the
Common Stock. Moreover, the Bank's focus on small-to-medium sized businesses
may result in a larger concentration by the Bank of loans to such businesses.
As a result, the Bank may assume greater lending risks than banks which have a
lesser concentration of such loans and tend to make loans to larger companies.
Management will attempt to minimize the Bank's credit exposure by carefully
monitoring the concentration of its loans within specific industries and
through prudent loan application and approval procedures, but there can be no
assurance that such monitoring and procedures will reduce such lending risks.
The Bank's legal lending limit will initially be approximately
$1,350,000. The Board of Directors will establish an "in-house" limit that
will be somewhat lower than the Bank's legal lending limit. The Board may from
time to time raise or lower the "in-house" limit as it deems appropriate to
comply with safe and sound banking practices and respond to overall economic
conditions. Accordingly, the size of the loans which the Bank can offer to
potential customers is less than the size of loans that most of the Bank s
competitors are able to offer. Initially, this limit will affect to some
degree the ability of the Bank to seek relationships with the area's larger
businesses. The Bank expects to accommodate loan volumes in excess of its
lending limit through the sale of participations in such loans to other banks.
However, there can be no assurance that the Bank will be successful in
attracting or maintaining customers seeking larger loans or that the Bank will
be able to engage in the sale of participations in such loans on terms
favorable to the Bank.
IMPACT OF INTEREST RATES AND ECONOMIC CONDITIONS
The results of operations for financial institutions, including the
Bank, may be materially and adversely affected by changes in prevailing
economic conditions, including declines in real estate market values, rapid
changes in interest rates and the monetary and fiscal policies of the federal
government. See "Supervision and Regulation -- General" and "Supervision and
Regulation -- Recent Regulatory Developments." The Bank's profitability is in
part a function of the spread between the interest rates earned on investments
and loans and the interest rates paid on deposits and other interest-bearing
liabilities. In the early 1990s, many banking organizations experienced
historically high interest rate spreads. More recently, interest rate spreads
have generally narrowed due to changing market conditions and competitive
pricing pressure, and there can be no assurance that such factors will not
continue to exert such pressure or that such high interest rate spreads will
return. Substantially all the Bank's loans will be to businesses and
individuals in the Michiana area and any decline in the economy of this area
could have an adverse impact on the Bank. Like most banking institutions, the
Bank's net interest spread and margin will be affected by general economic
conditions and other factors that influence market interest rates and the Bank
s ability to respond to changes in such rates. At any given time, the Bank s
assets and liabilities will be such that they are affected differently by a
given change in interest rates. As a result, an increase or decrease in rates,
the length of loan terms or the mix of adjustable and fixed rate loans in the
Bank's portfolio could have a positive or negative effect on the Bank's net
income, capital and liquidity. There can be no assurance that the positive
trends or developments
9
<PAGE> 11
discussed in this Prospectus will continue or that negative trends or
developments will not have a material adverse effect on the Bank. See
"Supervision and Regulation."
NEED FOR TECHNOLOGICAL CHANGE
The banking industry is undergoing rapid technological changes with
frequent introductions of new technology-driven products and services. In
addition to better serving customers, the effective use of technology increases
efficiency and enables financial institutions to reduce costs. The Company's
future success will depend in part on its ability to address the needs of its
clients by using technology to provide products and services that will satisfy
client demands for convenience as well as to create additional efficiencies in
the Bank's operations. Many of the Bank's competitors have substantially
greater resources to invest in technological improvements. There can be no
assurance that the Bank will be able to effectively implement new
technology-driven products and services or be successful in marketing such
products and services to its clients. See "Business -- Business Strategy."
ANTI-TAKEOVER PROVISIONS
The Company's certificate of incorporation (the "Certificate") and
bylaws (the "Bylaws") include provisions which may have the effect of delaying,
deferring or preventing certain types of transactions involving an actual or
potential change in control of the Company, including transactions in which the
stockholders might otherwise receive a premium for their shares over then
current market prices, and may limit the ability of the stockholders to approve
transactions that they may deem to be in their best interests. Section 203 of
the General Corporation Law of Delaware prohibits the Company from engaging in
certain business combinations with interested stockholders, and federal law
requires the approval of the Federal Reserve Board prior to acquisition of
"control" of a bank holding company. Indiana law also requires the approval of
the DFI prior to the acquisition of direct or indirect control of an
Indiana-chartered bank. These provisions may have the effect of delaying or
preventing a change in control of the Company without action by the
stockholders, and therefore could adversely affect the price of the Common
Stock. The Company's Certificate and Bylaws provide for the indemnification of
its officers and directors and insulate its officers and directors from
liability for certain breaches of the duty of care. See "Description of Capital
Stock -- Certain Anti-Takeover, Indemnification and Limited Liability
Provisions."
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's bylaws provide for the indemnification of its officers
and directors and insulate its officers and directors from liability for
certain breaches of the duty of care. It is possible that the indemnification
obligations imposed under these provisions could result in a charge against the
Company's earnings and thereby affect the availability of funds for payment of
dividends to the Company's stockholders. The Bank's bylaws will contain
similar provisions. See "Description of Common Stock -- Anti-Takeover,
Indemnification and Limited Liability Provisions."
DETERMINATION OF OFFERING PRICE
The initial public offering price of $10.00 per share was determined
by negotiations between the Company and Robert W. Baird & Co. Incorporated, the
underwriter of this offering (the "Underwriter"). This price is not based upon
earnings or any history of operations and should not be construed as indicative
of the present or anticipated future value of the Common Stock. See
"Underwriting."
CONTROL BY MANAGEMENT
Although the combined ownership and control over the Company's Common
Stock by the Company's officers and directors is likely to be less than 20%
after this offering, such individuals will be able to exert a significant
measure of control over the affairs and policies of the Company. Such control
could be used, for example, to help prevent an acquisition of the Company,
thereby precluding stockholders from possibly realizing any
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<PAGE> 12
premium which may be offered for the Company's Common Stock by a potential
acquiror. See "Principal Stockholders."
NO PRIOR PUBLIC MARKET; LIMITED TRADING MARKET EXPECTED
Prior to this offering, there has been no public trading market for
the Common Stock. The Price to Public has been determined by negotiations
between the Company and the Underwriter and may be greater than the market
price for the Common Stock following this offering. The Company expects that
the quotations for the Common Stock will be reported on the OTC Bulletin Board
under the symbol "SJOE." The Underwriter has also advised the Company that,
upon completion of this offering, it intends to act as a market maker in the
Common Stock, subject to applicable laws and regulatory requirements. Making a
market in securities involves maintaining bid and ask quotations and being
able, as principal, to effect transactions in reasonable quantities at those
quoted prices, subject to various securities laws and other regulatory
requirements. The development of a public trading market depends, however,
upon the existence of willing buyers and sellers, the presence of which is not
within the control of the Company, the Bank or any market maker. Even with a
market maker, factors such as the limited size of this offering, the lack of
earnings history for the Company and the absence of a reasonable expectation of
dividends within the near future mean that there can be no assurance of the
development in the foreseeable future of an active and liquid market for the
Common Stock. Even if a market develops, there can be no assurance that a
market will continue, or that stockholders will be able to sell their shares at
or above the Price to Public. The potential size of a secondary market for the
Common Stock might, at least initially, be limited to some extent by the
requirement of a $10,000 minimum investment imposed in connection with this
offering. The minimum investment requirement may act to restrict the number of
stockholders and make subsequent trading of small numbers of shares less
likely. Purchasers of Common Stock should carefully consider the potentially
illiquid and long-term nature of their investment in the shares being offered
hereby.
RECENT DEVELOPMENTS
Since May 31, 1996, the date of the Company's most recent audited
financial statements, the Company has continued to incur pre-opening expenses.
As of July 31, 1996, the Company's accumulated deficit was $224,741. The
additional expenses incurred related principally to legal and professional fees
incurred in the regulatory application process and in connection with this
offering, salaries and supplies.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,100,000 shares
of Common Stock offered hereby are estimated to be $10,116,500 ($11,651,000 if
the Underwriter's over-allotment option is exercised in full), after deduction
of the underwriting discounts and commissions and estimated offering expenses.
Such net proceeds have not been reduced by the amount of the Company's
organizational and other operating expenses which were $109,426 as of May 31,
1996.
Approximately $9 million of the net proceeds of this offering will be
invested by the Company in the Bank to provide the Bank's initial
capitalization. The Bank expects to use approximately $125,000 of these funds
to renovate the premises in which it is anticipated that the Bank will be
located, and approximately $740,000 to purchase necessary furniture, fixtures
and equipment for the Bank's temporary and main offices. It is currently
anticipated that the remaining amount will be used by the Bank to fund
investments in loans and U.S. government and agency securities, federal funds
sold and for payment of operating expenses.
The balance of the net proceeds of this offering, after capitalizing
the Bank with $9 million, is estimated to be approximately $1,116,500.
Depending upon the final allocation of organizational costs and offering
expenses between the Company and the Bank, a total of $275,000 of the net
proceeds of this offering will be used by the Company and the Bank to repay
organizational loans made by the Company's directors. The loans made by the
directors are repayable only from the proceeds of this offering and bear
interest at a rate of 6% per annum. Under the terms of these loans, however,
the directors may choose to receive repayment in full or in part through their
receipt in this offering of shares of Common Stock valued at the Price to
Public. All of the Company's directors have indicated their present intention
either to elect such option or to invest at least an equal amount in direct
purchases of Common Stock in this offering. See "Principal Stockholders." The
Company will further use $1,000 to redeem at cost organizational shares
purchased by John Rosenthal solely to facilitate the organization of the
Company and the election of its directors. The remaining amount (plus any net
proceeds as a result of the exercise of the Underwriter's over-allotment
option) will be held by the Company as working capital for general corporate
purposes as well as for possible future capital contributions to the Bank to
support asset growth. The funds will also be
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<PAGE> 13
available to partially finance any acquisitions of other financial institutions
or for expansion into other lines of business closely related to banking.
Management is not, however, involved at this time in any negotiations regarding
any such other possible acquisitions or businesses.
In addition to the foregoing, the Company or another subsidiary may
use the proceeds of this offering retained at the holding company level, or the
Bank may use a portion of the capital contributed to it by the Company, to
purchase the Bank s anticipated main office for $800,000 pursuant to the option
contained in the commitment to lease such property.
DIVIDEND POLICY
The Company initially expects that all Company and Bank earnings, if
any, will be retained to finance the growth of the Company and the Bank and
that no cash dividends will be paid for the foreseeable future. If and when
dividends are declared, the Company will probably be largely dependent upon
dividends paid by the Bank for funds to pay dividends on the Common Stock. It
is also possible, however, that the Company will pay dividends in the future
generated from investment income and other activities of the Company.
Under Indiana law, the Bank will be restricted as to the maximum
amount of dividends it may pay on its common stock. The Indiana Financial
Institutions Act (the "Indiana Act") provides that an Indiana bank may not pay
dividends in an amount greater than its undivided profits or if the payment of
dividends would impair such bank s capital. Moreover, the approval of the DFI
is required for the payment of any dividend if the aggregate amount of all
dividends paid by the Bank during such calendar year, including the proposed
dividend, would exceed the sum of: (i) the total net profits (as defined in
the Indiana Act) of the Bank for that year; and (ii) the retained net profits
of the Bank for the previous two years. The DFI and the FDIC are also
authorized under certain circumstances to prohibit the payment of dividends by
the Bank. In the case of the Company, the Delaware General Corporation Law
would allow the Company to pay dividends only out of its surplus, or if none,
out of the current and/or the past fiscal year's net profits. Further
restrictions on dividends may also be imposed by the Federal Reserve Board.
See "Supervision and Regulation -- The Bank -- Dividends" and "-- The Company
- -- Dividends."
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
May 31, 1996, and as adjusted to reflect the sale of the shares of Common Stock
offered hereby:
<TABLE>
<CAPTION>
MAY 31, 1996
---------------------------------------
ACTUAL AS ADJUSTED
------------------ ------------------
<S> <C> <C>
Long-term and short term debt . . . . . . . . . . . . . . . . . . . . $ 275,000 $ --
========= ===========
Stockholders equity:
Preferred Stock, $.01 par value, 100,000 shares authorized; no shares
issued or outstanding . . . . . . . . . . . . . . . . . . . . . .
Common Stock, $.01 par value, 1,500,000 shares authorized; 100 shares
issued and outstanding, and 1,100,000 shares as adjusted (1) . . 1 11,000
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 999 10,105,500
Accumulated deficit (2) . . . . . . . . . . . . . . . . . . . . . . . (109,426) (109,426)
--------- -----------
Total stockholders equity . . . . . . . . . . . . . . . . . . . . . $(108,426) $10,007,074
========= ===========
</TABLE>
_____________________
(1) Does not include 27,000 shares of Common Stock issuable upon exercise
of outstanding options under the Companys stock option plan (out of a
total of 100,000 shares reserved for issuance under such plan). See
"Management -- Stock Incentive Plan."
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<PAGE> 14
(2) The accumulated deficit as of May 31, 1996, is comprised primarily of
pre-opening expenses related principally to legal and professional
fees incurred in the regulatory application process, creation of the
holding company, office occupancy costs and supplies. In addition,
John Rosenthal has been receiving salary payments from the Company
since March 18, 1996. The accumulated deficit will continue to
increase prior to the Banks commencement of operations, and will then
increase further as expected initial operating losses are incurred.
Additional employees will be hired as the commencement date approaches
and further salary expenses and training costs will be incurred at
such time. Additional professional fees will also be incurred in
connection with this offering and other corporate matters.
BUSINESS
GENERAL
The Company is a proposed bank holding company organized in February,
1996, under Delaware law to own all of the common stock of the Bank. The Bank
is organizing as an Indiana-chartered commercial bank with depository accounts
to be insured by the FDIC. The Bank intends to offer a full range of
commercial and consumer banking services primarily within a fifteen mile radius
of Mishawaka, Indiana. This area encompasses a substantial portion of the
Indiana communities of Mishawaka, South Bend, Notre Dame, Granger, Osceola and
Elkhart, and certain Michigan communities including Niles and Edwardsburg. Due
to the overlap of this metropolitan area over state lines, this region is often
referred to as "Michiana." The Company and the Bank have applied for all
necessary regulatory approvals, and assuming the successful completion of this
offering, anticipate commencing business in a temporary modular facility by the
first quarter of 1997. The Company currently maintains its offices at 2015
Western Avenue, South Bend, Indiana 46629. The Company's telephone number is
(219) 283-0773.
BACKGROUND
The liberalization of the interstate banking laws of Indiana and
Michigan in recent years has led to substantial consolidation of the banking
industry in the Michiana area. Since the early 1980s, several of the area's
locally owned or locally managed financial institutions have been acquired by
large regional bank holding companies. Members of the Board, along with other
leading business people in the community, all of whom have been active
participants or observers of the local banking scene for many years, have
noticed the need for a locally owned, highly service-oriented banking
organization to fill a void created by this consolidation in the banking
industry. Specifically, it is believed that Michiana could greatly benefit
from a financial institution whose focus would be to serve the business and
personal banking needs of local entrepreneurs and local business owners. It is
further believed that this niche is currently being under-served by other
banks.
In the opinion of the Company's management, this situation has created
a favorable opportunity for a new commercial bank with headquarters in the
Michiana area. Management of the Company believes that such a bank can attract
those clients who prefer to conduct business with a locally-managed institution
that demonstrates an active interest in their businesses and personal financial
affairs. The Company believes that a locally managed institution will be
better able to deliver more timely responses to client requests, provide
customized financial products or services addressing out-of-the-ordinary
matters and offer the personal attention of senior banking officers. The Bank
will seek to take advantage of this opportunity by emphasizing in its marketing
plan the Bank's local management and the Bank's ties and commitment to the
Michiana area.
The Company and the Bank to date have conducted no business other than
matters incidental to their organization, including negotiations with
additional prospective executive officers. Following completion of this
offering and before commencement of operations, the Bank intends to occupy,
renovate and furnish its main office, hire and train staff, purchase or lease
and install equipment necessary to transact business, establish correspondent
banking relationships and make other arrangements for necessary services.
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<PAGE> 15
BUSINESS STRATEGY
The Bank intends to concentrate on the financial services needs of
individuals and local businesses. A cornerstone of the Bank's business
strategy will be to emphasize the Bank's local management and its commitment to
the Bank's market area. John Rosenthal, the Chairman of the Board, President
and Chief Executive Officer of the Company and the Bank, was most recently a
Vice President and Senior Corporate Banker at The First National Bank of
Chicago, with primary account responsibility for middle market lending in
Indiana and down-state Illinois. He has eleven years of experience in
correspondent banking and working with Indiana banks. Mr. Rosenthal is a
native of, and attended school in, the Michiana area through his graduation
from the University of Notre Dame. He is married and has three children and
has lived in Granger, Indiana for the past three years.
In addition to Mr. Rosenthal, the Company has hired three additional
experienced individuals to serve as executive officers of the Bank. Patrick D.
Novitzki is a Michiana resident who has worked in the banking industry in St.
Joseph and Elkhart Counties for over 20 years. Mr. Novitzki will serve as the
Bank's Senior Vice President - Lending. He was most recently the head of the
corporate banking department at KeyBank, National Association, in South Bend,
Indiana. Edward R. Pooley will serve as a Senior Vice President and the Cashier
of the Bank, and as a Senior Vice President and the Chief Financial Officer of
the Company. Mr. Pooley has ten years of banking experience since beginning
his career with National City Bank, Toledo, Ohio. He was most recently the
Cashier and Chief Operations Officer and the Treasurer of a bank and its parent
bank holding company, respectively, located in Ohio. Nancy N. King will serve
as Senior Vice President - Private Banking. Mrs. King is a South Bend resident
who has worked in the banking industry for 16 years. Mrs. King most recently
served as Regional Manager of Personal Trust Services for Key Trust Company of
Indiana, National Association, a subsidiary of KeyBank, National Association.
Employees will be active in the civic, charitable and social
organizations located in the Michiana area. Most of the Company's directors
currently hold, and have held in the past, leadership positions in a number of
community organizations, and intend to continue this active involvement in
future years. Other members of the management team will also be encouraged to
volunteer for such positions.
The Company's goal is to create a "customer-driven" organization
focused on providing high value to clients by promptly delivering products and
services matched directly to their needs. The Bank will strive to establish a
high standard of quality in each service it provides and the employees of the
Bank will be expected to emphasize service in their dealings with clients.
Because the Bank intends to commence operations with a staff of fewer than 15
full time employees, these employees will need to be flexible in the duties
they perform in an effort to satisfy clients. However, management believes that
the use of state-of-the-art technology will permit each employee to devote more
time and attention to personal service, respond more quickly to a client's
requests and deliver services in the most timely manner possible. This "high
touch-high tech" manner of operations is expected by management to be appealing
to clients.
Upon its opening, the Bank is planning to undertake a marketing
campaign utilizing an aggressive officer calling program and community-based
promotions. The campaign will emphasize the Bank's independence, local
management and special focus on client service. All employees will be expected
to actively market the Bank's services.
The Bank's initial legal lending limit will be approximately
$1,350,000. The Board of Directors will establish an "in-house" limit that
will be somewhat lower than the Bank's legal lending limit. The Board may from
time to time raise or lower the "in-house" limit as it deems appropriate to
comply with safe and sound banking practices and respond to overall economic
conditions. Initially, this limit will affect to a degree the ability of the
Bank to seek relationships with the area's larger businesses. However, in
light of John Rosenthal's previous experience and the relationships of the
Company's directors with a number of the region's other financial institutions,
the Bank may originate loan volumes in excess of its lending limit and sell
participations in such loans to other banks. Likewise, it is quite possible
that the Bank will purchase participations from other area institutions.
PRODUCTS AND SERVICES
The Bank's hours of operation will initially be 8:30 a.m. to 5:30
p.m., Monday through Friday. In addition, the Bank's employees will be
available to clients wishing to make appointments outside traditional banking
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<PAGE> 16
hours, either at the Bank or at the clients' homes or businesses. By providing
"by appointment banking," the Bank intends to demonstrate its high level of
responsiveness and service to its clients.
The Bank intends to offer a broad range of deposit services, including
checking accounts, NOW accounts, savings accounts and time deposits of various
types. The transaction accounts and time certificates will be tailored to the
principal market area at rates competitive with those offered in the area. All
deposit accounts will be insured by the FDIC up to the maximum amount permitted
by law. The Bank intends to solicit these accounts from individuals,
businesses, associations, organizations, financial institutions and government
authorities. It does not intend to accept brokered deposits. The Bank may
also use alternative funding sources as needed, including advances from Federal
Home Loan Banks, conduit financing and the packaging of loans for
securitization and sale.
The Bank plans to offer a computerized Treasury Management workstation
which will allow the Bank's clients to access account information and conduct
certain transactions via computer. All necessary safeguards and security
measures will be utilized in connection with this product. Bank-by-mail and
bank-by-phone will also be offered initially and the Bank intends to offer
other cash management products in the future.
The Bank will offer a full range of short to intermediate term
personal and commercial loans. The Bank intends to make personal loans
directly to individuals for various purposes, including purchases of
automobiles, mobile homes, boats and other recreational vehicles, home
improvements, education and personal investments. The Bank anticipates that it
will retain substantially all of such loans. The Bank intends initially to
offer only balloon payment and adjustable rate mortgages. It does not
anticipate offering long-term fixed rate mortgage products, except through an
arrangement with outside providers. The Bank expects that any fixed rate
residential mortgage loans it generates will be sold to third party investors,
though with respect to some of such loans, the Bank may continue to service the
loans for a fee. Commercial loans will be made primarily to small and
mid-sized businesses. These loans will be both secured and unsecured and will
be available for general operating purposes, acquisition of fixed assets,
including real estate, purchases of equipment and machinery, financing of
inventory and accounts receivable as well as any other purpose considered
appropriate.
The Bank currently plans to offer other services, including credit
cards, money orders, traveler's checks, automated teller services with access
to one or more regional or national automated teller networks and safe deposit
services. Although the Bank has been involved in discussions with a number of
vendors regarding the provision of such services, the Bank does not expect to
make final decisions with respect to the providers of such services until
approximately 30 days before its commencement of business. The Bank also
intends to establish relationships with correspondent banks and other financial
institutions to provide other services for its clients, including requesting
correspondent banks to participate in loans where the loan amount exceeds the
Bank's policies or legal lending limit.
Many of the data processing services, including on-line teller
service, will be purchased on a contract basis, reducing the number of persons
otherwise required to handle the operational functions of the Bank. The Bank
is in the process of discussing arrangements with potential data processing
companies.
MARKET AREA
The location of the Bank's main office will be in Mishawaka, Indiana,
which is located in the approximate center of the "Michiana" area. The
Michiana area is approximated by the 15 mile radius surrounding Mishawaka,
Indiana, and generally includes the Indiana communities of Mishawaka, South
Bend, Notre Dame, Granger, Osceola and Elkhart and the surrounding extended
market in St. Joseph and Elkhart Counties; as well as the Michigan communities
of Niles, Buchanan, Cassapolis and Edwardsburg and the greater Berrien and Cass
County area. If conditions warrant, the Bank may in the future open additional
offices in South Bend, Indiana, or elsewhere in the Michiana area, although the
Bank presently has no such plans.
According to Standard & Poors August 21, 1995, edition of CreditWeek
Municipal, the demographics of South Bend, Indiana, which comprises a major
portion of the Michiana area, are characterized by a growing and diversifying
local economy, average income levels and strong financial performance.
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<PAGE> 17
The area's retail, distribution, convention and tourism, health care
and services sectors have expanded to offset the decrease in manufacturing jobs
which has occurred in recent years. The University of Notre Dame, with over
10,000 students on the northeast side of the city of South Bend, is the area s
largest employer with approximately 3,800 employees in 1995, and contributes to
the stability of the local economy. Every year, Notre Dame has a large number
of visitors who fill the area's hotel rooms and restaurants providing a steady
stream of customers for local businesses. South Bend is also home to St. Mary
s College and seven other colleges and technical schools including Indiana
University and Purdue University local extensions, which help to provide the
area with additional stability and a skilled work force.
The Michiana area has also become a large provider of health care
services. Memorial Hospital and St. Joseph's Medical Center hospitals together
employed approximately 4,660 residents in 1995.
Unemployment is at historical lows and manufacturing jobs are at a
seven year high. Based upon levels of employment in the South Bend area, it is
estimated that manufacturing still supplied approximately 17% of the area s
total employment in 1995. AlliedSignal, Inc. is the area's fifth largest
employer. South Bend is the U.S. headquarters for the braking systems of
AlliedSignal Automotive and the home of manufacturing facilities for
AlliedSignal Aerospace's aircraft landing systems. A. M. General Corp. which
makes high mobility multipurpose wheeled vehicles (HUMVEEs) for the U.S.
military, has its headquarters near downtown South Bend and its main
manufacturing facilities in Mishawaka. Other large employers in the area
include Massachusetts Mutual Life Insurance Company, Ameritech and American
Electric Power Company. The area is also home to a number of small
manufacturing, retail and service businesses. Many major manufacturing
companies are also located in adjacent Elkhart County, including Bayer
Corporation, Coachmen Industries, CTS Corporation, Goshen Rubber Co., Inc.,
Holiday Rambler, LLC and Skyline Corporation.
Management believes that this diverse and growing commercial base
provides significant potential for business banking services, together with
personal banking services for owners and employees of these enterprises.
COMPETITION
The Bank's intended market area is competitive. There are currently
thirteen banks with multiple offices in the 15 mile radius surrounding the
Bank's proposed location. There are also five savings associations doing
business in the area and numerous credit unions. The Bank will also face
competition from finance companies, insurance companies, mortgage companies,
securities brokerage firms, money market funds, loan production offices and
other providers of financial services. Most of the Bank's competitors have
been in business for many years, have established customer bases, are
substantially larger, have substantially larger lending limits than the Bank
and can offer certain services, including multiple branches and international
banking services, that the Bank will be able to offer only through
correspondent banks, if at all. In addition, most of these entities have
greater capital resources than the Bank, which among other things, may allow
them to price their services at levels more favorable to clients and to provide
larger credit facilities than could the Bank. The Company anticipates that the
Bank's legal lending limit of approximately $1,350,000 will be adequate to
satisfy the credit needs of most of its clients and that the needs of its
clients in excess of this amount will be met through loan participation
arrangements with correspondent banks and others.
The Bank will compete for loans principally through the range and
quality of the services it will provide, interest rates and loan fees. The
Company believes that its personal service philosophy will enhance the Bank's
ability to compete favorably in attracting individuals and local businesses.
The Bank will actively solicit deposit-related clients and will compete for
deposits by offering clients personal attention, professional service and
competitive interest rates.
BANK PREMISES
The Company has signed a letter of intent to lease premises for the
Bank's main office at 3820 Edison Lakes Parkway, Mishawaka, Indiana, which will
also serve as the Company's corporate headquarters. The premises consist of a
9,600 square foot, two-story brick building constructed in 1988 with parking
for approximately 57 vehicles.
16
<PAGE> 18
Until such time as the Bank needs the space, the Company may sublet
approximately 1,200 square feet of the second floor if a suitable tenant is
located, although none has yet been identified. The building is located on a
major thoroughfare in Mishawaka, approximately 2 miles south of Interstate 80
and near the city's population center. The Bank expects to take possession of
the leased premises during March of 1997, but some renovation work, expected to
take approximately 45 days to complete, would be required before the Bank could
commence operations in its permanent office. The Company intends to select a
local contractor to handle the renovation project.
The Company expects that the lease for the building will have a
primary term of five years with an option for one five-year extension, and will
permit the Company, the Bank or an affiliate of either to purchase the property
for $800,000 at any time during the term of the lease. The proposed aggregate
annual lease payment is $67,500 for the first year of the lease and increases
by $9,500 in each succeeding year during the initial five year term. It also
increases by 5% per year over and above the rental payment due in year five in
each year of the five year option period, if exercised. The Company is also
obligated to pay all costs associated with taxes, assessments, maintenance,
utilities and insurance. In addition, if the Company is able to sublease any
of the building to another tenant, the Company is required to pay its lessor
one-half of the rent it receives from such tenant. Moreover, if that tenant
eventually vacates the building because the Bank is in need of the space for
further expansion, the rent for the building will be increased by an amount
equal to one-half of the subtenant's rental payment. If the Company is unable
to find another sublessee, the Company will owe the lessor a one time payment
of $5,000 in the second year of the lease, but such payment would be offset by
any previous payments paid to the lessor by the subtenant.
The Company estimates that the cost to renovate the building will be
approximately $125,000, and that the cost of necessary furniture, fixtures and
equipment will total approximately $740,000. The Bank will have four interior
teller stations and a night depository facility. The Company believes the
facility will be adequate to meet the needs of the Company and the Bank for the
foreseeable future. If the Company requires additional office space in the
future, the area on the second floor would, if not then subject to lease, be
available for expansion.
Until the leased premises are ready, the Bank will be located in a
temporary modular facility on vacant land that is being leased by the Company
and is adjacent to the Bank's future main office. The Bank expects to commence
operations in this temporary facility by the first quarter of 1997, at an
estimated cost of $2,000 per month.
EMPLOYEES
The Bank intends to commence operations with a staff of fewer than 15
full-time employees. John Rosenthal will serve as the Chairman of the Board,
President and Chief Executive Officer of the Company and the Bank. The Bank's
other executive officers will include Patrick Novitzki, Senior Vice President -
Lending; Edward Pooley, Senior Vice President and Cashier; and Nancy N. King,
who will serve as Senior Vice President - Private Banking. Mr. Rosenthal will
be responsible for the overall management of the Bank, including public
relations and marketing activities. Mr. Novitzki will serve as one of the
senior lending officers reporting to Mr. Rosenthal. Mr. Pooley's primary
responsibility will pertain to financial controls and operations, and he will
be in charge of implementing and supervising compliance with the Bank's
operating policies. Mr. Pooley will also serve as a Senior Vice President and
the Chief Financial Officer of the Company. At present, the Company's only
full-time employees are Messrs. Rosenthal, Novitzki and Mrs. King. Mrs. King's
primary responsibilities will be in the areas of consumer lending and deposit
accounts. See "Management."
The Company will hire additional officers and employees as
commencement of the Bank's operations becomes more imminent. The Company plans
to employ as officers and employees of the Bank primarily persons from the
Michiana area who have substantial experience and proven records in banking.
The Company intends to pay competitive salaries to attract and retain such
officers and employees. It is not anticipated that the Bank will experience
any substantial difficulty in attracting officers and other employees of the
caliber desired.
17
<PAGE> 19
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and officers of the Company as of the date hereof, and
the contemplated directors and officers of the Bank upon completion of this
offering, are as follows:
<TABLE>
<CAPTION>
POSITIONS POSITIONS
NAME AGE WITH THE COMPANY WITH THE BANK
---- --- ---------------- -------------
<S> <C> <C> <C>
John W. Rosenthal . . . . . . . 37 Chairman of the Board, Chairman of the Board,
President and Chief President and Chief
Executive Officer Executive Officer
Arthur J. Decio . . . . . . . . 65 Director --
David A. Eckrich . . . . . . . 55 Director Director
Jerry Hammes . . . . . . . . . 64 Director and Assistant Director
Secretary
V. Robert Hepler . . . . . . . 67 Director --
Helen L. Krizman . . . . . . . 33 Director Director
Scott C. Malpass . . . . . . . 33 Director Director
Jack Matthys . . . . . . . . . 49 Director Director
Arthur H. McElwee . . . . . . . 53 Director and Secretary Director
Richard A. Rosenthal . . . . . 63 Director Director
Robert A. Sullivan . . . . . . 41 Director Director
Nancy N. King . . . . . . . . . 50 -- Senior Vice President -
Private Banking
Patrick D. Novitzki . . . . . . 42 -- Senior Vice President
- Lending
Edward R. Pooley . . . . . . . 31 Senior Vice President and Senior Vice President
Chief Financial Officer and Cashier
</TABLE>
The Company has a classified board of directors, with directors
serving staggered three-year terms. The terms of Messrs. Eckrich, Hammes,
McElwee and John Rosenthal, as Class I directors, expire in April, 1997, the
terms of Messrs. Decio, Hepler, Matthys and Richard Rosenthal, as Class II
directors, expire in April, 1998, and the terms of Messrs. Malpass and Sullivan
and Mrs. Krizman, as Class III directors, expire in April, 1999. There are no
family relationships among any of the Company s directors, officers or key
personnel, except that Richard Rosenthal is the father of John Rosenthal.
Rather than receiving cash directors fees, it is instead expected that
the Company s directors will receive compensation for their services in the
form of options to purchase shares of Common Stock pursuant to the Company s
Stock Incentive Plan (as defined below). See "Management -- Stock Incentive
Plan." After commencement of the Bank s operations, directors of the Bank will
receive no fees for attendance at board meetings, but will be reimbursed for
any related out of pocket expenses.
18
<PAGE> 20
The Company has purchased a key person life insurance policy on John
Rosenthal in the amount of $1.5 million payable to the Company. The Company
maintains no other key person life insurance on any of its or the Bank's
officers or directors.
COMMITTEES OF THE BANK
The Bank will initially establish audit, loan, human resources and
investment committees. The audit committee will establish and review the
Bank's internal audit procedures and coordinate and review the preparation of
the Company's annual audit by its independent auditors. The loan committee
will establish lending policies and review larger lending accommodations made
by the Bank's loan officers and will monitor collection and delinquencies. The
human resources committee will generally oversee the Bank's employment
practices and employee benefits, including administration of the St. Joseph
Capital Corporation 1996 Stock Incentive Plan (the "Stock Incentive Plan").
The investment committee will set general investment guidelines, review current
and planned investments and instruments and will monitor the Bank's interest
rate exposure.
EXPERIENCE OF DIRECTORS AND OFFICERS
The experience and backgrounds of the directors and executive officers
of the Company and the Bank are summarized below.
JOHN W. ROSENTHAL has 11 years of banking experience, most recently as
Vice President and Senior Corporate Banker at the First National Bank of
Chicago, where he was employed since 1988. He is a native of Mishawaka and
attended schools there through his graduation from the University of Notre Dame
with a degree in business administration with a concentration in finance. Mr.
Rosenthal is a former faculty member of the Graduate School of Banking at the
University of Wisconsin and the Seminar for College Faculty. He is a Certified
Cash Manager ("CCM"). Even though he was employed at The First National Bank
of Chicago, he has maintained his primary residence in Granger, Indiana for the
past three years. He is active in community affairs and currently serves as
President of the Board of Education at Marian High School in Mishawaka,
Indiana. Mr. Rosenthal is married and has three children. He is an active
member of St. Monica's Parish and a member of Knollwood Country Club.
ARTHUR J. DECIO is Chairman of the Board and CEO of Skyline
Corporation, a New York Stock Exchange listed manufacturer of manufactured
housing and recreational vehicles. Mr. Decio is also a director of NIPSCO
Industries, Inc. a gas and electric utility company, located in Hammond,
Indiana, Schwartz Paper Co., a paper company located in Chicago, Illinois, and
Quality Dining, Inc., a food service company headquartered in Mishawaka,
Indiana. Mr. Decio has received Presidential appointments to three national
commissions and has served on the boards of more than 35 civic, religious,
educational, business and financial institutions including the Federal Reserve
Bank of Chicago. He is currently a Fellow and Trustee of The University of
Notre Dame, a Trustee of Holy Cross College, Notre Dame, Indiana, a Trustee of
Hillsdale College, Hillsdale, Michigan and a member of the Advisory Board of
Indiana University, South Bend. He is also a Life Member, Chairman of the
Executive Committee, and past Chairman of the National Advisory Board of the
Salvation Army, Washington, D.C. and a director of Special Olympics
International, Washington, D.C.
DAVID A. ECKRICH has been the owner and president of Adams Road
Development, Inc., a residential real estate development company located in
Granger, Indiana, since 1978. He is a director of the Chamber of Commerce of
St. Joseph County and past Chairman and current Trustee of Project Future. He
is also a State Director of the Indiana Builders Association. He is a graduate
of the University of Notre Dame and received his MBA from Northwestern
University. Mr. Eckrich is a member of Knollwood County Club. He is married
and has five children and six grandchildren.
19
<PAGE> 21
JERRY HAMMES is Chairman of Romy Hammes Bancorp, Inc.; Peoples Bank of
Kankakee County, Illinois; and Romy Hammes, Inc., a successor to a business
founded in 1926 that has been involved in auto dealerships, major appliance
distribution and real estate developments. Mr. Hammes is a director of Skyline
Corporation, a manufacturer of manufactured housing and recreational vehicles.
He also served on the Board of Directors of the following bank holding
companies: Trustcorp, Inc., Toledo, Ohio; Society Bancorp of Indiana, Inc.,
South Bend, Indiana; and Society Corporation, Cleveland, Ohio. He is a Trustee
of St. Mary's College and Chairman of Holy Cross College Board of Trustees. He
attended the University of Notre Dame. He is involved in many fund raising,
charitable and civic projects.
V. ROBERT HEPLER is President and Chief Executive Officer of VRH
Rentals, a construction equipment company located in Florida, a position he has
held since 1994. Prior to that, Mr. Hepler was President and Chief Executive
Officer of Bob Hepler Construction Equipment Company, South Bend, Indiana,
Booms and Scissors, Indianapolis, Indiana, and Booms and Scissors South, of
North and South Carolina, all of which are construction equipment rental and
sales companies. He attended the University of Washington. Mr. Hepler is
married and has four children and ten grandchildren. He is a member of South
Bend Country Club and Signal Point Country Club.
HELEN L. KRIZMAN has been controller of various affiliated
corporations managed by The Warrick Corporation for the past five years and is
a certified public accountant. Currently, Mrs. Krizman is serving as
Controller of R-Vision, Inc., a manufacturer of travel trailers. She held the
position of senior accountant for a large public accounting firm from 1985
through 1987. Mrs. Krizman graduated from Western Michigan University with a
major in accounting and minors in information processing and general business.
Mrs. Krizman is married and has four children.
SCOTT C. MALPASS is currently the Associate Vice President for Finance
and Chief Investment Officer for the University of Notre Dame where he has been
employed for the past eight years. Prior to that, Mr. Malpass was an
investment consultant and portfolio manager with Irving Trust Company in New
York from 1986 to 1988. Mr. Malpass is a director of Endowment Advisers, Inc.,
Westport, Connecticut, and Venture Lending and Leasing, Inc., San Jose,
California. In addition, he serves as a member of the Advisory Council for
several venture capital and real estate investment partnerships. Mr. Malpass
is active in community affairs and is a director of The Community Foundation of
St. Joseph County, Inc. and the South Bend Community School Corporation
Education Foundation. Mr. Malpass received a Bachelor of Science degree and an
MBA with a concentration in finance from the University of Notre Dame.
JACK MATTHYS was Senior Vice President of Commercial Loans and a
member of the Management Committee for the St. Joseph Bank, which merged with
Trustcorp, Inc. in 1986. He became an Executive Vice President with Trustcorp
Bank and head of all lending in the State of Indiana through the end of 1989
when Trustcorp merged with Society Corporation. Mr. Matthys then served as
President of Krizman, Inc., a manufacturer of automotive parts located in
Mishawaka, Indiana, from 1990 through the end of 1992 when he retired from
Krizman. Mr. Matthys is a director of Wm. Lehman, Inc., a processor of
essential mint oils located in Bremen, Indiana; Toefco Engineering, Inc., an
industrial coater, and Medical Education Foundation, a not-for-profit medical
education assistance advocate. He received a Bachelor of Science degree in
Business Administration and an MBA from Indiana University. Mr. Matthys is
married and has four children and five grandchildren. Mr. Matthys also serves
as an advisor to other area companies.
20
<PAGE> 22
ARTHUR H. MCELWEE, JR. has been the President and Owner of Toefco
Engineering, Inc., an industrial coater located in Niles, Michigan, since 1994.
From 1991 to 1994 he was President of Goshen Rubber Co., Inc., a rubber
products manufacturer located in Goshen, Indiana. Mr. McElwee was President
from 1974 to 1986 of the St. Joseph Bank, and Chairman and Chief Executive
Officer of Trustcorp Bank and Society Bank, both successors to the St. Joseph
Bank, from 1987 to 1990. He is a director of Goshen Rubber Co., Inc., a member
of the Greater Niles Chamber of Commerce and the Economic Development
Foundation. He attended Indiana University and served as a member of the Board
of Advisors to the Business Schools of the University of Notre Dame and Indiana
University. Mr. McElwee is the founding chairman of the St. Joseph's Care
Foundation. Mr. McElwee is married and has four children and four
grandchildren. He is a member of Knollwood Country Club.
RICHARD A. ROSENTHAL was the Director of Athletics at the University
of Notre Dame from 1987 to 1995. Mr. Rosenthal was Chairman of the Board and
Chief Executive Officer of the St. Joseph Bank from 1962 to 1987. Mr.
Rosenthal has chaired a variety of civic and charitable boards, including
United Way, United Community Services, Project Future, Century Center, and St.
Joseph's Medical Center. He was Chairman of the local Operating Committee of
International Special Olympics. Mr. Rosenthal is currently a director of Athey
Products, Inc., a manufacturer of street sweepers located in Raleigh, North
Carolina; Advance Drainage Systems, Inc., a manufacturer of plastic pipe
located in Columbus, Ohio; Beck, Inc., a manufacturer of steel frames for the
manufactured housing and recreational vehicle industries located in Elkhart,
Indiana; Goshen Rubber Co., Inc., a manufacturer of rubber piece parts located
in Goshen, Indiana; LaCrosse Footwear, Inc., a manufacturer of leather and
rubber footwear located in LaCrosse, Wisconsin; Toefco Engineering, Inc., an
industrial coater located in Niles, Michigan, and Zimmer Paper Products, a
specialty paper company located in Indianapolis, Indiana. He is also an
advisory board member of CID Investment Partners, a venture capital firm
located in Indianapolis, Indiana, and R.F.E. Investment Partners, a venture
capital firm located in New Caanan, Connecticut. Mr. Rosenthal graduated from
the University of Notre Dame. He is married and has eight children and nine
grandchildren. He is a member of Signal Point Country Club.
ROBERT A. SULLIVAN is co-founder and President of Capital Bank, N.A.,
Sylvania, Ohio, a position he has held since 1989. He is a director of Capital
Bank, N.A. and of Capital Holdings, Inc., the parent company of Capital Bank,
N.A. From 1983 to 1988, Mr Sullivan served as Senior Vice President-Community
Banking Division of Trustcorp Bank, Toledo, Ohio, where he was responsible for
lending and branch activities in northwest Ohio. Mr. Sullivan is a director of
The Lyden Company, a petroleum marketing company. He is a Trustee of St.
Vincent Medical Center and Central Catholic High School and a director of the
Toledo - Lucas County Port Authority. He is a member of the Young President's
Organization, the Inverness Club and the Toledo Club. Mr. Sullivan graduated
from St. Joseph's High School in South Bend and the University of Notre Dame.
He is married and has two children.
NANCY N. KING has a broad range of banking experience, including
eleven years with Wells Fargo Bank in bank administration, consumer real estate
and commercial lending. For the past five years Mrs. King has served as a
Trust Officer and Regional Manager of Personal Trust Services at Key Trust
Company of Indiana, National Association, a wholly owned subsidiary of Key Bank,
National Association. She graduated from Miami University. In 1994 she
received a Certified Trust and Financial Analyst designation. Mrs. King serves
as Vice President of the YWCA board of directors, is a director of the
Scholarship Foundation of St. Joseph County and is actively involved in several
other community activities. Mrs. King is married with two children and lives
in South Bend, Indiana.
PATRICK D. NOVITZKI has over 20 years of banking experience in
Michiana, most recently as head of the corporate banking department at KeyBank,
National Association, in South Bend, Indiana. After graduating from the
University of Notre Dame, Mr. Novitzki began his banking career at St. Joseph
Bank as a collateral auditor and credit analyst. He is on the board of
directors and a member of the finance committee of the local YMCA, a director
of the Michiana Marlins Swim Club and a member of the Chamber of Commerce of
St. Joseph County. Mr. Novitzki is married and lives in Granger, Indiana.
EDWARD R. POOLEY has ten years of banking experience since beginning
his career with National City Bank as a management trainee. In 1991, he joined
an Ohio community bank and served as the Cashier and Chief Operations Officer
of the bank and as Treasurer of its parent bank holding company. He graduated
from the University of Toledo. Mr. Pooley is married and has two children.
21
<PAGE> 23
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to
John Rosenthal, its only executive officer who received compensation for
services rendered during the period from the Company s organization through May
31, 1996.
<TABLE>
<CAPTION>
===================================================================================================================
SUMMARY COMPENSATION TABLE(1)
- -------------------------------------------------------------------------------------------------------------------
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
- -------------------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (G) (H)
PERIOD SECURITIES ALL OTHER
NAME AND ENDED UNDERLYING COMPENSATION
PRINCIPAL POSITION MAY 31(ST) SALARY($)(2) BONUS($) OPTIONS/SARS (#) ($)
===================================================================================================================
<S> <C> <C> <C> <C> <C>
John W. Rosenthal,
Chairman of the Board,
President and Chief
Executive Officer 1996 $20,923 -- 27,000 --
===================================================================================================================
</TABLE>
(1) Mr. Rosenthal received certain perquisites, but the incremental cost
of providing such perquisites did not exceed the lesser of $50,000
or 10% of his salary and bonus.
(2) Mr. Rosenthal's annual salary is $98,000.
STOCK OPTION INFORMATION
The following table sets forth certain information concerning the
stock options granted by the Company through May 31, 1996:
<TABLE>
<CAPTION>
==============================================================================================================
OPTION GRANTS IN 1996
- --------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E)
NUMBER OF
SECURITIES % OF TOTAL OPTIONS
NAME UNDERLYING GRANTED TO
OPTIONS GRANTED EMPLOYEES IN EXERCISE OR BASE EXPIRATION
(#)(1) FISCAL YEAR PRICE ($/SH) DATE
==============================================================================================================
<S> <C> <C> <C> <C>
John W. Rosenthal,
Chairman of the Board,
President and Chief Executive
Officer 27,000 100% $10.00 June, 2006
==============================================================================================================
</TABLE>
(1) Options become exercisable in equal portions on December 31,
1996, June 30, 1997 and June 30, 1998.
EMPLOYMENT AGREEMENT
The Company has entered into an employment agreement with John
Rosenthal, dated March 18, 1996, for a term beginning on such date and ending
on March 18, 1997, if the Bank is not organized at such time or, if the Bank is
so organized, on March 18, 2000. In the absence of notice from either party to
the contrary, the employment term under the agreement extends for an additional
one year at the end of each year of the agreement. Under the agreement, Mr.
Rosenthal will receive an initial annual salary of $98,000. The agreement also
includes a provision for the review, and possible increase (but not a decrease)
of his salary in subsequent years, as well as performance
22
<PAGE> 24
bonuses, membership in a local country club, an automobile allowance and
participation in the Company's benefit plans and disability benefits. The
agreement also provides for the grant of options to purchase 27,000 shares of
Common Stock under the Company's stock option plan. See "-- Stock Incentive
Plan."
The employment agreement is terminable at any time by either the
Company's Board of Directors or by Mr. Rosenthal. The agreement provides
severance benefits in the event he is terminated without cause, including
severance compensation equal to his then current salary and benefits for the
remainder of the then current term of the employment agreement. The Company
also must pay all accrued salary, vested deferred compensation and other
benefits then due to him. The Company may terminate the agreement at any time
for cause without incurring any post-termination obligation to Mr. Rosenthal.
If Mr. Rosenthal is terminated upon a change in control, he is to be paid
severance compensation equal to three times: (i) his salary at the rate then
in effect at the time of termination; (ii) the amount of any bonus he would
have received; and (iii) the value of the other benefits which would have
accrued to him if he had remained employed for the full term of his agreement.
Moreover, he will continue to receive health, life and disability insurance
coverage for three years following such termination. Pursuant to a
non-competition covenant of the agreement, Mr. Rosenthal is prohibited from
competing with the Company or its subsidiaries within a 50-mile radius of the
Company's main office for a period of one year following the termination of his
employment agreement.
STOCK INCENTIVE PLAN
The Company's Board of Directors and sole stockholder have adopted
resolutions approving the Stock Incentive Plan to promote equity ownership of
the Company by directors and selected officers and employees of the Company and
the Bank, to increase their proprietary interest in the success of the Company
and to encourage them to remain in the employ of the Company.
ADMINISTRATION. The Stock Incentive Plan will be administered by the
Company's human resources committee which is comprised of at least two
non-employee directors appointed by the Company's Board of Directors (the
"Committee"). The Committee will have the authority, subject to approval by
the Board of Directors, to select the directors and employees to whom awards
may be granted, to determine the terms of each award, to interpret the
provisions of the Stock Incentive Plan and to make all other determinations
that it may deem necessary or advisable for the administration of the Stock
Incentive Plan.
The Stock Incentive Plan provides for the grant of "incentive stock
options," as defined under Section 422(b) of the Internal Revenue Code of 1986,
as amended, options that do not so qualify (referred to herein as "nonstatutory
options"), restricted stock and stock appreciation rights ("SARs"), as
determined in each individual case by the Committee. The Board of Directors
has reserved 100,000 shares of Common Stock for issuance under the Stock
Incentive Plan. In general, if any award (including an award granted to a
non-employee director) granted under the Stock Incentive Plan expires,
terminates, is forfeited or is canceled for any reason, the shares of Common
Stock allocable to such award may again be made subject to an award granted
under the Stock Incentive Plan.
AWARDS. Directors and key policy-making employees of the Company and
the Bank are eligible to receive grants under the Stock Incentive Plan. Only
employees may be granted incentive stock options. Awards may be granted
subject to a vesting requirement and in any event will become fully vested upon
a merger or change of control of the Company. The exercise price of incentive
stock options granted under the Stock Incentive Plan must at least equal the
fair market value of the Common Stock subject to the option (determined as
provided in the plan) on the date the option is granted. The exercise price of
nonstatutory options and SARs will be determined by the Committee.
An incentive stock option granted under the Stock Incentive Plan to an
employee owning more than 10% of the total combined voting power of all classes
of capital stock of the Company is subject to the further restriction that such
option must have an exercise price of at least 110% of the fair market value of
the shares of Common Stock issuable upon exercise of the option (determined as
of the date the option is granted) and may not have an exercise term of more
than five years. Incentive stock options are also subject to the further
restriction that the aggregate fair market value (determined as of the date of
grant) of Common Stock as to which any such incentive stock option first
23
<PAGE> 25
becomes exercisable in any calendar year, is limited to $100,000. To the
extent options covering more than $100,000 worth of Common Stock first become
exercisable in any one calendar year, the excess will be nonstatutory options.
For purposes of determining which, if any, options have been granted in excess
of the $100,000 limit, options will be considered to become exercisable in the
order granted.
Each director and key employee eligible to participate in the Stock
Incentive Plan will be notified by the Committee. To receive an award under
the Stock Incentive Plan, an award agreement must be executed which specifies
the type of award to be granted, the number of shares of Common Stock (if any)
to which the award relates, the terms and conditions of the award and the date
granted. In the case of an award of options, the award agreement will also
specify the price at which the shares of Common Stock subject to the option may
be purchased, the date(s) on which the option becomes exercisable and whether
the option is an incentive stock option or a nonstatutory option.
The full exercise price for all shares of Common Stock purchased upon
the exercise of options granted under the Stock Incentive Plan must be paid by
cash, personal check, personal note, award surrender or Common Stock owned at
the time of exercise. Incentive stock options granted to employees under the
Stock Incentive Plan may remain outstanding and exercisable for ten years from
the date of grant or until the expiration of ninety days (or such lesser period
as the Committee may determine) from the date on which the person to whom they
were granted ceases to be employed by the Company. Nonstatutory options and
SARs granted under the Stock Incentive Plan remain outstanding and exercisable
for such period as the Committee may determine.
INCOME TAX. Incentive stock options granted under the Stock
Incentive Plan have certain advantageous tax attributes to the recipient under
the income tax laws. No taxable income is recognized by the option holder for
income tax purposes at the time of the grant or exercise of an incentive stock
option, although neither is there any income tax deduction available to the
Company as a result of such a grant or exercise. Any gain or loss recognized
by an option holder on the later disposition of shares of Common Stock acquired
pursuant to the exercise of an incentive stock option generally will be treated
as capital gain or loss if such disposition does not occur prior to one year
after the date of exercise of the option, or two years after the date the
option was granted.
As in the case of incentive stock options, the grant of nonstatutory
stock options, restricted stock or SARs will not result in taxable income for
income tax purposes to the recipient of the awards, nor will the Company be
entitled to an income tax deduction. Upon the exercise of nonstatutory stock
options or SARs, or the lapse of restrictions on restricted stock, the award
holder will generally recognize ordinary income for income tax purposes equal
to the difference between the exercise price and the fair market value of the
shares of Common Stock acquired or deemed acquired on the date of exercise, and
the Company will be entitled to an income tax deduction in the amount of the
ordinary income recognized by the option holder. In general, any gain or loss
realized by the option holder on the subsequent disposition of such shares will
be a capital gain or loss.
AMENDMENT AND TERMINATION. The Stock Incentive Plan expires ten
years after its adoption, unless sooner terminated by the Board of Directors.
The Board of Directors has authority to amend the Stock Incentive Plan in such
manner as it deems advisable. The Stock Incentive Plan provides for
appropriate adjustment, as determined by the Committee, in the number and kind
of shares subject to unexercised options, in the event of any change in the
outstanding shares of Common Stock by reason of a stock split, stock dividend,
combination or reclassification of shares, recapitalization, merger or similar
event.
In accordance with his employment agreement, on June 11,1996, Mr. John
Rosenthal received the grant of options under the Stock Incentive Plan to
purchase 27,000 shares of Common Stock at the initial public offering price of
$10.00 per share. The options will be for a ten year term and will become
exercisable in equal portions on December 31, 1996, June 30, 1997, and June 30,
1998.
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<PAGE> 26
CERTAIN TRANSACTIONS
ORGANIZATIONAL LOANS
The directors of the Company have loaned to the Company an aggregate
of $275,000 for use in connection with organizational and capital raising
expenses. All such amounts borrowed by the Company from its directors bear
interest at an annual rate of 6%, and are repayable in cash only from the
proceeds of this offering. Directors may elect to receive repayment in the form
of shares of Common Stock sold in this offering, valued at the Price to Public.
All of the Company's directors have indicated their current intention either to
elect such option or to invest at least an equal amount in direct purchases of
Common Stock in this offering. See "Principal Stockholders."
LEASE OF THE BANK PREMISES
The Company has signed a letter of intent to lease the Bank's
permanent office from BK Main Street, which is an affiliate of the principal
stockholder of Quality Dining, Inc. Arthur Decio, a director of the Company,
is also a director of Quality Dining, Inc., which is the current tenant of the
premises. The Company expects the lease to provide that the Company will be
obligated to pay rent in an annual amount of $67,500 during the first year of
the lease with such annual rent increasing by $9,500 in each succeeding year
during the initial five year term. The Company is also obligated to pay all
costs associated with taxes, assessments, maintenance, utilities and insurance.
In addition, if the Bank has subleased any portion of the building to another
tenant, the Company is required to pay its lessor one-half of the rent it
receives from such tenant. Moreover, if that tenant subsequently vacates the
space so that the Bank may expand its operations, the annual rent will increase
by one-half of the former subtenant's rental payment. If the Company is unable
to find another sublessee, the Company will owe the lessor a one time payment
of $5,000 in the second year of the lease, but such payment will be reduced by
any amounts previously paid to the lessor by the sublessee. The lease is
expected to be renewable for one additional five year period, with the annual
rent increasing by 5% per year over and above the rental payment due in year
five in each year during such period. The lease is expected to permit the
Company, the Bank or an affiliate of either to purchase the property for
$800,000 at any time during the term of the lease. Management of the Company
believes that the proposed terms of the lease are no less favorable to the
Company than could be obtained from non-affiliated parties.
BANKING TRANSACTIONS
It is anticipated that the directors and officers of the Company and
the Bank and the companies with which they are associated will have banking and
other transactions with the Company and the Bank in the ordinary course of
business. All transactions between the Company and affiliated persons,
including 5% stockholders, will be on terms no less favorable to the Company
than could be obtained from independent third parties. Any loans and
commitments to lend to such affiliated persons or entities included in such
transactions will be made in accordance with all applicable laws and
regulations and on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
unaffiliated parties of similar creditworthiness.
INDEMNIFICATION
The Certificate and Bylaws of the Company provide for the
indemnification of directors and officers of the Company and the Bank,
including reasonable legal fees, incurred by such directors and officers while
acting for or on behalf of the Company or the Bank as a director or officer,
subject to certain limitations. See "Description of Capital Stock -- Certain
Anti-Takeover, Indemnification and Limited Liability Provisions." The Company
expects to purchase directors and officers liability insurance for directors
and officers of the Company and the Bank.
PRINCIPAL STOCKHOLDERS
Except for 100 shares issued to John Rosenthal for the sole purpose of
incorporating the Company and electing its directors, the Company has not yet
issued any Common Stock. These organizational shares will be repurchased by
the Company at their $1,000 cost concurrently with the closing of this
offering. See "Description of Capital Stock -- Common Stock." The following
table sets forth certain information with respect to the projected
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<PAGE> 27
beneficial ownership of Common Stock after the sale of shares offered hereby,
by: (i) each person expected by the Company to beneficially own more than 5%
of the outstanding Common Stock; (ii) each of the current directors and
executive officers of the Company and the contemplated directors and executive
officers of the Bank; and (iii) all such directors and executive officers of
the Company and the Bank as a group. All share numbers are provided based upon
estimates, supplied to the Company by the persons listed below, of the number
of shares of Common Stock expected to be purchased in this offering by such
persons, including shares which may be issued to certain directors in full or
partial satisfaction of loans made to the Company. See "Certain Transactions
- -- Organizational Loans." Depending upon their individual circumstances at the
time, each of such individuals may purchase a greater or fewer number of shares
than indicated in the following table.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED PERCENTAGE OF OUTSTANDING
NAME AFTER THIS OFFERING(1) SHARES OWNED AFTER THIS OFFERING
---- ----------------------- --------------------------------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
John W. Rosenthal(2) . . . . . . . . . 8,700 0.79%
Arthur J. Decio . . . . . . . . . . . . 25,000 2.27%
David A. Eckrich . . . . . . . . . . . 25,000 2.27%
Jerry Hammes(3) . . . . . . . . . . . . 49,900 4.54%
V. Robert Hepler . . . . . . . . . . . 25,000 2.27%
Helen L. Krizman . . . . . . . . . . . 10,000 0.91%
Scott C. Malpass . . . . . . . . . . . 2,500 0.23%
Jack Matthys . . . . . . . . . . . . . 20,000 1.82%
Arthur H. McElwee . . . . . . . . . . . 10,000 0.91%
Richard A. Rosenthal(4) . . . . . . . . 20,000 1.82%
Robert A. Sullivan . . . . . . . . . . 10,000 1.91%
Nancy N. King . . . . . . . . . . . . . -- --
Patrick D. Novitzki . . . . . . . . . . 5,200 0.47%
Edward R. Pooley . . . . . . . . . . . 1,000 0.09%
Directors and executive officers as a
group (14 individuals) . . . . . . . . 212,300 19.30%
- ---------------------
</TABLE>
(1) The information contained in this column is based upon information
furnished to the Company by the persons named above and the members of the
designated group. The nature of beneficial ownership for shares shown in
this column is sole voting and investment power, except as set forth in the
footnotes below. Inclusion of shares shall not constitute an admission of
beneficial ownership or voting or investment power over included shares.
(1) Excludes options to purchase 27,000 shares of Common Stock.
(2) Includes 25,000 shares of Common Stock to be purchased by an affiliated
company.
(3) Includes 10,000 shares of Common Stock to be purchased by Mr. Rosenthal's
spouse.
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<PAGE> 28
SUPERVISION AND REGULATION
GENERAL
The growth and earnings performance of the Company can be affected not
only by management decisions and general economic conditions, but also by the
policies of various governmental regulatory authorities including, but not
limited to, the DFI, the Federal Reserve Board, the FDIC, the Internal Revenue
Service and state taxing authorities. Financial institutions and their holding
companies are extensively regulated under federal and state law. The effect of
such statutes, regulations and policies can be significant, and cannot be
predicted with a high degree of certainty.
Federal and state laws and regulations generally applicable to
financial institutions such as the Company and the Bank, regulate, among other
things, the scope of business, investments, reserves against deposits, capital
levels relative to operations, the nature and amount of collateral for loans,
the establishment of branches, mergers, consolidations and dividends. The
system of supervision and regulation applicable to the Company and the Bank
establishes a comprehensive framework for their respective operations and is
intended primarily for the protection of the FDIC's deposit insurance funds and
the depositors, rather than the stockholders, of financial institutions.
The following references to material statutes and regulations
affecting the Company and the Bank are brief summaries thereof and do not
purport to be complete, and are qualified in their entirety by reference to
such statutes and regulations. Any change in applicable law or regulations may
have a material effect on the business of the Company and the Bank.
RECENT REGULATORY DEVELOPMENTS
On August 8, 1995, the FDIC amended its regulations to change the
range of deposit insurance assessments charged to members of the Bank Insurance
Fund (the "BIF"), such as the Bank, from the then-prevailing range of 0.23% to
0.31% of deposits, to a range of 0.04% to 0.31% of deposits. On November 14,
1995, the FDIC further reduced the deposit insurance assessments for BIF-member
institutions by four basis points. As a result, the range of BIF assessments
for the semi-annual assessment period which commenced January 1, 1996, is
between 0% and 0.27% of deposits. BIF-member institutions qualifying for the
0% assessment category will, however, still have to pay the $1,000 minimum
semi-annual assessment required by federal statute.
The FDIC was able to change the range for BIF-member deposit insurance
assessments to their current levels because the ratio of the insurance reserves
of the BIF to total BIF-insured deposits exceeds the statutorily designated
reserve ratio of 1.25%. Because the Savings Association Insurance Fund (the
"SAIF") does not meet this designated reserve ratio, the FDIC is prohibited by
federal law from reducing the deposit insurance assessments charged to SAIF-
member institutions to the same levels currently charged BIF-member
institutions, and SAIF -insured institutions currently pay assessments ranging
from 0.23% to 0.31% of deposits. Legislation pending before the Congress would
recapitalize the SAIF to the designated reserve ratio by imposing a special
assessment against SAIF-insured institutions. The pending bill would also
require that BIF assessments be used to fund a portion of the interest payments
due on outstanding bonds issued in the late 1980's to recapitalize the Federal
Savings and Loan Insurance Corporation, which until 1989 insured the
institutions now insured by the SAIF. It is anticipated that BIF assessments
will increase if this provision is enacted. Further, in conjunction with the
proposed recapitalization of the SAIF, legislation has been introduced in the
Congress that would, among other things, require federal thrift institutions to
convert to state or national banks and would merge the BIF and the SAIF into a
single deposit insurance fund administered by the FDIC. At this time, it is
not possible to predict whether, or in what form, any such legislation will be
adopted or the impact, if any, such legislation would have on the Company or
the Bank or if such legislation would cause an increase in deposit insurance
premiums, although such increase appears probable.
THE COMPANY
GENERAL. The Company expects to receive the approval of the Federal
Reserve Board to acquire all of the capital stock to be issued by the Bank in
connection with its organization. The Company, as the
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<PAGE> 29
sole shareholder of the Bank, will be a bank holding company. As a bank
holding company, the Company will be required to be registered with, and will
be subject to regulation by, the Federal Reserve Board under the Bank Holding
Company Act of 1956, as amended (the "BHCA"). In accordance with Federal
Reserve Board policy, the Company will be expected to act as a source of
financial strength to the Bank and to commit resources to support the Bank in
circumstances where the Company might not do so absent such policy. Under the
BHCA, the Company will also be subject to periodic examination by the Federal
Reserve Board and will be required to file periodic reports of its operations
and such additional information as the Federal Reserve Board may require.
INVESTMENTS AND ACTIVITIES. Under the BHCA, a bank holding company
must obtain Federal Reserve Board approval before: (i) acquiring, directly or
indirectly, ownership or control of any voting shares of another bank or bank
holding company if, after such acquisition, it would own or control more than
5% of such shares (unless it already owns or controls the majority of such
shares); (ii) acquiring all or substantially all of the assets of another bank
or bank holding company; or (iii) merging or consolidating with another bank
holding company.
Prior to September 29, 1995, the BHCA prohibited the Federal Reserve
Board from approving any direct or indirect acquisition by a bank holding
company of more than 5% of the voting shares, or of all or substantially all of
the assets, of a bank located outside of the state in which the operations of
the bank holding company'sbanking subsidiaries are principally located unless
the laws of the state in which the bank to be acquired is located specifically
authorize such an acquisition. Pursuant to amendments to the BHCA which took
effect September 29, 1995, the Federal Reserve Board may now allow a bank
holding company to acquire banks located in any state of the United States
without regard to geographic restrictions or reciprocity requirements imposed
by state law, but subject to certain conditions, including limitations on the
aggregate amount of deposits that may be held by the acquiring holding company
and all of its insured depository institution affiliates and state law
provisions requiring the target bank to have existed for some period of time
(not exceeding five years) prior to the date of acquisition.
The BHCA also prohibits the Company, with certain exceptions noted
below, from acquiring direct or indirect ownership or control of more than 5%
of the voting shares of any company which is not a bank and from engaging in
any business other than that of banking, managing and controlling banks or
furnishing services to banks and their subsidiaries, except that bank holding
companies may engage in, and may own shares of companies engaged in, certain
businesses found by the Federal Reserve Board to be "so closely related to
banking . . . as to be a proper incident thereto." Under current regulations
of the Federal Reserve Board, the Company and any non-bank subsidiaries it may
control are permitted to engage in, among other activities, such
banking-related businesses as the operation of a thrift, the operation of a
trust company, sales and consumer finance, equipment leasing, the operation of
a computer service bureau, including software development, and mortgage banking
and brokerage. The BHCA does not place territorial restrictions on the
activities of non-bank subsidiaries of bank holding companies. The DFI also
requires out-of-state banking-holding companies acquiring an Indiana bank or
bank holding company to file a written notice regarding such acquisition with
the DFI prior to such acquisition.
Federal legislation also prohibits the acquisition of "control" of a
bank or bank holding company, such as the Company, without prior notice to
certain federal bank regulators. "Control" is defined in certain cases as the
acquisition of 10% of the outstanding voting shares of a bank or bank holding
company. Indiana law requires the approval of the DFI prior to the acquisition
of "control" of the Company or the Bank. For these purposes, "control" means
the acquisition of at least 25% of the voting stock of an institution or the
ability to direct the management or policies of a bank or bank holding company.
CAPITAL REQUIREMENTS. The Federal Reserve Board uses capital adequacy
guidelines in its examination and regulation of bank holding companies. If
capital falls below minimum guideline levels, a bank holding company may, among
other things, be denied approval to acquire or establish additional banks or
non-bank businesses.
The Federal Reserve Board's capital guidelines establish the following
minimum regulatory capital requirements for bank holding companies: a
risk-based requirement expressed as a percentage of total risk-weighted assets
and a leverage requirement expressed as a percentage of total assets. The
risk-based requirement consists of a minimum ratio of total capital to total
risk-weighted assets of 8%, of which at least one-half must be Tier 1 capital
(which consists principally of stockholders equity). The leverage requirement
consists of a minimum ratio of Tier 1
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<PAGE> 30
capital to total assets of 3% for the most highly rated companies, with minimum
requirements of 4% to 5% for all others.
The risk-based and leverage standards presently used by the Federal
Reserve Board are minimum requirements and higher capital levels will be
required if warranted by the particular circumstances or risk profiles of
individual banking organizations. Further, any banking organization
experiencing or anticipating significant growth would be expected to maintain
capital ratios, including tangible capital positions (i.e., Tier 1 capital less
all intangible assets), well above the minimum levels.
The Federal Reserve Board's regulations provide that the foregoing
capital requirements will generally be applied on a bank-only (rather than a
consolidated) basis in the case of a bank holding company with less than $150
million in total consolidated assets.
DIVIDENDS. The Federal Reserve Board has issued a policy statement on
the payment of cash dividends by bank holding companies. In the policy
statement, the Federal Reserve Board expressed its view that a bank holding
company experiencing earnings weaknesses should not pay cash dividends
exceeding its net income or which could only be funded in ways that weakened
the bank holding company's financial health, such as by borrowing.
Additionally, the Federal Reserve Board possesses enforcement powers over bank
holding companies and their non-bank subsidiaries to prevent or remedy actions
that represent unsafe or unsound practices or violations of applicable statutes
and regulations. Among these powers is the ability to proscribe the payment of
dividends by banks and bank holding companies.
In addition to the restrictions on dividends imposed by the Federal
Reserve Board, the Delaware General Corporation Law would allow the Company to
pay dividends only out of its surplus, or if the Company has no such surplus,
out of its net profits for the fiscal year in which the dividend is declared
and/or the preceding fiscal year.
THE BANK
GENERAL. The Bank will be an Indiana-chartered bank, the deposit
accounts of which will be insured by the BIF of the FDIC. As a BIF-insured,
Indiana-chartered bank, the Bank will be subject to the examination,
supervision, reporting and enforcement requirements of the DFI, as the
chartering authority for Indiana banks, and the FDIC, as administrator of the
BIF.
DEPOSIT INSURANCE. As an FDIC-insured institution, the Bank will be
required to pay deposit insurance premium assessments to the FDIC. The amount
each institution pays for FDIC deposit insurance coverage is determined in
accordance with a risk-based assessment system under which all insured
depository institutions are placed into one of nine categories and assessed
insurance premiums based upon their level of capital and supervisory
evaluation. Institutions classified as well-capitalized (as defined by the
FDIC) and considered healthy pay the lowest premium while institutions that are
less than adequately capitalized (as defined by the FDIC) and considered of
substantial supervisory concern pay the highest premium. For the semi-annual
assessment period which began January 1, 1996, BIF assessments ranged from
$1,000 for institutions that are well-capitalized to 0.27% of deposits for
other institutions. Because the Bank will initially be a "well capitalized"
institution for purposes of its deposit insurance premiums, it expects its
initial annual FDIC premium to be $2,000. See " -- Recent Regulatory
Developments." Risk classification of all insured institutions is made by the
FDIC for each semi-annual assessment period.
The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC determines, after a hearing, that the institution has
engaged or is engaging in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable law,
regulation, order or any condition imposed in writing by, or written agreement
with, the FDIC. The FDIC may also suspend deposit insurance temporarily during
the hearing process for a permanent termination of insurance if the institution
has no tangible capital.
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<PAGE> 31
CAPITAL REQUIREMENTS. The FDIC has established the following minimum
capital standards for state-chartered, insured, non-member banks, such as the
Bank: a leverage requirement consisting of a minimum ratio of Tier 1 capital
to total assets of 3% for the most highly-rated banks with minimum requirements
of 4% to 5% for all others, and a risk- based capital requirement consisting of
a minimum ratio of total capital to total risk-weighted assets of 8%, at least
one-half of which must be Tier 1 capital.
The capital requirements described above are minimum requirements.
Higher capital levels will be required if warranted by the particular
circumstances or risk profiles of individual institutions. For example, the
regulations of the FDIC provide that additional capital may be required to take
adequate account of the risks posed by concentrations of credit and
nontraditional activities, interest rate risk and the institution's ability to
manage such risks. Management does not anticipate that this amendment will
adversely affect the ability of the Bank to maintain compliance with applicable
capital requirements. Upon receiving its charter, the Bank will exceed its
minimum regulatory capital requirements.
Federal law provides the federal banking regulators with broad powers
to take prompt corrective action to resolve the problems of undercapitalized
institutions. The extent of the regulators powers depends on whether the
institution in question is "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized," as defined by regulation. Depending upon the capital
category to which an institution is assigned, the regulators corrective powers
include: requiring the submission of a capital restoration plan; placing
limits on asset growth and restrictions on activities; requiring the
institution to issue additional capital stock (including additional voting
stock) or to be acquired; restricting transactions with affiliates; restricting
the interest rate the institution may pay on deposits; ordering a new election
of directors of the institution; requiring that senior executive officers or
directors be dismissed; prohibiting the institution from accepting deposits
from correspondent banks; requiring the institution to divest certain
subsidiaries; prohibiting the payment of principal or interest on subordinated
debt; and ultimately, appointing a receiver for the institution.
DIVIDENDS. Under the Indiana Act, the Bank will be prohibited from
paying dividends in an amount greater than its undivided profits or if the
payment of dividends would impair the Bank's capital. The Bank will, however,
be required to obtain the approval of DFI for the payment of any dividend if
the aggregate amount of all dividends paid by the Bank during any calendar
year, including the proposed dividend, would exceed the sum of: (i) the total
net profits of the Bank for that year; and (ii) the retained net profits of the
Bank for the previous two years. For purposes of the Indiana Act, "net
profits" means the sum of all earnings from current operations plus actual
recoveries on loans, investments and other assets, less the sum of all current
operating expenses, actual losses, accrued dividends on preferred stock, if
any, and all federal, state and local taxes. The payment of dividends by any
financial institution or its holding company is affected by the requirement to
maintain adequate capital pursuant to applicable capital adequacy guidelines
and regulations.
INSIDER TRANSACTIONS. The Bank will be subject to certain
restrictions imposed by the Federal Reserve Act on any extensions of credit to
the Company and any future subsidiaries, on investments in the stock or other
securities of the Company and its subsidiaries and the acceptance of the stock
or other securities of the Company or its subsidiaries as collateral for loans.
Certain limitations and reporting requirements are also placed on extensions of
credit by the Bank to its directors and officers, to directors and officers of
the Company and its subsidiaries, to principal stockholders of the Company and
to "related interests" of such directors, officers and principal stockholders.
In addition, such legislation and regulations may affect the terms upon which
any person becoming a director or officer of the Company or one of its
subsidiaries or a principal stockholder of the Company may obtain credit from
banks with which the Bank maintains a correspondent relationship.
SAFETY AND SOUNDNESS STANDARDS. The federal banking regulators,
including the FDIC, have promulgated guidelines establishing operational and
managerial standards to promote the safety and soundness of federally insured
depository institutions. These guidelines establish standards for internal
controls, information systems, internal audit systems, loan documentation,
credit underwriting, interest rate exposure, asset growth and compensation,
fees and benefits. In general, the guidelines prescribe the goals to be
achieved in each area, and each institution is responsible for establishing its
own procedures to achieve those goals. If an institution fails to comply with
any of the standards set forth in the guidelines, the institution's primary
federal regulator may require the institution to submit a plan for
30
<PAGE> 32
achieving and maintaining compliance. The preamble to the guidelines states
that the agencies expect to require a compliance plan from an institution whose
failure to meet one or more of the standards is of such severity that it could
threaten the safe and sound operation of the institution. Failure to submit an
acceptable compliance plan, or failure to adhere to a compliance plan that has
been accepted by the appropriate regulator, will constitute grounds for further
enforcement action. The federal banking agencies have also published for
comment proposed asset quality and earnings standards which, if adopted, would
be added to the safety and soundness guidelines. This proposal, like the final
guidelines, would establish the goals to be achieved with respect to asset
quality and earnings, and each institution would be responsible for
establishing its own procedures to meet such goals.
BRANCHING AUTHORITY. Indiana banks, such as the Bank, have the
authority under Indiana law to establish branches anywhere in the State of
Indiana, subject to receipt of all required regulatory approvals. Effective
June 1, 1997 (or earlier if expressly authorized by applicable state law), the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Riegle-Neal Act") allows banks to establish interstate branch networks through
acquisitions of other banks, subject to certain conditions, including certain
limitations on the aggregate amount of deposits that may be held by the
surviving bank and all of its insured depository institution affiliates. The
establishment of de novo interstate branches or the acquisition of individual
branches of a bank in another state (rather than the acquisition of an
out-of-state bank in its entirety) is allowed by the Riegle-Neal Act only if
specifically authorized by state law. The legislation allows individual states
to "opt-out" of certain provisions of the Riegle-Neal Act by enacting
appropriate legislation prior to June 1, 1997. The State of Indiana recently
passed a law establishing interstate branching provisions for Indiana
state-chartered banks consistent with those established by the Riegel-Neal Act
(the "Indiana Branching Law"). The Indiana Branching Law authorizes Indiana
banks to branch interstate by merger or de novo expansion and authorizes
out-of-state banks meeting certain requirements to branch into Indiana by
merger or de novo expansion. The Indiana Branching Law became effective March
15, 1996, but contains the limitation that prior to June 1, 1997, interstate
mergers and de novo branches are not permitted to out-of-state banks unless the
laws of their respective home state permit Indiana banks to merge or establish
de novo branches on a reciprocal basis.
STATE BANK ACTIVITIES. Under federal law, as implemented by
regulations adopted by the FDIC, FDIC-insured state banks are prohibited,
subject to certain exceptions, from making or retaining equity investments of a
type, or in an amount, that are not permissible for a national bank. Federal
law, as implemented by FDIC regulations, also prohibits FDIC-insured state
banks and their subsidiaries, subject to certain exceptions, from engaging as
principal in any activity that is not permitted for a national bank or its
subsidiary, respectively, unless the bank meets, and continues to meet, its
minimum regulatory capital requirements and the FDIC determines that the
activity would not pose a significant risk to the deposit insurance fund of
which the bank is a member. Impermissible investments and activities must be
divested or discontinued within certain time frames set by the FDIC. These
restrictions are not currently expected to have a material impact on the
operations of the Bank.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company presently consists of
1,500,000 shares of Common Stock, par value $.01 per share, and 100,000 shares
of preferred stock, par value $.01 per share, issuable in series (the
"Preferred Stock").
COMMON STOCK
As of the date of this Prospectus, there were 100 shares of Common
Stock issued and outstanding and held by John Rosenthal. These shares were
issued at a price of $10.00 per share for the sole purpose of incorporating the
Company and for electing its directors, and they will be redeemed at cost and
canceled concurrently with the closing of this offering. All outstanding
shares of Common Stock offered hereby will be fully paid and nonassessable.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters voted upon by stockholders. Subject to preferences that
may be applicable to any outstanding shares of Preferred Stock, each share of
outstanding Common Stock is entitled to participate equally in any distribution
of net assets made to the stockholders in liquidation, dissolution or winding
up the Company and is entitled to participate equally in dividends
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<PAGE> 33
as and when declared by the Company's Board of Directors. There are no
redemption, sinking fund, conversion or preemptive rights with respect to the
shares of Common Stock. All shares of Common Stock have equal rights and
preferences. The transfer agent and registrar for the Common Stock is First
Union National Bank of North Carolina.
PREFERRED STOCK
As of the date of this Prospectus, no shares of Preferred Stock were
issued or outstanding. The Board of Directors is authorized to fix or alter
the rights, preferences, privileges and restrictions of any wholly unissued
series of Preferred Stock, including the dividend rights, original issue price,
conversion rights, voting rights, terms of redemption, liquidation preferences
and sinking fund terms thereof, and the number of shares constituting any such
series and the designation thereof and to increase or decrease the number of
shares of such series subsequent to the issuance of shares of such series (but
not below the number of shares then outstanding). Because the terms of the
Preferred Stock can be fixed by the Board of Directors without stockholder
action, the Preferred Stock could be issued with terms calculated to defeat a
proposed takeover of the Company or to make the removal of management more
difficult. The Board of Directors, without stockholder approval, could issue
Preferred Stock with dividend, voting and conversion rights which could
adversely affect the rights of the holders of Common Stock. At present, the
Company has no plans to issue any shares of Preferred Stock.
CERTAIN ANTI-TAKEOVER, INDEMNIFICATION AND LIMITED LIABILITY PROVISIONS
The Company's Certificate contains certain provisions which may have
the effect of delaying, deferring or preventing a change in control of the
Company. Such provisions could also result in the Company being less
attractive to a potential acquiror. The Certificate provides that the Board of
Directors shall consist of three classes of directors, each serving for a
three-year term ending in a successive year. This provision may make it more
difficult to effect a takeover of the Company because it would generally take
two annual meetings of stockholders for an acquiring party to elect a majority
of the Board of Directors. As a result, a classified Board of Directors may
discourage proxy contests for the election of directors or purchasers of a
substantial block of stock because it could operate to prevent obtaining
control of the Board of Directors in a relatively short period of time. For
information relating to the initial classes of directors of the Company, see
"Management -- Directors and Officers."
The Certificate also requires the affirmative vote of 66-2/3% of the
outstanding shares of voting stock (or of shares held by disinterested
stockholders if the transaction involves an interested stockholder (as defined
below)) to approve certain fundamental changes such as mergers, consolidations
or dissolutions of the Company or the sale or lease of all or substantially all
of the Company's assets, unless such changes have received advance approval of
66-2/3% of the Company's directors (or of directors not affiliated with an
interested stockholder if the transaction involves an interested stockholder),
in which case the required vote is a majority.
In addition, the Certificate provides that the stockholders may only
take action at a duly called and held meeting and may not take action by
written consent. This provision may make it more difficult to effect a
takeover of the Company by means of certain transactions, such as a merger or
sale of assets, by requiring a potential acquiror to hold a stockholders
meeting before such a transaction could be consummated.
The Certificate also provides that the provisions of the Certificate
governing the amendment of the Certificate and the bylaws, establishing the
Company's classified board of directors, restricting certain business
combinations with interested stockholders, requiring stockholder actions to be
taken only at meetings, providing that special meetings of stockholders may
only be called by the Board of Directors and permitting the Board of Directors
to consider certain non- stockholder interests when evaluating a proposed
tender or exchange offer, may be amended only by the affirmative vote of not
less than 66-2/3% of the outstanding shares of voting stock of the Company,
unless such changes have received advance approval of at least 66-2/3% of the
Company's directors, in which case the required vote is a majority.
The Company is subject to the provisions of Section 203 of the
Delaware General Corporation Law. In general, this statute prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date the
person or entity becomes an interested
32
<PAGE> 34
stockholder, unless (with certain exceptions) the business combination or the
transaction in which the person becomes an interested stockholder is approved
in a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale or other transaction resulting in a financial benefit to
the stockholder. An "interested stockholder" is generally defined as a person
who, together with affiliates and associates, owns (or, within the three prior
years, did own) 15% or more of the corporation's voting stock. This provision
may have the effect of delaying, deferring or preventing a change in control of
the Company without further action by the stockholders.
As permitted by the provisions of the Delaware General Corporation
Law, the Certificate eliminates in certain circumstances the monetary liability
of directors of the Company for a breach of their fiduciary duty as directors.
These provisions do not eliminate the liability of a director for: (i) a
breach of the director's duty of loyalty to the Company or its stockholders;
(ii) acts or omissions by a director not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) liability arising
under Section 174 of the Delaware General Corporation Law (relating to the
declaration of dividends and purchase or redemption of shares in violation of
the Delaware General Corporation Law); or (iv) any transaction from which the
director derived an improper personal benefit. In addition, these provisions
do not limit the rights of the Company or its stockholders, in appropriate
circumstances, to seek equitable remedies such as injunctive or other forms of
non-monetary relief. Such remedies may not be effective in all cases.
The Company's Certificate and Bylaws provide that the Company shall
indemnify all directors and officers of the Company to the full extent
permitted by the Delaware General Corporation Law. Under such provisions, any
director or officer, who in his or her capacity as such, is made or threatened
to be made, a party to any suit or proceeding, shall be indemnified if such
director or officer acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests to the Company. The
Certificate, Bylaws and the Delaware General Corporation Law further provide
that such indemnification is not exclusive of any other rights to which such
individuals may be entitled under the Certificate, the Bylaws, any agreement,
insurance policies, vote of stockholders or disinterested directors or
otherwise.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company expects to have
1,100,000 shares of its Common Stock outstanding. The 1,100,000 shares of the
Company's Common Stock purchased in this offering (plus any additional shares
sold upon the Underwriter's exercise of its over-allotment option) have been
registered with the SEC under the Securities Act, and may generally be resold
without registration under the Securities Act unless they were acquired by
directors, executive officers, or other affiliates of the Company or the Bank
(collectively, "Affiliates"). Affiliates of the Company may generally only
sell shares of the Common Stock pursuant to the SEC's Rule 144.
In general, under Rule 144 as currently in effect, an affiliate (as
defined in Rule 144) of the Company may sell shares of Common Stock within any
three-month period in an amount limited to the greater of 1% of the outstanding
shares of the Company's Common Stock (11,000 shares immediately after the
completion of this offering) or the average weekly trading volume in the
Company's 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.
The Company and the directors and officers of the Company and the Bank
(who are expected to hold an aggregate of approximately 212,300 shares after
this offering), have agreed, or will agree, that they will not issue, offer for
sale, sell, grant any options for the sale of or otherwise dispose of any
shares of Common Stock or any rights to purchase shares of Common Stock, in the
open market or otherwise, without the prior written consent of the Underwriter
for a period of 180 days from the date of this Prospectus.
Prior to this offering, there has been no public trading market for
the Common Stock, and no predictions can be made as to the effect, if any, that
sales of shares or the availability of shares for sale will have on the
prevailing market price of the Common Stock after completion of this offering.
Nevertheless, sales of substantial amounts of Common Stock in the public market
could have an adverse effect on prevailing market prices.
33
<PAGE> 35
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement,
Robert W. Baird & Co. Incorporated, as Underwriter, has agreed to purchase from
the Company an aggregate of up to 1,100,000 shares of Common Stock at the Price
to Public less the Underwriting Discounts and Commissions set forth on the
cover page of this Prospectus.
The Underwriting Agreement provides that the Underwriter's obligation
to pay for and accept delivery of the shares of Common Stock offered hereby is
subject to certain conditions precedent and that the Underwriter will be
obligated to purchase all such shares, excluding shares covered by the
over-allotment option, if any are purchased.
The Company and the Underwriter have agreed that the Underwriter will
purchase the shares of Common Stock offered hereunder at a Price to Public of
$10.00 per share less Underwriting Discounts and Commissions of $0.70 per
share. However, Underwriting Discounts and Commissions will be reduced to
$0.30 per share with respect to sales to certain investors identified by the
Company to the Underwriter prior to June 21, 1996.
The Company has been advised by the Underwriter that the Underwriter
proposes to offer the 1,100,000 shares of Common Stock to the public at the
Price to Public. The Underwriter has advised the Company that, after the
initial public offering of the Common Stock, the public offering price and
other selling terms may be changed by the Underwriter. Unless waived by the
Underwriter, shares of Common Stock will be sold to the public only in minimum
lots of 1,000 shares ($10,000). Such minimum purchase was determined by mutual
agreement of the Company and the Underwriter and is designed to decrease the
costs to the Company that are associated with servicing a large number of
stockholders with each owning only a relatively small number of shares.
The Underwriter has informed the Company that it does not intend to
confirm sales of the shares of Common Stock offered hereby to any accounts over
which it exercises discretionary authority.
The Company has granted the Underwriter an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of
165,000 additional shares of Common Stock to cover over-allotments, if any, at
the same price per share to be paid by the Underwriter for the other shares of
Common Stock offered hereby. The Underwriter may exercise such option only for
the purpose of covering any over-allotments of the 1,100,000 shares of Common
Stock offered hereby.
The Company, its directors and executive officers and those of the
Bank agreed or will agree with the Underwriter, for a period of 180 days after
the date of this Prospectus, not to issue, sell, offer to sell, grant any
options for the sale of, or otherwise dispose of any shares of Common Stock or
any rights to purchase shares of Common Stock, in the open market or otherwise,
without the prior written consent of the Underwriter.
The Underwriting Agreement contains indemnity provisions between the
Underwriter and the Company and the controlling persons thereof against certain
liabilities, including liabilities arising under the Securities Act of 1933, as
amended. The Company is generally obligated to indemnify the Underwriter in
connection with losses or claims arising out of any untrue statement of a
material fact contained in this Prospectus or in related documents filed with
the Commissioner or with any state securities administrator or any omission of
certain material facts from such documents.
There has been no public trading market for the Common Stock. The
Price to Public was determined by negotiations between the Company and the
Underwriter. This price is not based upon earnings or any history of
operations and should not be construed as indicative of the present or
anticipated future value of the Common Stock. Several factors were considered
in determining the initial offering price of the Common Stock, among them the
size of the offering, the desire that the security being offered be attractive
to individuals and the Underwriter's experience in dealing with initial public
offerings for financial institutions.
34
<PAGE> 36
LEGAL PROCEEDINGS
Neither the Bank nor the Company is a party to any pending legal
proceeding. Management believes there is no litigation threatened in which the
Company or the Bank faces potential loss or exposure or which will materially
affect stockholders equity or the Company's business or financial condition
upon completion of this offering.
LEGAL OPINIONS
The legality of the shares of Common Stock being offered hereby will
be passed upon for the Company by Barack, Ferrazzano, Kirschbaum & Perlman, 333
West Wacker Drive, Suite 2700, Chicago, Illinois. Barnes & Thornburg, 1313
Merchants Building, 11 South Meridian Street, Indianapolis, Indiana, is acting
as counsel for the Underwriter in connection with certain legal matters
relating to the shares of Common Stock offered hereby.
EXPERTS
The financial statements of the Company included in this Prospectus
have been audited by Crowe, Chizek and Company LLP, independent public
accountants, as indicated in their report with respect thereto. Such financial
statements have been included herein and in the Registration Statement in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement with the Commission in
accordance with the provisions of the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
portions of which have been omitted as permitted by the rules and regulations
of the Commission. For further information pertaining to the shares of Common
Stock offered hereby and to the Company, reference is made to the Registration
Statement, including the Exhibits filed as a part thereof, copies of which can
be inspected at and copied at the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission s
regional offices located at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Room 1400, 75 Park Place, New
York, New York 10007. Copies of such materials can also be obtained at
prescribed rates by writing to the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the Company is
required to file electronic versions of these documents with the Commission
through the Commission's Electronic Data Gathering, Analysis and Retrieval
(EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the provisions discussed above under "Description of
Capital Stock -- Certain Anti-Takeover, Indemnification and Limited Liability
Provisions," or otherwise, the Company has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable.
35
<PAGE> 37
ST. JOSEPH CAPITAL CORPORATION
CONTENTS
<TABLE>
<S> <C> <C>
REPORT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
FINANCIAL STATEMENTS
BALANCE SHEET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
STATEMENT OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
STATEMENT OF CASH FLOWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
</TABLE>
F-1
<PAGE> 38
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
St. Joseph Capital Corporation
South Bend, Indiana
We have audited the accompanying balance sheet of St. Joseph Capital
Corporation (the "Company") as of May 31, 1996, and the related statement of
operations, changes in stockholders deficit and cash flows for the period from
February 29, 1996 (date of inception) to May 31, 1996. 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 audit.
We conducted our audit 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 misstatements. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of St. Joseph Capital Corporation
as of May 31, 1996, and the results of its operations and its cash flows for
the period from February 29, 1996 (date of inception) to May 31, 1996 in
conformity with generally accepted accounting principles.
Crowe, Chizek and Company LLP
South Bend, Indiana
June 5, 1996
F-2
<PAGE> 39
ST. JOSEPH CAPITAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MAY 31, 1996
<TABLE>
<S> <C>
ASSETS
Cash and due from banks $42,504
Interest bearing deposits in banks 201,538
-------
Total cash and cash equivalents 244,042
Premises and equipment, net 2,322
-----
Total assets $ 246,364
= =======
LIABILITIES AND STOCKHOLDERS DEFICIT
Liabilities
Accounts payable $76,704
Loans payable 275,000
Accrued interest payable 3,086
-----
Total liabilities 354,790
Stockholders deficit
Preferred stock, $.01 par value, 100,000 shares authorized;
-0- shares issued and outstanding -
Common stock, $.01 par value, 1,500,000 shares authorized;
100 shares issued and outstanding 1
Additional paid-in capital 999
Deficit accumulated during the development stage (109,426)
--------
Total stockholders deficit (108,426)
--------
Total liabilities and stockholders deficit $ 246,364
= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE> 40
ST. JOSEPH CAPITAL CORPORATION
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the Period from February 29, 1996 (date of inception) to May 31, 1996
<TABLE>
<S> <C>
Income
Interest income $ 1,538
EXPENSES
Salary expense 20,923
Interest expense 3,086
Professional fees 73,921
Other expenses 13,034
------
110,964
-------
Net loss $ (109,426)
=============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 41
ST. JOSEPH CAPITAL CORPORATION
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS DEFICIT
For the Period from February 29, 1996 (date of inception) to May 31, 1996
<TABLE>
<CAPTION>
ADDITIONAL DEFICIT ACCUMULATED
COMMON PAID IN DURING THE
STOCK CAPITAL DEVELOPMENT STAGE TOTAL
----- ------- ----------------- -----
<S> <C> <C> <C> <C> <C> <C>
Proceeds from issuance
of common stock $ 1 $ 999 $ - $ 1,000
Net loss - - (109,426) (109,426)
- - -------- --------
Balance, May 31, 1996 $ 1 $ 999 $ (109,426) $ (108,426)
= = = === = ======== = ========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 42
ST. JOSEPH CAPITAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 29, 1996 (DATE OF INCEPTION) TO MAY 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(109,426)
Adjustments to reconcile net loss to net cash
from operating activities
Depreciation 136
Increase in accounts payable 76,704
Increase in accrued interest payable 3,086
-----
Net cash from operating activities (29,500)
-------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed asset expenditures (2,458)
------
Net cash from investing activities (2,458)
------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 1,000
Proceeds from loans 275,000
-------
Net cash from financing activities 276,000
-------
Net increase in cash and cash equivalents 244,042
Cash and cash equivalents at beginning of period --
--
CASH AND CASH EQUIVALENTS AT END OF PERIOD $244,042
========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 43
ST. JOSEPH CAPITAL CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
May 31, 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: St. Joseph Capital Corporation (the "Company") was incorporated
under the laws of the state of Delaware on February 29, 1996 with an initial
capitalization of $1,000. The Company s activities to date have been limited
to the organization of St. Joseph Capital Bank (the "Bank"), as well as
preparation for a $11,000,000 common stock offering (the "Offering"). A
substantial portion of the proceeds of the offering will be used by the Company
to provide the initial capitalization of the Bank. The start-up of the Bank is
contingent upon receiving the approval of various banking regulatory
authorities and also a successful completion of the offering.
Nature of Business: The Bank intends to offer a full range of commercial and
consumer banking services primarily within a fifteen mile radius of Mishawaka,
Indiana in the region often referred to as "Michiana."
Use of Estimates: Management must make estimates and assumptions in preparing
financial statements that affect the amounts reported therein and the
disclosures provided. These estimates and assumptions may change in the future
and future results could differ. Areas involving the use of management s
estimates and assumptions include the realization of deferred tax assets and
the depreciation of premises and equipment.
NOTE 2 - LOANS PAYABLE
The members of the Board of Directors of the Company have made loans to the
Company aggregating $275,000 for use in connection with organizational and
capital raising expenses. The loans bear interest at an annual rate of 6% and
have no specified maturity date. The loans are repayable in cash from the
proceeds received from the sale of the Company s stock. Under the terms of
these loans, however, the directors may choose to receive repayment in full or
in part through their receipt in the stock offering of shares of common stock
valued at the price to the public.
NOTE 3 - STOCK OPTIONS
The Company s Board of Directors has adopted a stock option plan. Under the
terms of this plan, options for up to 100,000 shares of the Company s common
stock may be granted to key management employees and directors of the Company
and its subsidiaries. The
exercise price of the options will be determined at the time of grant by an
administrative committee to be appointed by the Board of Directors.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
The Company has committed to lease a building for its main office location.
The proposed lease has a term of five years with the option for one five year
extension. In addition, the lease agreement allows the Company to purchase the
building for $800,000 at any time during the term of the lease. The aggregate
annual lease payment is $67,500 for the first year of the lease and increases
by $9,500 in each succeeding year during the initial five year term. Future
minimum commitments are:
<TABLE>
<S> <C>
1997 $ 67,500
1998 77,000
1999 86,500
2000 96,000
2001 105,500
-------
Total $ 432,500
= =======
</TABLE>
<PAGE> 44
<TABLE>
<S> <C>
NO DEALER, SALESPERSON OR ANY OTHER PERSON
HAS BEEN AUTHORIZED TO GIVE INFORMATION OR MAKE
ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE IN
THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH 1,100,000 SHARES
INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR
THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR ST. JOSEPH CAPITAL CORPORATION
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES COMMON STOCK
CREATE ANY IMPLICATION THAT THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF THIS PROSPECTUS.
----------------
________________________
TABLE OF CONTENTS PROSPECTUS
Page ________________
----
Prospectus Summary . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . 7
Recent Developments . . . . . . . . . . . . 11
Use of Proceeds . . . . . . . . . . . . . . 11
Dividend Policy . . . . . . . . . . . . . . 12 ROBERT W. BAIRD & CO.
Capitalization . . . . . . . . . . . . . . 12 INCORPORATED
Business . . . . . . . . . . . . . . . . . 13
Management . . . . . . . . . . . . . . . . 18
Certain Transactions . . . . . . . . . . . 25
Principal Stockholders . . . . . . . . . . 25
Supervision and Regulation . . . . . . . . 27
Description of Capital Stock . . . . . . . 31
Shares Eligible for Future Sale . . . . . . 33
Underwriting . . . . . . . . . . . . . . . 34
Legal Proceedings . . . . . . . . . . . . . 35
Legal Opinions . . . . . . . . . . . . . . 35 SEPTEMBER ___, 1996
Experts . . . . . . . . . . . . . . . . . . 35
Additional Information . . . . . . . . . . 35
Index to Financial Statements . . . . . . . F-1
________________________
UNTIL _____________, 1996, ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
</TABLE>
II-1
<PAGE> 45
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant s certificate of incorporation and bylaws provide that
the Registrant shall indemnify its directors and officer to the fullest extent
permitted by law, against liability in connection with proceedings to which the
director or officer is made or threatened to be made a party by reason of his
or her capacity as a director or officer. Indemnification shall not be
available where the director or officer breached or failed to perform a duty to
the Registrant and the breach or failure constitutes: (a) a willful failure to
deal fairly with the Registrant or its stockholders in connection with the
matter in which the director or officer has a material conflict of interest;
(b) a violation of criminal law, unless the director or officer had reasonable
cause to believe his or her conduct was lawful or no reasonable cause to
believe his or her conduct was unlawful; (c) a transaction from which the
director or officer derived an improper personal benefit; or (d) willful
misconduct.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses in connection with
the sale and distribution of the Common Stock being registered, other than
underwriting discounts and commissions. All amounts shown are estimates,
except the SEC registration fee and the NASD filing fee:
<TABLE>
<S> <C>
SEC registration fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 4,363
NASD filing fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,765
Printing and mailing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Fees and expenses of Company counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
Accounting and related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Blue Sky fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,635
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,737
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $113,500
</TABLE>
ITEM 26. Recent Sales of Unregistered Securities.
The Company has not previously issued any securities, except that Mr.
John W. Rosenthal, Chairman of the Board, President and Chief Executive Officer
of the Company and the Bank, purchased 100 shares of the Company s Common Stock
at $10.00 per share upon the Company s organization solely for the purpose of
organizing the entity and electing its directors. These shares will be
repurchased at their $1,000 cost and canceled by the Company concurrently with
the closing of this offering.
<PAGE> 46
Item 27. Exhibits.
Exhibit No. Description
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation, as amended, of St. Joseph Capital Corporation
3.2 Bylaws of St. Joseph Capital Corporation
4.1 Specimen Stock Certificate of St. Joseph Capital Corporation (See also Articles IV, VI, VII, VIII, XI
and XII of Exhibit 3.1 and Articles III, IX, X, XI and XII of Exhibit 3.2)
5.1 Opinion of Barack, Ferrazzano, Kirschbaum & Perlman regarding legality of securities being registered
10.1 St. Joseph Capital Corporation 1996 Stock Incentive Plan
10.2 Stock Option Agreement between St. Joseph Capital Corporation and John W. Rosenthal, dated June 11,
1996
10.3 Employment Agreement between St. Joseph Capital Corporation and John W. Rosenthal, dated March 18,
1996
10.4 Agreement to Organize Bank Holding Company and Bank and Loan Organizational Funds among directors of
St. Joseph Capital Corporation, dated as of March 1, 1996
10.5 Commitment to Lease between St. Joseph Capital Corporation and BK Main Street, dated April 17, 1996
21.1 Subsidiaries of St. Joseph Capital Corporation
23.1 Consent of Barack, Ferrazzano, Kirschbaum & Perlman (included in opinion filed as Exhibit 5.1)
23.2 Consent of Crowe, Chizek and Company LLP
24.1 Power of Attorney (included on the signature page of this Registration Statement)
27.1 Financial Data Schedule
</TABLE>
<PAGE> 47
ITEM 28. UNDERTAKING
The undersigned registrant hereby undertakes as follows:
(1) The registrant will provide to the underwriter at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
(2) 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 the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore unenforceable. In the event that a claim for indemnification
against liabilities arising under the Securities Act (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 of
whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(3) The registrant will:
(i) For determining any liability under the Securities
Act, treat 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 small business issuer
under Rule 424(b)(1), or (4) or 497(h) under the Securities Act as
part of this registration statement as of the time the Commission
declared it effective; and
(ii) For determining any liability under the Securities
Act, treat each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities offered
in the registration statement, and that offering of the securities at
that time as the initial bona fide offering of those securities.
II-3
<PAGE> 48
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this Amendment
No. 1 to be signed on its behalf by the undersigned, thereunder duly authorized,
in the City of South Bend, State of Indiana, on August 29, 1996.
ST. JOSEPH CAPITAL CORPORATION
By: /s/ John W. Rosenthal
-------------------------------------
John W. Rosenthal, Chief Executive
Officer and Chairman of the Board
By: /s/ Edward R. Pooley
-------------------------------------
Edward R. Pooley, Principal Financial
Officer and Accounting Officer
In accordance with the requirements of the Securities Act of 1933,
this Amendment No. 1 was signed by the following persons in the capacities
indicated on August 29, 1996.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
President, Principal Executive Officer
/s/ John W. Rosenthal and Chairman of the Board
-----------------------------------------
John W. Rosenthal
Principal Financial Officer and
/s/ Edward R. Pooley Accounting Officer
-----------------------------------------
Edward R. Pooley
* Director
-----------------------------------------
Arthur J. Decio
* Director
------------------------------------------
David A. Eckrich
</TABLE>
S-1
<PAGE> 49
<TABLE>
<S> <C>
* Director
------------------------------------------
Jerry Hammes
* Director
------------------------------------------
V. Robert Hepler
* Director
------------------------------------------
Helen L. Krizman
* Director
------------------------------------------
Scott C. Malpass
* Director
-----------------------------------------
Jack Matthys
* Director
-----------------------------------------
Arthur H. McElwee
* Director
------------------------------------------
Richard A. Rosenthal
* Director
------------------------------------------
Robert A. Sullivan
</TABLE>
* John W. Rosenthal, by signing his name hereto, does hereby sign this
document on behalf of himself and on behalf of each of the directors named above
pursuant to powers of attorney duly executed by such other persons.
/s/ John W. Rosenthal
------------------------------------------
John W. Rosenthal, Attorney in Fact
S-2
<PAGE> 50
ST. JOSEPH CAPITAL CORPORATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION OF EXHIBITS PAGE NUMBER
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation, as amended, of St. Joseph Capital *
Corporation
3.2 Bylaws of St. Joseph Capital Corporation *
4.1 Specimen Common Stock Certificate of St. Joseph Capital Corporation *
(See also Articles IV, VI, VII, VIII, XI and XII of Exhibit 3.1 and
Articles III, IX, X, XI and XII of Exhibit 3.2)
5.1 Opinion of Barack, Ferrazzano, Kirschbaum & Perlman regarding legality *
of securities being registered
10.1 St. Joseph Capital Corporation 1996 Stock Incentive Plan *
10.2 Stock Option Agreement between St. Joseph Capital Corporation and *
John W. Rosenthal, dated June 11, 1996
10.3 Employment Agreement between St. Joseph Capital and John W. Rosenthal *
dated March 18, 1996
10.4 Agreement to Organize Bank Holding Company and Bank and Loan *
Organizational Funds among directors of St. Joseph Capital Corporation,
dated as of March 1, 1996
10.5 Commitment to Lease between St. Joseph Capital Corporation and BK Main *
Street, dated April 17, 1996
21.1 Subsidiaries of St. Joseph Capital Corporation *
23.1 Consent of Barack, Ferrazzano, Kirschbaum & Perlman (included in *
opinion filed as Exhibit 5.1)
23.2 Consent of Crowe, Chizek and Company LLP *
24.1 Power of Attorney (included on the signature page of this Registration *
Statement)
27.1 Financial Data Schedule *
</TABLE>
S-3
<PAGE> 1
ST. JOSEPH CAPITAL CORPORATION
1,100,000 Shares(1)
of Common Stock
UNDERWRITING AGREEMENT
September 4, 1996
Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
RE: ST. JOSEPH CAPITAL CORPORATION
Dear Ladies and Gentlemen:
St. Joseph Capital Corporation, a Delaware corporation (the "Company"),
has authorized capital stock consisting of 1,500,000 shares of common stock,
$0.01 par value per share ("Common Stock"), and 100,000 shares of preferred
stock, $0.01 par value per share, of which 100 shares of Common Stock are
currently issued and outstanding. Pursuant to this Underwriting Agreement
(this "Agreement"), the Company proposes to issue and sell 1,100,000 shares of
authorized but unissued Common Stock (the"'Firm Common Shares") to Robert W.
Baird & Co. Incorporated (the "Underwriter"). In addition, the Company has
agreed to grant to the Underwriter an option to purchase up to 165,000
additional shares of Common Stock ("Optional Common Shares"), as provided in
Section 3 hereof. The Firm Common Shares and, to the extent such option is
exercised, the Optional Common Shares are hereinafter collectively referred to
as the "Common Shares."
You, the Underwriter, have advised the Company that you propose to
make a public offering of the Common Shares as soon hereafter as in your
judgment is advisable and that the initial public offering price of the Common
Shares will be $10.00 per share.
The Company hereby confirms its agreements with the Underwriter as
follows:
SECTION 1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, the
Underwriter and shall be deemed to represent and warrant to the Underwriter on
each Closing Date (as hereinafter defined) that:
(a) The Company has been duly incorporated and is validly
existing as a corporation under the laws of the State of Delaware,
and, subject to Section l(e) hereof and the commencement of business
of the Bank (as defined below), is duly registered under Section
3(a)(1) of the Bank Holding Company Act of 1956, as amended (the "Bank
Holding Company Act"), with full corporate power and authority to own,
lease and operate its properties and conduct its business as described
in the Prospectus (as defined in Section 1(n) hereof) and in the
Registration Statement (as defined in Section 1(n) hereof).
(b) The Company is duly qualified to do business as a
foreign corporation under the laws of, and is in good standing as such
in, the State of Indiana and in each other jurisdiction in which it
owns or leases properties, has an office, or in which its business is
conducted and such qualification is required, except where the failure
to so qualify would not reasonably be expected to have a material
adverse effect on the condition (financial or other), business,
properties, results of operations or, to the extent the Company can
reasonably foresee, prospects (collectively, a "Material Adverse
Effect") of the Company
________________________
(1) Plus an option to acquire up to 165,000 additional shares of Common
Stock from the Company to cover over-allotments.
<PAGE> 2
or St. Joseph Capital Bank, an Indiana state bank in
organization (the "Bank"), taken separately; and the Company has no
knowledge that any proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing, or seeking to revoke,
limit or curtail such power and authority or qualification. Complete
and correct copies of the certificate of incorporation and by-laws, as
amended or restated, of the Company as in effect on the date hereof
("Certificate of Incorporation" and "By-laws," respectively), have
been delivered to the Underwriter, and no changes thereto will be made
on or subsequent to the date hereof and prior to each Closing Date.
(c) The Common Shares (including any Optional Common
Shares which may be sold by the Company upon exercise of the option
granted in Section 3 hereof) have been duly authorized and, when
issued, delivered and paid for pursuant to this Agreement, will be
validly issued, fully paid and nonassessable, and will conform to the
description thereof contained in the Prospectus and the Registration
Statement. Except for 100 shares of Common Stock issued to John W.
Rosenthal to allow completion of the organization of the Company (and
which will be repurchased at their issuance price of $1,000 in the
aggregate on the First Closing Date, as defined below (the
"Organizational Shares"), there are no shares of Common Stock issued
and outstanding as of the date of this Agreement. Except for the
agreement of the Company to repurchase the Organizational Shares,
there are no preemptive, preferential or, except as described in the
Prospectus, other rights to subscribe for or purchase any shares of
Common Stock (including the Common Shares). Upon consummation of the
purchase of the Common Shares under this Agreement and delivery of
certificates for the Common Shares to be issued and sold by the
Company hereunder, the Underwriter will acquire good and marketable
title thereto, free and clear of any lien, claim, encumbrance, defect
in title, security interest or restriction on transfer (except for any
restrictions under federal and applicable state securities laws and
banking laws). There are no outstanding options, warrants or other
rights of any description, contractual or otherwise, entitling any
person to be issued any class of security by the Company (other than
as described in the Prospectus), and there are no holders of Common
Stock or other securities of the Company having rights to registration
thereof under the Securities Act of 1933, as amended (the "Act"), or
the securities laws or regulations of any of the states (the "Blue Sky
Laws").
(d) The Company has full corporate power and authority to
enter into and perform this Agreement, and the execution and
delivery by the Company of this Agreement and the performance by the
Company of its obligations hereunder and the consummation of the
transactions described herein, (i) have been duly authorized by all
necessary corporate action on the part of the Company, (ii) do not and
will not violate any provision of the Company's Certificate of
Incorporation or By-laws, (iii) will not violate any provisions of, or
result in the breach, modification or termination of, or constitute a
default under, any provision of any agreement, lease, franchise,
license, loan agreement, indenture, permit, mortgage, deed of trust,
evidence of indebtedness or other instrument to which the Company is a
party or by which the Company or any property owned or leased by the
Company may be bound or affected, (iv) will not violate any statute,
ordinance, order, rule or regulation applicable to the Company (except
with respect to the position of the Commission (as defined below)
concerning indemnification for liabilities arising under the Act), and
(v) will not violate any order or decree of any court, regulatory or
governmental body, arbitrator, administrative agency or
instrumentality of the United States or other jurisdiction having
jurisdiction over the Company or any of its properties, or result in
the creation or imposition of any lien, charge, or encumbrance upon
any property or assets of the Company. No consent, approval,
authorization or other order of any court, regulatory or governmental
body, arbitrator, administrative agency or instrumentality of the
United States or other jurisdiction is required for the execution and
delivery of this Agreement by the Company, the performance of its
obligations hereunder, or the consummation of the transactions
contemplated by this Agreement, except for such as have already been
obtained and except for compliance with the Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Blue Sky
Laws and the approval of the compensation payable to the Underwriter
pursuant to this Agreement by the National Association of Securities
Dealers, Inc. ("NASD"). This Agreement has been duly executed and
delivered by the Company and is a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms,
except that rights to indemnity or contribution hereunder may be
limited or denied by applicable law and except as enforceability of
this Agreement may be limited or denied
-2-
<PAGE> 3
by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors generally, and by equitable
principles limiting the right to specific performance or other
equitable relief.
(e) The Company has prepared and filed with the Board of
Governors of the Federal Reserve System (the "FRB") in accordance with
Section 3(a)(1) of the Bank Holding Company Act, and Section 225.14 of
Regulation Y promulgated by the FRB, an application to become a bank
holding company which, together with all exhibits, schedules,
amendments and supplements thereto, hereinafter is referred to as the
"Holding Company Application." On ______________, 1996, the FRB
approved the Company's application to become a bank holding company
through the acquisition of 100% of the voting stock of the Bank (the
"Holding Company Approval"), effective upon the Company's compliance
with commitments and representations made in connection with the
Holding Company Application including, without limitation: [(i) that
any acquisition of five percent (5%) or more of the Common Stock by
any investor is subject to prior approval from the FRB; and (ii) that
the Company will not incur debt at the holding company level, without
prior approval of the FRB, for five years from the date it acquires
100% of the stock of the Bank.] The Holding Company Approval
provides that the acquisition by the Company of the Bank must be made
within a "window" commencing 30 days after ______________, 1996, and
ending three months after such date, unless the period is extended by
the FRB. The Holding Company Approval further requires that the FRB
be provided, within 30 days of the Company's acquisition of the Bank's
voting stock, certain further information as set forth therein. In
the event that the Company files with the FRB an amendment or
supplement to the Holding Company Application, the term "Holding
Company Application" shall refer to such amended or supplemented
Holding Company Application from and after the time it is filed with
the FRB.
(f) The Company does not own any equity interest in, or
control, directly or indirectly, any corporation, limited liability
company, association, partnership, joint venture, trust or other
business entity, except that as of the First Closing Date and the
Second Closing Date (as each such term is defined in Section 3
hereof), the Company will either own or have the sole right to acquire
all of the outstanding capital stock of the Bank. Upon the
contribution by the Company to the Bank of $9,000,000 of the net
proceeds from the sale of the Common Shares to the Underwriter
pursuant to this Agreement, all of the authorized capital stock of the
Bank will be issued to the Company and upon such issuance will have
been duly authorized and validly issued, will be fully paid and
non-assessable and will be owned by the Company free and clear of any
lien, claim, encumbrance, defect in title, security interest or
restriction on transfer (except for any restrictions under federal or
state banking laws); and no options, warrants or other rights to
purchase, agreements or other obligations to issue or rights to
convert any obligations into shares of capital stock or ownership
interest in the Bank are, or will as of the First Closing Date and the
Second Closing Date be, outstanding.
(g) The incorporators of the Bank have prepared and filed
with the Indiana Department of Financial Institutions (the "DFI") in
accordance with the Indiana Financial Institutions Act (the "IFIA") an
Application to Organize a State Bank which, together with all
exhibits, schedules, amendments and supplements thereto, is
hereinafter referred to as the "Charter Application." On ___________,
1996, the DFI approved the Charter Application for authority to
organize the Bank, subject to certain terms and conditions specified
in such approval (the "Charter Approval"). The Charter Approval
remains in full force and effect as of the date hereof. In the event
that the Company or the Bank files with the DFI an amendment or
supplement to the Charter Application, the term "Charter Application"
shall refer to such amended or supplemented Charter Application from
and after the time it is filed with the DFI.
(h) The incorporators of the Bank have, on behalf of the
Bank, prepared and filed with the Federal Deposit Insurance
Corporation (the "FDIC") in accordance with Section 5(a)(1) of the
Federal Deposit Insurance Act, as amended (the "Federal Deposit
Insurance Act"), an Application for Federal Deposit Insurance which,
together with all exhibits, schedules, amendments and supplements
thereto, hereinafter is referred to as the "Deposit Insurance
Application." On ___________, 1996, the FDIC approved the Deposit
Insurance Application, subject to certain terms and conditions
specified in such approval (the "Approval of Deposit Insurance"). In
the event that the Bank files with the FDIC an amendment or supplement
to the Deposit Insurance Application, the term "Deposit Insurance
Application"
-3-
<PAGE> 4
shall refer to such amended or supplemented Deposit Insurance
Application from and after the time it is filed with the FDIC.
(i) The Company has previously provided the Underwriter
with true and complete copies of the Charter Application, the Holding
Company Application and the Deposit Insurance Application, as each has
been amended or supplemented from time to time (the "Applications"),
and the Charter Approval, Holding Company Approval and Approval of
Deposit Insurance, as each has been amended or supplemented in writing
from time to time (the "Approvals"). As of the respective times the
Applications were filed with the respective authorities, upon the
filing or first delivery to the Underwriter of the Prospectus, as of
the date hereof and at the First Closing Date and the Second Closing
Date: (i) such Applications each conformed and will conform in all
material respects to the respective applicable requirements of the
IFIA, the Bank Holding Company Act, the Federal Deposit Insurance Act
and the rules and regulations promulgated by the respective
authorities thereunder; and (ii) none of the Applications contained or
will contain any untrue statement of a material fact or omitted or
will omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(j) As of the First Closing Date and the Second Closing
Date, as the case may be, subject to the capital contribution to the
Bank by the Company of $9,000,000 of the net proceeds from the sale of
the Common Shares to the Underwriter pursuant to this Agreement, and
the satisfaction of the conditions set forth in the Charter Approval
and the Approval of Deposit Insurance, the Bank will be duly organized
and validly existing and in good standing under the laws of the State
of Indiana as a commercial bank, and will have full power and
authority (corporate and other) to own, lease and operate its
properties and to conduct its business as described in the
Registration Statement, the Prospectus, the Applications and the
Approvals, and is not required to be qualified as a foreign
corporation in any jurisdiction, except where the failure so to
qualify would not reasonably be expected to have a Material Adverse
Effect on the Company and the Bank considered as one enterprise or of
the Bank considered separately, and no proceeding has been instituted
in any such jurisdiction revoking, limiting or curtailing, or seeking
to revoke, limit or curtail, such qualification.
(k) As of the First Closing Date and the Second Closing
Date, as the case may be, the Bank will have received the Charter
Approval and the Approval of Deposit Insurance (collectively, the
"Bank Approvals") from, respectively, the DFI and the FDIC and, as of
such respective dates: (i) the Bank Approvals will be in full force
and effect and no action to suspend or revoke any of the Bank
Approvals will have been taken, or proceedings therefor initiated or
threatened, by the DFI or the FDIC; (ii) the Bank will not be in
breach or default under any condition precedent of or commitment
contained in any of the Bank Approvals which can be satisfied as of
such date; and (iii) the Bank will have satisfied all conditions
precedent to the Bank Approvals which can be satisfied as of such
date.
(l) As of the First Closing Date and the Second Closing
Date, as the case may be, the Company will have received the Holding
Company Approval from the FRB and, as of such respective dates: (i)
the Holding Company Approval will be in full force and effect and no
action to suspend or revoke the Holding Company Approval will have
been taken by the FRB or proceedings therefor initiated or threatened
by the FRB; (ii) the Company will not be in breach or default under
any condition of or commitment contained in the Holding Company
Approval which can be satisfied as of such date; and (iii) the Company
will have satisfied all conditions precedent to the Holding Company
Approval which can be satisfied as of such date.
(m) In addition to the representations regarding federal
deposit insurance herein, the Company and the Bank maintain all other
insurance of the types and in the amounts generally deemed adequate in
their respective businesses and consistent with insurance coverage
maintained by similar companies and businesses, and as required by the
rules and regulations of all governmental agencies having jurisdiction
over the Company or the Bank, all of which insurance is in full force
and effect. The Company has a keyperson life insurance policy on the
life of John W. Rosenthal in the amount of $1,500,000, payable to the
Company, which insurance is in full force and effect.
-4-
<PAGE> 5
(n) A registration statement on Form SB-2 (File No.
333-6581) with respect to the Common Shares, including a preliminary
form of prospectus, has been prepared by the Company in conformity
with the requirements of the Act and the rules and regulations (the
"Rules and Regulations") of the Securities and Exchange Commission
(the "Commission") thereunder, and has been filed with the Commission.
The conditions for use of Form SB-2, set forth in the General
Instructions thereto, have been satisfied. The Company has prepared
and filed such amendments thereto since its initial filing with the
Commission, if any, and such as may have been required to the date
hereof, and will file such additional amendments thereto as may
hereafter be required. There have been delivered to the Underwriter
two signed copies of such registration statement and each amendment
thereto, if any, together with two copies of each exhibit filed
therewith and such number of conformed copies of such registration
statement and each amendment thereto, if any (but without exhibits),
and of each Preliminary Prospectus (as hereinafter defined) and of the
Prospectus as the Underwriter has requested. Such registration
statement has been declared effective by the Commission under the Act
and is not proposed to be amended. Such registration statement, as
finally amended and revised at the time such registration statement
was or is declared effective by the Commission (including the
information contained in the form of final prospectus, if any, filed
with the Commission pursuant to Rule 424(b) and Rule 430A under the
Act and deemed to be part of the registration statement if the
registration statement has been declared effective pursuant to Rule
430A(b)) and as thereafter amended by post-effective amendment, if
any, is herein referred to as the "Registration Statement," and the
related final prospectus in the form first filed with the Commission
pursuant to Rule 424(b) or, if no such filing is required, as included
in the Registration Statement, or any supplement thereto, is herein
referred to as the "Prospectus." The prospectus subject to completion
in the form included in the Registration Statement at the time of
initial filing with the Commission, and each such prospectus as
amended from time to time until the date of the Prospectus is herein
referred to as the "Preliminary Prospectus." The Company is a "small
business issuer" as such term is defined in Rule 405 and Regulation
S-B under the Act.
(o) Neither the Commission nor any state securities
commission has issued any order preventing or suspending the use of
any Preliminary Prospectus, nor, to the knowledge of the Company, have
any proceedings for that purpose been initiated or threatened, and
each Preliminary Prospectus complied in all material respects with the
requirements of the Act and the Rules and Regulations and, as of its
date, did not include any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were made;
and when the Registration Statement becomes effective, and at all
times subsequent thereto up to each Closing Date (as defined in
Section 3 hereof), the Registration Statement and the Prospectus, and
any amendments or supplements thereto, contained or will contain all
statements that are required to be stated therein in accordance with
the Act and will comply in all material respects with the requirements
of the Act and the Rules and Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto,
will include any 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 not misleading in light of the circumstances under
which they were made; provided, however, that the Company makes no
representation or warranty as to information contained in or omitted
from any Preliminary Prospectus, the Registration Statement, the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of the Underwriter specifically for inclusion in the Prospectus
as provided in Section 2 hereof.
(q) Crowe, Chizek and Company LLP, which have expressed
their opinion with respect to the financial statements and schedules
filed with the Commission as a part of the Registration Statement and
included or to be included in the Prospectus and in the Registration
Statement, are to the best knowledge of the Company independent
accountants as required by the Act and the Rules and Regulations.
(r) The financial statements and the related notes
thereto and schedules, if any, of the Company included or to be
included in the Registration Statement, each Preliminary Prospectus,
and the Prospectus present fairly in all material respects the
financial position of the Company, as of the dates of such financial
statements, and the results of operations, changes in stockholders'
equity and changes in cash flows of the Company for the periods
covered thereby, all in conformity with generally accepted accounting
-5-
<PAGE> 6
principles consistently applied throughout the periods involved. The
Company had an outstanding capitalization as set forth in the
Registration Statement and under the caption "Capitalization"
in the Prospectus as of the dates indicated therein and there has been
no change therein since such dates except as disclosed in the
Prospectus. The financial and statistical information and data
relating to the Company included in the Registration Statement, each
Preliminary Prospectus and the Prospectus are fairly presented in all
material respects and prepared on a basis consistent with the audited
financial statements and the books and records of the Company. The
financial statements and related notes included in each Preliminary
Prospectus, the Prospectus, or the Registration Statement are the only
such financial statements required under the Act to be set forth
therein.
(s) Neither the Company nor the Bank is, nor with the
giving of notice or passage of time or both, would be, in violation or
breach of, or in default under (i) its respective Certificate of
Incorporation, By-laws, articles of incorporation, or bylaws; (ii)
any statute, ordinance, injunction, judgment, rule or regulation,
license, permit, approval or authorization applicable to the Company
or the Bank; (ii) any order or decree of any court or any
governmental, administrative or regulatory body, agency or authority
or arbitrator of the United States or other jurisdiction having
jurisdiction over the Company or the Bank; (iii) any condition of or
commitment contained in any of the Applications, if such can be
performed as of such date; or (iv) any provision of any agreement,
lease, franchise, license, loan agreement, permit, mortgage, deed of
trust, evidence of indebtedness or other instrument to which the
Company or the Bank is a party or by which any of either of its
respective properties are bound or affected, and there does not exist
any state of facts which constitutes an event of default as defined in
such documents or which, with notice or lapse of time or both, would
constitute such an event of default, where such violation, breach,
default or event of default individually or in the aggregate has or
would have a Material Adverse Effect on the Company or the Bank.
Neither the Company nor the Bank has received notice of any violation
of any applicable statute, ordinance, order, rule or regulation
applicable to the Company or the Bank.
(t) Other than the routine processing of the
Applications, there are no legal or governmental proceedings or
investigations pending, or to the Company's knowledge, threatened, to
which the Company or the Bank is or may be a party or to which any
property owned or leased by the Company or the Bank is or may be the
subject, including without limitation, any such proceedings related to
environmental or employment discrimination matters, including any of
which are required to be disclosed in the Registration Statement and
the Prospectus and are not disclosed, or which question the validity
of this Agreement or any action taken or to be taken pursuant hereto.
(u) The Company and the Bank have good and marketable
title to all the properties and assets reflected as owned by the
Company or the Bank, respectively, in the financial statements
hereinabove described (or elsewhere in the Prospectus or the
Registration Statement), free and clear of all liens, claims,
mortgages, pledges, charges, security interests or other encumbrances
of any kind or nature whatsoever except those, if any, reflected in
such financial statements (or elsewhere in the Prospectus or the
Registration Statement). All property (real and personal) held or
used by the Company or the Bank under leases, licenses, franchises or
other agreements are held by them under valid, subsisting, binding and
enforceable leases, licenses, franchises or other agreements with
respect to which they are not in default, except to the extent that
the enforceability of the rights and remedies of the Company or the
Bank under any such lease, license, franchise or other agreement may
be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and by general
equitable principles limiting the right to specific performance or
other equitable relief.
(v) Neither the Company nor any person that controls, is
controlled by (including the Bank) or is under common control with the
Company, has taken and will take, directly or indirectly, any action
designed to cause or result in, or which has constituted, or which
might reasonably be expected to cause or result, under the Exchange
Act or otherwise, in stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of the Common Shares.
-6-
<PAGE> 7
(w) Except as reflected in or contemplated by the Registration
Statement or the Prospectus, since the respective dates as of
which information is given in the Registration Statement or the
Prospectus and prior to the First Closing Date and the Second Closing
Date (as such terms are defined in Section 3 hereof):
(i) the Company and the Bank have not incurred
and will not have incurred any liability or obligation, direct
or contingent, or entered into any transaction that is
material to the Company or the Bank, not in the ordinary
course of business of organizing the Company or the Bank;
(ii) except for the Organizational Shares, the
Company has not and will not have issued any shares of its
Common Stock or committed to pay, make or declare any
dividends or other distributions with respect to its capital
stock, and neither the Company nor the Bank is and will not be
delinquent in the payment of principal or interest on any
outstanding debt obligations; and
(iii) there has not been and will not have been any
change in the capital stock or any material change in the
indebtedness of the Company or the Bank, or any material
adverse change, or any development involving a prospective
material adverse change, in the condition (financial or
other), business, properties, results of operations or, to the
extent the Company can reasonably foresee, prospects of the
Company or the Bank.
(x) There are no contracts, agreements, or other
documents, transactions, relationships, or obligations required to be
described in the Registration Statement or the Prospectus or to be
filed or deemed to be filed as an exhibit to the Registration
Statement, which have not been described or filed as required. All
such contracts, documents or agreements required to be filed to which
the Company or the Bank is a party have been duly authorized, executed
and delivered by the Company or the Bank and are enforceable by and
against the Company or the Bank, in accordance with the respective
terms thereof, except to the extent that the enforceability of the
rights and remedies of the Company or the Bank thereunder may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and by general
equitable principles limiting the right to specific performance or
other equitable relief.
(y) All documents delivered or to be delivered by the
Company or any of its representatives in connection with the issuance
and sale of the Common Shares were on the dates on which they were
delivered, or will be on the dates on which they are to be delivered,
true, complete and correct in all material respects.
(z) The Company and the Bank have filed all necessary
federal, state, local and foreign income, sales, use and franchise tax
returns, all such returns, as filed, are accurate in all material
respects, and the Company and the Bank have paid all taxes shown as
due thereon; no tax deficiency has been asserted or threatened against
the Company or the Bank which would reasonably be expected to have a
Material Adverse Effect. No state of facts exists or has existed
which would constitute grounds for the assessment of any material tax
liability with respect to the periods which have not been audited by
appropriate federal, state, local or foreign authorities. The Company
has not made an S Corporation election and has not at any time been
and is not qualified as an S Corporation. The Company and the Bank
have maintained their books of account in accordance with generally
accepted accounting principles consistently applied, and such books
and records are correct and complete, fairly and accurately reflect
the income, expenses, assets and liabilities of the Company and the
Bank and provide a fair and materially accurate basis for the
preparation of the financial statements and financial data contained
in the Prospectus.
(aa) Neither the Company nor the Bank nor any person that
controls, is controlled by or is under common control with the Company
or the Bank, has directly or indirectly:
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<PAGE> 8
(i) made any unlawful contribution to any
candidate for political office, or failed to disclose fully
any contribution in violation of law; or
(ii) made any payment to any federal or state or
foreign governmental officer or official or other person
charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United
States or the several states.
(bb) The Company and the Bank own or possess adequate
rights to use all patents, patent applications, trademarks, service
marks, trade names, trademark registrations, service mark
registrations, copyrights, licenses and other proprietary rights
("Trade Rights") necessary for the conduct of their businesses or
ownership of their properties, and neither the Company nor the Bank
has received any notice of conflict with the asserted rights of others
in respect thereof. Neither the Company nor the Bank has violated or
infringed upon, or misappropriated the Trade Rights of any third
party, which would reasonably be expected to have a Material Adverse
Effect, or received any notice of conflict with the asserted Trade
Rights of any third parties.
(cc) No labor dispute with the employees of the Company or
the Bank exists or, to the knowledge of the Company, is threatened or
imminent; and the Company has no knowledge of any existing, threatened
or imminent labor dispute or disturbance by the employees of any of
its principal suppliers, manufacturers, contractors or customers which
might reasonably be expected individually or in the aggregate to have
a Material Adverse Effect.
(dd) The Company and the Bank have conducted and are
conducting their businesses in compliance with all applicable local,
state and federal statutes, laws, rules, regulations or ordinances
relating to the environment or the use, disposal or release of any
Hazardous Materials (as defined below) (collectively, the
"Environmental Laws"), and neither the Company nor the Bank has
received any notices of any alleged violation of any Environmental
Laws. There has been no Release (as defined below) of Hazardous
Materials by the Company or the Bank, or to the Company's knowledge,
any other person or entity on, upon, about, in, under or adjacent to
the real properties owned, used or leased by the Company or the Bank.
To the Company's knowledge, there are no conditions existing or that
have existed which would subject the Company or the Bank to damages,
penalties, injunctive relief or clean-up costs under any Environmental
Laws or pursuant to any third-party claim or which require or are
likely to require reporting, clean-up, removal, remedial action or
other response pursuant to Environmental Laws. For purposes hereof,
"Hazardous Materials" means: (i) any petroleum or petroleum products,
radioactive materials, friable asbestos, urea formaldehyde foam
insulation, transformers or other equipment that contain dielectric
fluid containing detectable levels of polychlorinated biphenyls (PCBs)
or radon gas; (ii) any chemicals, materials or substances which are
now defined or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants"' or words of similar import, under any Environmental Law;
and (iii) any other chemical, material, substance or waste, exposure
to which is now prohibited, limited or regulated by any governmental
authority; and "Release" means any release, spilling, emitting,
discharging, emptying, leaking, pumping, pouring, injecting, escaping,
migrating, leaching, dumping or otherwise disposing into the
environment (including the atmosphere, soil, surface water,
groundwater or property).
(ee) Upon the satisfaction of the conditions set forth in
the Approvals, the Company and the Bank will hold and will be in
compliance with all permits, certificates, licenses, approvals,
registrations, consents and authorizations required under all laws,
rules and regulations in connection with their businesses, and all of
such permits, certificates, licenses, approvals, registrations,
consents and authorizations will be in full force and effect; and
neither the Company nor the Bank has received any notice of threatened
proceedings relating to the revocation or modification of any such
permit, certificate, license, approval, registration, consent or
authorization. Neither the Company nor the Bank is, and neither has
been (by virtue of any action, omission to act, contract to which it
is a party or any occurrence or state of facts whatsoever) in
violation of any applicable federal, state, municipal or local
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<PAGE> 9
statutes, laws, ordinances, rules, regulations and/or orders issued
pursuant to foreign, federal, state, municipal or local statutes,
laws, ordinances, rules or regulations (including those relating to
environmental protection, occupational safety and health and
employment practices) heretofore or currently in effect, except any
such violations which have been fully cured or satisfied without
recourse or which would not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect.
(ff) The provisions of any employee pension benefit plan
("Pension Plan") as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), in which the
Company or the Bank is a participating employer are in compliance with
ERISA, and neither the Bank nor the Company is in violation of ERISA.
The Company or the Bank, as the case may be, has timely filed the
reports required to be filed by ERISA in connection with the
maintenance of any Pension Plans in which the Company or the Bank is a
participating employer, and no facts, including, without limitation,
any "reportable event" as defined by ERISA and the regulations
thereunder, exist in connection with any Pension Plan in which the
Company or the Bank is a participating employer which might constitute
grounds for the termination of such plan by the Pension Benefit
Guaranty Corporation or for the appointment by the appropriate United
States District Court of a trustee to administer any such plan. The
provisions of any employee benefit welfare plan, as defined in Section
3(l) of ERISA, in which the Company or the Bank is a participating
employer are in compliance with ERISA and the Company or the Bank as
the case may be, has timely filed the reports required to be filed by
ERISA in connection with the maintenance of any such plans.
(gg) Except with the prior consent of the Underwriter,
neither the Company nor any person that controls, is controlled by or
is under common control with the Company, has distributed or will
distribute on or prior to either Closing Date any offering material in
connection with the offering and sale of the Common Shares other than
a Preliminary Prospectus, the Prospectus, the Registration Statement
or other materials permitted by the Act or the Rules and Regulations
and provided to the Underwriter.
(hh) The Company and the Bank maintain an accounting
system sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or
specific authorizations; and (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity
with generally accepted accounting principles ("GAAP") and with the
rules and regulations of the FRB and the FDIC and the IFIA.
(ii) The Company is not an "investment company," an
"affiliated person" of, or "promoter" or "principal underwriter" for,
an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended (the "Investment Company Act"), will
invest the proceeds of the offering and sales of the Common Shares
pending their use in such a manner that, upon completion of such
investment, the Company will not be an "investment company," and is
not otherwise subject to the regulations under such act.
(jj) The Company is in compliance with all provisions of
Florida Statutes Section 517.075 (Chapter 92-198, Laws of
Florida). The Company does not do any business, directly or
indirectly, with the government of Cuba or with any person or entity
located in Cuba.
(kk) Except pursuant to this Agreement, the Company knows
of no outstanding claims for finder's, origination or underwriting
fees with respect to the sale of the Common Shares.
(ll) The Company has delivered to the Underwriter a
written agreement from each director and officer of the Company to the
effect that such officer or director will not, without the
Underwriter's prior written consent, for a period of 180 days after
the date of the Prospectus, sell, offer to sell, grant any option for
the sale of, or otherwise dispose of, any shares of Common Stock or
any rights to purchase shares of Common Stock, except for any
repurchase of the Organizational Shares from John W. Rosenthal.
(mm) All material transactions between the Company and the
Bank and the officers, directors and major stockholders (i.e., those
stockholders who beneficially own or will own, following the
completion of the offering contemplated by this Agreement, more than
5% of any class of the Company's
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<PAGE> 10
Common Stock) have been accurately disclosed in the Prospectus, and
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.
(nn) Neither the Company nor the Bank, nor any officer or
director of the Company or the Bank, or any person who owns, of record
or beneficially, more than 5% of any class of securities issued by the
Company is: (i) an officer, director or partner of any brokerage firm,
broker or dealer that is a member of the NASD ("NASD Member"); or (ii)
directly or indirectly, a "person associated with" an NASD member or
an "affiliate" of an NASD member, as such terms are used in the NASD
Rules of Fair Practice. In addition, neither the Company nor the Bank
has issued or transferred any Common Stock, warrants, options or other
securities, or any other items of value, to the Underwriter or any
"related person" of any Underwriter, as such term is used in the NASD
Rules of Fair Practice, except as provided in this Agreement.
Any certificate signed by any officer of the Company and delivered to
the Underwriter or to the counsel for the Underwriter shall be deemed a
representation and warranty of the Company to the Underwriter as to the matters
covered thereby. A certificate delivered by the Company to its counsel for
purposes of enabling such counsel to render the opinion referred to in Section
6(f)(i) will also be furnished to the Underwriter and the counsel for the
Underwriter and shall be deemed to be additional representations and warranties
to the Underwriter by the Company as to the matters covered thereby.
SECTION 2. Representations and Warranties of the Underwriter.
The Underwriter represents and warrants to the Company that the
information set forth in the last paragraph of the cover page of the Prospectus
concerning the terms of the offering and sale of the Common Shares by the
Underwriter, and in the fourth and fifth paragraphs under the caption
"Underwriting" in the Prospectus, was furnished to the Company by and on behalf
of the Underwriter for use in connection with the preparation of the
Registration Statement or the Prospectus and as of its date was correct and
complete in all material respects. The Underwriter further represents and
warrants that it has provided the Company with any necessary subsequent changes
to such information.
SECTION 3. Purchase, Sale and Delivery of Common Shares.
(a) On the basis of the representations, warranties and
agreements herein contained, and subject to the terms and conditions
herein set forth, the Company agrees to sell to the Underwriter and
the Underwriter agrees to purchase from the Company for resale,
1,000,000 Common Shares at $9.30 per share; except as provided in the
following paragraph.
(b) The purchase price will be increased to $9.70 with
respect to sales of Common Shares to any investor whose name, address
and telephone number are on a list furnished to the Underwriter by the
Company as of June 21, 1996.
(c) In addition, on the basis of the representations,
warranties and agreements herein contained, and subject to the terms
and conditions herein set forth, the Company hereby grants an option
to the Underwriter to purchase up to an aggregate of 150,000 Optional
Common Shares of the Company at the same purchase price per share to
be paid for the Firm Common Shares pursuant to paragraph (a) of this
Section, for use solely in covering any over-allotments made by the
Underwriter in the sale and distribution of the Firm Common Shares.
The option granted hereunder may be exercised at any time (but not
more than once) within 30 days after the date of the Prospectus upon
notice by the Underwriter to the Company setting forth the aggregate
number of Optional Common Shares as to which the Underwriter is
exercising its option, the names and denominations in which the
certificates for such shares are to be registered and the time and
place at which such certificates will be delivered. Such time of
delivery (which may not be earlier than the First Closing Date), being
herein referred to as the "Second Closing Date," shall be determined
by the Underwriter, but, if at any time other than the First Closing
Date, shall not be earlier than three nor later than ten full business
days after delivery of such notice of exercise. Certificates
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<PAGE> 11
for the Optional Common Shares will be made available for checking and
packaging at 9:00 a.m., Milwaukee time, on the first full business day
preceding the Second Closing Date at a location to be designated by
the Underwriter. The manner of payment for and delivery of the
Optional Common Shares shall be the same as for the Firm Common Shares
as specified in paragraph (d) of this Section.
(d) At 9:00 a.m., Milwaukee time, on the third full
business day after the initial public offering, or at such other time
after the initial public offering as the Underwriter and the Company
may agree, the Company will deliver to the Underwriter at its offices
located at 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, or
through the facilities of The Depository Trust Company, certificates
representing the Firm Common Shares against payment in Milwaukee,
Wisconsin of the purchase price therefor by certified or bank
cashier's check in next day funds payable to the order of the Company.
Such time of delivery and payment is herein referred to as the "First
Closing Date." The certificates for the Firm Common Shares so to be
delivered will be in such denominations and registered in such names
as the Underwriter requests by notice to the Company prior to 9:00
a.m., Milwaukee time, on the third full business day preceding the
First Closing Date, and will be made available for checking and
packaging at 9:00 a.m., Milwaukee time, on the first full business day
preceding the First Closing Date at a location to be designated by the
Underwriter.
SECTION 4. Covenants of the Company.
The Company covenants that:
(a) If the effective time of the Registration Statement
is not prior to the execution and delivery of this Agreement, the
Company will use its best efforts to cause the Registration Statement
to become effective at the earliest possible time and, upon
notification from the Commission that the Registration Statement has
become effective, will so advise the Underwriter and counsel for the
Underwriter promptly. If the effective time of the Registration
Statement is prior to the execution and delivery of this Agreement and
any information shall have been omitted therefrom in reliance upon
Rule 430A, the Company, at the earliest possible time, will furnish
the Underwriter and counsel to the Underwriter with two copies of the
Prospectus to be filed by the Company with the Commission to comply
with Rule 424(b) and Rule 430A under the Act, and, if the Underwriter
does not object to the contents thereof, will comply with such rules.
Upon compliance with such rules, the Company will so advise the
Underwriter promptly. The Company will advise the Underwriter and
counsel for the Underwriter immediately upon notification to it of the
issuance by the Commission or any state securities commission of any
stop order suspending the effectiveness of the Registration Statement
or of the institution of any proceedings for that purpose, or of any
notification of the suspension of qualification of the Common Shares
for sale in any jurisdiction or the initiation or threat of any
proceedings for that purpose, and will also advise the Underwriter and
counsel for the Underwriter promptly of any request of the Commission
for amendment or supplement of the Registration Statement, of any
Preliminary Prospectus or of the Prospectus, or for additional
information, and will not file or make any amendment or supplement to
the Registration Statement (either before or after it becomes
effective), to any Preliminary Prospectus or to the Prospectus as to
which the Underwriter has not been furnished with a copy prior to such
filing (with a reasonable opportunity to review such amendment or
supplement) or to which the Underwriter objects.
(b) If, at any time when a prospectus relating to the
Common Shares is required by law to be delivered, any event occurs as
a result of which the Prospectus, including any amendments or
supplements thereto, would include an untrue statement of a material
fact, or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus, including any
amendments or supplements thereto, to comply with the Act, the Company
promptly will advise the Underwriter and counsel for the Underwriter
thereof and will promptly prepare and file with the Commission an
amendment or supplement which will correct such statement or omission
or an amendment which will effect such compliance; and, in case the
Underwriter is required to deliver a prospectus nine months or more
after the effective date of the Registration Statement, the Company
upon
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<PAGE> 12
request of the Underwriter, and at its expense, will prepare promptly
such prospectus or prospectuses as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the Act.
(c) The Company will not, prior to the later of 30 days
after the date of this Agreement or 30 days after the Second Closing
Date, incur any material liability or obligation, direct or
contingent, or enter into any material transaction not in the ordinary
course of the business of banking, or any transaction with a related
party which is required to be disclosed in the Prospectus pursuant to
Item 404 of Regulation S-B under the Act, except as described in the
Prospectus or the Registration Statement.
(d) Other than the repurchase of the Organizational
Shares, the Company will not acquire any of its capital stock prior to
the 180 days after the later of the First Closing Date or the Second
Closing Date, if any, nor will the Company declare or pay any dividend
or make any other distribution upon its capital stock payable to
stockholders of record on a date prior to such date, except as
disclosed in the Registration Statement and Prospectus.
(e) The Company will make generally available to its
security holders and the Underwriter an earnings statement (which need
not be audited) as soon as practicable, but in no event later than 15
months after the end of the Company's current fiscal quarter, covering
a period of at least 12 consecutive calendar months beginning after
the effective date of the Registration Statement, but beginning not
later than four months after such effective date, which will satisfy
the provisions of the last paragraph of Section 11(a) of the Act and
Rule 158 promulgated thereunder.
(f) During such period as a prospectus is required by law
to be delivered in connection with sales by an underwriter or dealer,
the Company will furnish to the Underwriter at its expense, copies of
the Registration Statement, the Prospectus, any Preliminary Prospectus
and all amendments and supplements to any such documents as soon as
available and in such quantities as the Underwriter may reasonably
request, for the purposes contemplated by the Act. The Company will
furnish to the Underwriter and counsel for the Underwriter copies of
all reports on Form SR required by Rule 463 under the Act to be filed
by the Company with the Commission.
(g) The Company will cooperate with the Underwriter and
counsel for the Underwriter in qualifying or registering, or exempting
from qualification or registration, the Common Shares for sale under
the Blue Sky Laws of such jurisdictions as the Underwriter and the
Company shall jointly designate and will continue such qualifications,
registrations or exemptions in effect so long as reasonably required
for the distribution of the Common Shares. In each jurisdiction where
any of the Common Shares shall have been qualified, registered or
exempted as provided above, the Company will make all required
filings, and otherwise comply in all respects with the undertakings
given by the Company, in connection with: (i) the Registration
Statement filed with the Commission; and (ii) the qualification or
registration, or exemption from qualification or registration for
nonissuer transactions for a period of at least five years from the
date of this Agreement (and thereby permit market-making transactions
and secondary trading in Common Stock in such jurisdictions).
(h) During the period of five years from the date of this
Agreement: (i) as soon as practicable after the end of each fiscal
year, the Company will furnish to the Underwriter two copies of the
annual report of the Company containing the consolidated balance sheet
of the Company as of the close of such fiscal year and corresponding
consolidated statements of income, stockholders' equity and cash flows
for the fiscal year then ended, such financial statements to be under
the certificate of opinion of the Company's independent public
accountants; and (ii) the Company will file promptly and will furnish
to the Underwriter at or prior to the filing thereof copies of all
reports and any definitive proxy or information statements required to
be filed by the Company with the Commission pursuant to Sections 13,
14 or 15 of the Exchange Act. During such five year period, the
Company will also furnish to the Underwriter two copies of the
following:
(i) as soon as practicable after the filing
thereof, each other report, statement or other document filed
by the Company with the Commission;
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<PAGE> 13
(ii) as soon as practicable after the filing
thereof, all reports, statements, other documents and
financial statements furnished by the Company to the NASD
pursuant to the requirements of or agreements with the NASD;
and
(iii) as soon as available, each report, statement
or other document of the Company mailed to its shareholders.
(i) Except for the sale of the Common Shares pursuant to
this Agreement, without the prior written consent of the Underwriter,
the Company will not, directly or indirectly, issue, sell, offer to
sell, grant any option for the sale of, contract to sell, or otherwise
issue or dispose of any shares of Common Stock, warrants or rights to
acquire Common Stock or securities convertible into Common Stock, on
the open market or otherwise, for a period of 180 days after the date
of the Prospectus, and during such period, will not register any of
its Common Stock or such warrants or rights for sale under the Act
(other than the Common Shares) without the prior written consent of
the Underwriter. The Company has obtained or will obtain for the
benefit of the Underwriter the agreement of the officers and directors
of the Company that for the period indicated in the foregoing
sentence, such persons will not offer to sell, sell, grant any option
for the sale of, or otherwise dispose of, any shares of Common Stock
or any rights to purchase shares of Common Stock without the prior
written consent of the Underwriter, except for the sale to the Company
of the Organizational Shares by John W. Rosenthal.
(j) To the extent the same are within the control of the
Company, the Company will use all reasonable efforts to satisfy or
cause to be satisfied the conditions to the obligations of the
Underwriter in Section 6 hereof.
(k) The Company shall deliver the requisite notice of
issuance to the NASD and shall take all necessary and appropriate
action within its power to cause or permit trading and listing of the
Common Stock on the OTC Bulletin Board for a period of at least 36
months after the date of this Agreement except during such period(s)
in which the Company's Common Stock shall be listed for trading on any
of the: (i) Nasdaq Small Cap Market; (ii) the Nasdaq National Market
System; (iii) the American Stock Exchange; or (iv) the New York Stock
Exchange; or with the prior written consent of the Underwriter.
(l) The Company shall promptly prepare and file with the
Commission, from time to time, such reports as may be required to be
filed by the Company under the Act, the Exchange Act or the Rules and
Regulations thereunder.
(m) The Company will apply the net proceeds from the sale
of the Common Shares to be sold by it hereunder for the purposes set
forth in the Prospectus.
(n) Neither the Company nor the Bank shall file any
amendment or supplement to any of the Applications of which the
Underwriter shall not previously have been advised and furnished with
a copy or as to which the Underwriter shall have objected in writing
promptly after reasonable notice thereof. In addition, the Company
will advise the Underwriter promptly of any of the following events:
(i) the issuance by the DFI, the FRB or the FDIC of any amendment to
any of the Approvals; (ii) the receipt of any comments from the DFI,
the FRB or the FDIC concerning any of the Applications or the
Approvals; (iii) any request by the DFI, the FRB or the FDIC for any
amendment or supplement to any of the Applications or for additional
information; and (iv) the issuance by the DFI, the FRB or the FDIC of
any order suspending any of the Approvals or the initiation or
threatening of any proceedings for that purpose.
SECTION 5. Payment of Expenses.
Whether or not the transactions contemplated hereby are consummated or
this Agreement becomes effective or is terminated for any reason, the Company
agrees to pay:
(a) All costs, fees and expenses (excluding the legal
fees and disbursements of counsel for the Underwriter, except as
described in Section 5(b) below and in Section 7 hereof) incurred in
connection
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<PAGE> 14
with the performance of the Company's obligations hereunder,
including, without limiting the generality of the foregoing, the
registration fees related to the filing of the Registration Statement
with the Commission; all fees and expenses of the Company's counsel,
accountants, and all costs and expenses incurred in connection with
the preparation, printing, filing, shipping, distribution and delivery
of the Registration Statement, each Preliminary Prospectus and the
Prospectus (including all exhibits and financial statements) and all
amendments and supplements provided for herein, this Agreement, and
the Preliminary and Supplemental Blue Sky Memoranda;
(b) All registration fees and expenses, including legal
fees and disbursements of counsel for the Underwriter, incurred in
connection with the qualifying or registering all or any part of the
Common Shares for offer and sale under the Blue Sky Laws and clearing
the underwriting arrangements provided for herein with the NASD; and
(c) All fees and expenses of the Company's transfer agent
and registrar, all costs and expenses of printing of the certificates
for the Common Shares, all transfer taxes, if any, with respect to the
sale and delivery of the Common Shares, and all fees of the OTC
Bulletin Board.
SECTION 6. Conditions to the Obligations of the Underwriter.
The obligations of the Underwriter to purchase and pay for the Firm
Common Shares on the First Closing Date and the Optional Common Shares on the
Second Closing Date shall be subject to the accuracy of the representations and
warranties of the Company herein set forth as of the date hereof and as of the
First Closing Date or the Second Closing Date, as the case may be, to the
accuracy of the statements of the Company's officers made pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder and to the following additional conditions, unless waived in writing
by the Underwriter:
(a) The Registration Statement shall have become
effective not later than 1:00 p.m., Milwaukee time, on the date hereof
or such later time and date as shall have been consented to by the
Underwriter but in no event later than 1:00 p.m., Milwaukee time, on
the third full business day following the date hereof. If the Company
omitted information from the Registration Statement at the time it
became effective in reliance on Rule 430A under the Act, the
Prospectus shall have been filed with the Commission in compliance
with Rule 424(b) and 430A under the Act. No stop order suspending the
effectiveness of the Registration Statement shall have been issued and
no proceeding for that purpose shall have been instituted or shall be
pending or, to the knowledge of the Company or the Underwriter, shall
be contemplated by the Commission or any state securities commission,
and any request of the Commission or state securities commission, for
inclusion of additional information in the Registration Statement or
otherwise, shall have been complied with to the Underwriter's
reasonable satisfaction.
(b) The Common Shares shall have been qualified or
registered for sale, or shall be exempt from such qualification or
registration requirements, under the Blue Sky Laws of such
jurisdictions as shall have been jointly specified by the Underwriter
and the Company prior to the date hereof and shall be approved for
listing on the OTC Bulletin Board. The underwriting arrangements
contemplated hereby shall have been cleared by the NASD.
(c) The legality and sufficiency of the authorization,
issuance and sale of the Common Shares hereunder, the validity and
form of the certificates representing the Common Shares, the execution
and delivery of this Underwriting Agreement, all corporate proceedings
and other legal matters incident thereto and the form of the
Registration Statement and the Prospectus (except financial statements
and other financial and statistical data included therein) shall have
been approved by Barnes & Thornburg, counsel for the Underwriter, to
the reasonable satisfaction of the Underwriter.
(d) After consulting with counsel, the Underwriter shall
not have advised the Company that, in its opinion, the Registration
Statement or Prospectus, or any amendment or supplement thereto,
contains an untrue statement of fact which, in the reasonable opinion
of the Underwriter or its counsel, is or may
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<PAGE> 15
be material or omits to state a fact which, in the reasonable opinion
of the Underwriter or its counsel, is material and is required to be
stated therein or necessary to make the statements therein not
misleading.
(e) Since the dates as of which information is given in
the Registration Statement:
(i) there shall not have been any material
adverse change, or any development involving a prospective
material adverse change, in the ability of the Company or the
Bank to conduct its business (whether by reason of any court,
legislative, or governmental action, order, decree, or
otherwise), or in the general affairs, management, business,
properties, financial condition, results of operations or, to
the extent the Company can reasonably foresee, prospects of
the Company or the Bank, whether or not arising from
transactions in the ordinary course of business;
(ii) there shall not have been any change in the
capital stock or any material adverse change in the
indebtedness of the Company and, except for the Organizational
Shares, the Company shall not have acquired any of its capital
stock nor shall the Company have declared or paid any
dividend, or made any other distribution, upon its outstanding
capital stock payable to stockholders of record on a date
prior to the First Closing Date or Second Closing Date, as the
case may be; and
(iii) the Company shall not have sustained any loss
or interference with its business from any labor dispute,
fire, explosion, windstorm, flood, accident or other calamity
or from any court or governmental action, order or decree;
the effect of which on the Company, in any such case described in
clause (i), (ii) or (iii) of this subsection 6(e), is in the
Underwriter's opinion so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or
the delivery of the Common Shares on the terms and in the manner
contemplated in the Registration Statement and the Prospectus.
(f) There shall have been furnished to the Underwriter on
each Closing Date, except as otherwise expressly provided below:
(i) An opinion of Barack, Ferrazzano, Kirschbaum
& Perlman, counsel for the Company, addressed to the
Underwriter and dated the First Closing Date or the Second
Closing Date, as the case may be, to the effect that:
(1) The Company has been duly
incorporated and is validly existing as a corporation
under the laws of the State of Delaware, and has
received the approval of the FRB to become a bank
holding company under Section 3(a)(1) of the Bank
Holding Company Act, with full corporate power and
authority to own, lease and operate its properties
and conduct its business as presently conducted and
as described in the Prospectus and the Registration
Statement; and the Company is duly qualified to do
business as a foreign corporation in the State of
Indiana and in each other jurisdiction in which it
owns or leases properties, has an office, or in which
business is conducted and such qualification is
required, except where the failure to so qualify
would not reasonably be expected to have a Material
Adverse Effect.
(2) The authorized capital stock of the
Company consists of 1,500,000 shares of Common Stock,
$0.01 par value per share, and 100,000 shares of
preferred stock, $0.01 par value per share, of which
no shares other than the Organizational Shares are
outstanding as of the date prior to the First Closing
Date; the Common Shares conform as to legal matters
to the description thereof in the Registration
Statement and Prospectus; the authorized and
outstanding stock of the Company is as set forth
under the caption "Capitalization" in the Prospectus;
and the statements made in the Prospectus under the
caption "Description of Common Stock" are accurate in
all material respects.
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<PAGE> 16
(3) Except for the Agreement of the
Company to repurchase the Organizational Shares, to
our knowledge, there are no preemptive, preferential
or other rights to subscribe for or purchase any of
the Common Shares sold by the Company hereunder; and
no shares of Common Stock have been issued in
violation of such rights.
(4) The certificates for the Common
Shares to be delivered by the Company hereunder are
in due and proper form and conform to any applicable
requirements of the IFIA; and, when duly
countersigned by the Company's transfer agent,
delivered to the Underwriter or upon the order of the
Underwriter against payment of the agreed
consideration therefor in accordance with the
provisions of this Agreement, the Common Shares
represented thereby will be duly authorized and
validly issued, fully paid and nonassessable, and
free of any preemptive, preferential or other rights
to subscribe for or purchase shares of Common
Stock; and, upon delivery to the Underwriter or
upon the order against payment of the agreed
consideration therefor in accordance with the
provisions of this Agreement, the Underwriter will
acquire good and marketable title thereto, free and
clear of any lien, claim, security interest,
encumbrance or restriction on transfer (except for
any restrictions under the Act, the Blue Sky Laws and
applicable banking laws).
(5) The Registration Statement has
become effective under the Act and, to such counsel's
knowledge, 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, to such counsel's knowledge,
threatened under the Act or any Blue Sky Laws, and
the Registration Statement and Prospectus and each
amendment or supplement thereto (except for the
financial statements, schedules, if any, 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 Act and the Rules and
Regulations; and the conditions for use of Form SB-2,
set forth in the General Instructions thereto, have
been satisfied. No facts have come to the attention
of such counsel which lead it to believe that either
the Registration Statement or the Prospectus, or any
amendment or supplement thereto (except for the
financial statements, schedules, if any, and other
financial data included therein, as to which such
counsel need express no opinion), contains any untrue
statement of a material fact or fails 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; to such counsel's knowledge, there are no
legal or governmental proceedings pending or
threatened required to be described in the
Registration Statement or Prospectus which are not so
described or which question the validity of this
Agreement or any action taken or to be taken pursuant
thereto, nor is there any agreement, contract or
document of a character required to be described in
or filed with the Registration Statement which is not
described or filed as required.
(6) The Company has full corporate power
and authority to enter into and perform this
Agreement; this Agreement and the performance of the
Company's obligations hereunder have been duly
authorized by all necessary corporate action of the
Company; this Agreement has been duly executed and
delivered by and on behalf of the Company, and is a
legal valid and binding agreement of the Company
enforceable in accordance with its terms, except that
rights to indemnity or contribution may be limited or
denied by applicable law and except as may be limited
or denied by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by
general equitable principles limiting the right to
specific performance or other equitable relief, and
except as may be described in the Prospectus, no
consent, approval, authorization or other order or
decree of any court, regulatory or governmental body,
arbitrator, administrative agency, or other
instrumentality of the United States or any other
jurisdiction having jurisdiction over the
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<PAGE> 17
Company is necessary for the execution and delivery
of this Agreement in connection with the issue or
sale of the Common Shares by the Company pursuant
to this Agreement (other than under the Act,
applicable Blue Sky Laws and clearance of the
underwriting arrangements by the NASD) or the
consummation by the Company of any other transactions
contemplated hereby.
(7) The execution, delivery and
performance of this Agreement by the Company,
including application of the net proceeds of the
offering, if and when received, as described in the
Prospectus under the caption "Use of Proceeds," will
not, to such counsel's knowledge after due
investigation, contravene any of the provisions of,
or result in a default under, the Certificate of
Incorporation or By-laws, or the Articles of
Incorporation or bylaws of the Company and the Bank,
respectively, any material contract, agreement,
lease, franchise, license, indenture, permit, loan
agreement, deed of trust, or other evidence of
indebtedness or other instrument known to such
counsel and to which the Company or the Bank is a
party or by which the Company or the Bank or any of
its material owned or leased properties is bound, and
will not violate any statute, ordinance, order, rule,
decree or regulation of any court, regulatory or
governmental body, arbitrator, administrative agency
or other instrumentality of the United States or
other jurisdiction having jurisdiction over the
Company or its properties.
(8) There are no holders of Common
Stock, convertible securities or other securities of
the Company having rights to the registration of such
securities under the Act or any Blue Sky Laws.
(9) The Company does not own or control
any subsidiary or other affiliate other than the
Bank, and does not, to such counsel's knowledge, own
any equity interest in or control, directly or
indirectly, any other corporation, limited liability
company, joint venture, partnership, proprietorship,
association, trust or other business entity or
organization other than the Bank.
(10) Upon the satisfaction of the
conditions set forth in the Approvals, and upon
contribution by the Company to the Bank of $9,000,000
of the net proceeds from the sale of the Common
Shares to the Underwriter pursuant to this Agreement,
all of the capital stock of the Bank will be duly
authorized and validly issued, will be fully paid and
non-assessable and will be owned by the Company free
and clear of any lien, encumbrance, equity, security
interest or claim; and to such counsel's knowledge,
no options, warrants or other rights to purchase,
agreements or other obligations to issue or rights to
convert any obligations into shares of capital stock
or ownership interest in the Bank are, or will as of
the First Closing Date and the Second Closing Date
be, outstanding.
(11) As of the time the Holding Company
Application was filed with the FRB and as of the
First Closing Date and the Second Closing Date, as
the case may be: (A) such application conformed in
all material respects to the applicable requirements
of the Bank Holding Company Act and the rules and
regulations thereunder; and (B) to such counsel's
knowledge, as of any such times such application
contained no untrue statement of a material fact or
omitted to state any material fact required to be
stated therein or necessary in order to make the
statements therein, in light of the circumstances
under which they were made, not misleading.
(12) The Bank has received the Approvals
from the DFI and the FDIC and, to the knowledge of
such counsel, as of the date hereof: (A) such
Approvals are in full force and effect and no action
to suspend or revoke any of such Approvals has been
taken, or, proceedings therefor initiated or
threatened, by the DFI or the FDIC; (B) the Bank is
not in breach or default under any condition
precedent of or commitment
-17-
<PAGE> 18
contained in any of such Approvals which can be
satisfied as of such date; and (C) the Bank has
satisfied all conditions precedent to such Approvals
which can be satisfied as of such date.
(13) The Company has received Holding
Company Approval from the FRB and, to the knowledge
of such counsel, as of the date hereof: (A) the
Holding Company Approval is in full force and effect
and no action to suspend or revoke the Holding
Company Approval has been taken by the FRB or
proceedings therefor initiated or threatened by the
FRB; (B) the Company is not in breach or default
under any condition of or commitment which may be
satisfied as of the date hereof contained in the
Holding Company Approval; and (C) the Company has
satisfied all conditions precedent to the Holding
Company Approval which can be satisfied as of such
date.
(14) The description in the Registration
Statement and the Prospectus of statutes, laws,
regulations, legal and governmental proceedings,
contracts and other legal documents described therein
fairly and correctly present, in all material
respects, the information required to be included
therein by the Act.
(15) Subject to the capital contribution
by the Company to the Bank of $9,000,000 of the
net proceeds from the sale of the Common Shares to the
Underwriter pursuant to this Agreement, and the
satisfaction of the conditions set forth in the
Charter Approval and the Approval of Deposit
Insurance, the Bank will be duly organized and validly
existing under the laws of the State of Indiana as a
commercial bank and will have all requisite corporate
power and authority to own, lease and operate its
properties and to conduct its business as described in
the Registration Statement, the Prospectus and the
Applications, and is not required to be duly qualified
as a foreign corporation in any state, except where
the failure so to qualify would not have a material
adverse effect on the conditions or earnings of the
Company and the Bank considered as one enterprise or
of the Bank considered separately, and no proceeding
has been instituted in any such jurisdiction revoking,
limiting or curtailing, or seeking to revoke, limit or
curtail, such qualification.
(16) As of the respective times the
Charter Application and the Deposit Insurance
Application were filed with the respective
authorities and as of the First Closing Date and the
Second Closing Date, as the case may be: (A) such
applications each conformed in all material respects
to the respective applicable requirements of the
IFIA, the Federal Deposit Insurance Act and the rules
and regulations promulgated by the respective
authorities thereunder; and (B) to such counsel's
knowledge as of such times such Applications
contained no untrue statement of a material fact or
omitted to state any material fact required to be
stated therein or necessary in order to make the
statements therein, in light of the circumstances
under which they were made, not misleading.
Such counsel may rely as to factual matters (including, but not
limited to, the existence of liens and encumbrances) on certificates of
officers of the Company and state officials, in each case reasonably
satisfactory to the Underwriter, in which case such counsel's opinion shall
state that it is so doing and that such counsel believes such reliance is
reasonable, and copies of said certificates or opinions shall be attached to
the opinion. For purposes of such opinion, "to counsel's knowledge" or words
of similar import shall mean the actual knowledge of facts by any attorneys in
the firm of Barack, Ferrazzano, Kirshbaum & Perlman who have worked on matters
related to the Company or the Bank, or any facts which should have been known
by such attorneys in the exercise of reasonable due diligence.
(ii) A certificate of the chief executive officer
and the principal financial officer of the Company, dated the
First Closing Date or the Second Closing Date, as the case may
be, to the effect that:
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<PAGE> 19
(1) The representations and warranties
of the Company set forth in Section 1 of this
Agreement are true and correct as of the date of this
Agreement and as of the First Closing Date or the
Second Closing Date, as the case may be, as if again
made on and as of such date, and the Company has
complied with all the agreements and satisfied all
the conditions on its part to be performed or
satisfied by it at or prior to such date.
(2) The Commission has not issued an
order preventing or suspending the use of the
Prospectus or any Preliminary Prospectus filed as
part of the Registration Statement or any amendment
or supplement thereto; no stop order suspending the
effectiveness of the Registration Statement has been
issued; and to the best knowledge of the respective
signatories, no proceedings for that purpose have
been instituted or are pending or contemplated under
the Act or under the Blue Sky Laws of any
jurisdiction.
(3) Each of the respective signatories
has carefully examined the Registration Statement and
the Prospectus, and any amendments or supplements
thereto, and the Registration Statement and the
Prospectus and any amendments or supplements thereto
contain all statements required to be stated therein,
and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto
includes any untrue statement of a material fact or
omits to state any material fact required to be
stated therein or necessary to make statements
therein not misleading in light of the circumstances
under which they were made, and, since the effective
date of the Registration Statement, there has
occurred no event required to be set forth in an
amended or supplemented prospectus or in an amendment
to the Registration Statement that has not been so
set forth.
(4) Since the date on which the
Registration Statement was initially filed with the
Commission, there has not been any material adverse
change or a development involving a prospective
material adverse change in the general affairs,
management, business, properties, financial
condition, results of operations or, to the extent
the Company can reasonably foresee, prospects of the
Company, whether or not arising from transactions in
the ordinary course of business relating to the
organization of the Company or the Bank, except as
disclosed in the Prospectus and the Registration
Statement as heretofore amended or (but only if the
Underwriter expressly consents thereto in writing) as
disclosed in an amendment or supplement thereto filed
with the Commission and delivered to the Underwriter
after the execution of this Agreement; since such
date and except as so disclosed or in the ordinary
course of business, the Company has not incurred any
liability or obligation, direct or indirect, or
entered into any material transaction; since such
date and except as so disclosed, there has not been
any change in the capital stock, or material adverse
change in short-term debt or long-term debt, of the
Company; since such date and except as so disclosed,
the Company has not acquired any of its capital stock
nor has the Company declared or paid any dividend, or
made any other distribution, upon its outstanding
capital stock payable to stockholders of record on a
date prior to the First Closing Date or Second
Closing Date, as the case may be; since such date and
except as so disclosed, the Company has not incurred
any material contingent obligations, and no material
litigation is pending or threatened against the
Company; and since such date and except as so
disclosed, the Company has not sustained a material
loss or interference with its business from any labor
dispute, strike, fire, explosion, flood, windstorm,
accident or other calamity (whether or not insured)
or from any court or governmental action, order or
decree.
The delivery of the certificate provided for in this
subsection (ii) shall be and constitute a representation and
warranty of the Company as to the facts required to be set
forth in such certificate.
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<PAGE> 20
(iii) A written agreement or agreements signed by
officers and directors of the Company to the effect that such
persons will not offer to sell, sell, grant any option for the
sale of, or otherwise dispose of any shares of Common Stock,
or any rights to purchase shares of Common Stock, in the open
market or otherwise, for a period of 180 days after the date
of the Prospectus, except with the prior written consent of
the Underwriter and except for the sale to the Company of the
Organizational Shares by John W. Rosenthal.
(iv) At the time this Agreement is executed and
also on the First Closing Date and the Second Closing Date,
there shall be delivered to the Underwriter a letter addressed
to the Underwriter from Crowe, Chizek and Company LLP,
independent accountants, the first letter to be dated the date
of this Agreement, the second letter to be dated the First
Closing Date, and the third letter (in the event of a Second
Closing) to be dated the Second Closing Date, which shall be
in form and substance satisfactory to the Underwriter and
shall contain information as of a date within five days of the
date of such letter. There shall not have been any change
specified in any of the letters referred to in this
subparagraph which makes it impractical or inadvisable in the
judgment of the Underwriter to proceed with the public
offering or purchase of the Common Shares as contemplated
hereby.
(v) Such further certificates and documents as the
Underwriter may reasonably request.
(vi) All of the conditions precedent and
commitments of the Bank and the Company specified in the
Approvals, which can be satisfied as of the First and Second
Closing Dates, shall have been satisfied; if any amendment or
supplement to any of the Applications is required to be filed
with the DFI, the FRB or the FDIC, as the case may be, such
amendment or supplement shall have been filed in the manner
and within the time specified by the relevant authority; and
no order suspending any of the Approvals shall have been
issued or proceedings therefore initiated or threatened by the
DFI, the FRB or the FDIC.
If any condition to the Underwriter's obligations hereunder to be
satisfied prior to or at the First Closing Date is not so satisfied or waived
by the Underwriter, this Agreement, at the Underwriter's election, will
terminate upon notification to the Company without liability on the part of the
Underwriter or the Company, except for the expenses to be paid or reimbursed by
the Company pursuant to Sections 5 and 7 hereof and except to the extent
provided in Section 9 hereof.
All such opinions, certificates, letters and documents required by
this Section shall be in compliance with the provisions hereof only if they are
reasonably satisfactory to the Underwriter and to Barnes & Thornburg, counsel
for the Underwriter. The Company and its officers shall furnish the
Underwriter with such manually signed or conformed copies of such opinions,
certificates, letters and documents as the Underwriter may reasonably request.
SECTION 7. Reimbursement of Underwriter's Expenses.
If the sale to the Underwriter of the Common Shares at the First
Closing Date or the Second Closing Date is not consummated because any material
condition of the Underwriter's obligations hereunder is not satisfied or
because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or to comply with any provisions hereof, the
Company agrees to reimburse the Underwriter upon demand for all documented
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been reasonably incurred by the Underwriter in connection with
the proposed purchase and the sale of the Common Shares. Any such termination
shall be without liability of any party to any other party except that the
provisions of Sections 5, 7 and 9 hereof shall at all times be effective and
shall apply.
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<PAGE> 21
SECTION 8. Effectiveness of Registration Statement.
The Underwriter and the Company will use their respective best efforts
to cause the Registration Statement to become effective, to prevent the
issuance of any stop order suspending the effectiveness of the Registration
Statement and, if such stop order be issued, to obtain as soon as possible the
lifting thereof.
SECTION 9. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter
within the meaning of the Act or the Exchange Act, from and against
any losses, claims, damages, liabilities or actions in respect thereof
("Claims"), joint or several, to which the Underwriter or each such
controlling person may become subject under the Act, the Exchange Act,
the Blue Sky Laws or other federal or state statutory laws or
regulations, including banking regulations, at common law or otherwise
(including payments made in settlement of any litigation, if such
settlement is effected with the written consent of the Company),
insofar as such Claims arise out of or are based upon any breach of
any representation, warranty or covenant made by the Company in this
Agreement, or any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, any amendment or supplement thereto, or in
any application filed under any Blue Sky Law or other document
executed by the Company for that purpose or based upon written
information furnished by the Company and filed in any state or other
jurisdiction to qualify, register or exempt any or all of the Common
Shares under the securities laws thereof (any such document,
application or information being hereinafter referred to as a "Blue
Sky Application"), or arise out of or are based upon the omission or
alleged omission to state therein 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. The
Company will reimburse the Underwriter and any such controlling person
for any legal or other expenses reasonably incurred by the Underwriter
or any such controlling person in connection with investigating or
defending any such Claim; provided, however, that the Company will not
be liable in any such case to the extent that:
(i) any such Claim arises out of or is based upon
an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto or in any Blue Sky Application in reliance
upon and in conformity with written information furnished to
the Company pursuant to Section 2 of this Agreement; or
(ii) such statement or omission was contained or
made in any Preliminary Prospectus and corrected in the
Prospectus and (1) any such Claim suffered or incurred by the
Underwriter (or any person who controls the Underwriter)
resulted from an action, claim or suit by any person who
purchased Common Shares which are the subject thereof from the
Underwriter in the offering and (2) the Underwriter failed to
deliver or provide a copy of the Prospectus (as then amended
if the Company shall have amended the Prospectus) to such
person at or prior to the confirmation of the sale of such
Common Shares in any case where such delivery is required by
the Act, unless such failure was due to a failure by the
Company to provide copies of the Prospectus (as so amended) to
the Underwriter as required by this Agreement.
The indemnification obligations of the Company provided above are in
addition to and in no way limit any liabilities which the Company may otherwise
have under other agreements, common law or otherwise.
(b) The Underwriter will indemnify and hold harmless the
Company and each of its directors and each of its officers who signs
the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Act or the Exchange Act, against any
Claim to which the Company, or any such director, officer or
controlling person may become subject, under the Act, the Exchange
Act, Blue Sky Laws, or other federal or state statutory laws or
regulations, at common law or otherwise (including payments made in
settlement of any litigation, if such settlement is effected with the
written consent of such Underwriter), insofar as such Claim arises out
of or is based upon any untrue or alleged
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<PAGE> 22
untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus,
any amendment or supplement thereto, or in any Blue Sky Application,
or arises out of or is based upon the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission
was made in the Registration Statement, any Preliminary Prospectus,
the Prospectus or any amendment or supplement thereto, or in any Blue
Sky Application, in each case in reliance solely upon and in
conformity with the written information furnished by the Underwriter
to the Company pursuant to Section 2 of this Agreement. The
Underwriter will also reimburse any legal fees or other expenses
reasonably incurred by the Company, or any such director, officer or
controlling person in connection with investigating or defending any
such Claim, and from any and all Claims resulting from failure of the
Underwriter to deliver a copy of the Prospectus, if the person
asserting such Claim purchased Common Shares from the Underwriter and
a copy of the Prospectus (as then amended if the Company shall have
amended the Prospectus) was not sent or given by or on behalf of the
Underwriter to such person, if required by law so to have been
delivered, and or prior to the written confirmation of the sale of the
Common Shares to such person, and if the Prospectus (as so amended)
would have cured the defect giving rise to such Claim, unless the
failure to deliver a Prospectus was due to a failure by the Company to
provide copies of the Prospectus to the Underwriter as required by
this Agreement. The indemnification obligations of the Underwriter as
provided above are in addition to any liabilities the Underwriter may
otherwise have under other agreements, common law or otherwise.
Notwithstanding any provision of this Agreement to the contrary, in no
event shall the Underwriter be required to indemnify the Company or
any officer, director or controlling person of the Company pursuant to
this Agreement or otherwise, to the extent that such payment, when
aggregated with all other payments to such persons for indemnification
or contribution, shall be in an amount in excess of the total
underwriting discount the Underwriter received hereunder.
(c) Promptly after receipt by an indemnified party under
paragraph (a) or (b) of this Section of notice of the commencement of
any action in respect of a Claim, such indemnified party will, if a
Claim in respect thereof is to be made against an indemnifying party
under such paragraph, notify the indemnifying party of the
commencement thereof, but the omission to so notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party under this paragraph or otherwise. In case any such
action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate in, and, to the extent that it may
wish jointly with all other indemnifying parties similarly notified,
to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party, provided, however, that if the defendants in
any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnified party or
parties shall have the right to select separate counsel to assume such
legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties.
(d) Upon receipt of notice from the indemnifying party to
such indemnified party of the indemnifying party's election so to
assume the defense of such action and upon approval by the indemnified
party of counsel selected by the indemnifying party, the indemnifying
party will not be liable to such indemnified party under paragraph
(a), (b) or (c) of this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof, unless:
(i) the indemnified party shall have employed
such counsel in connection with the assumption of legal
defenses in accordance with the provision of the last sentence
of paragraph (c) of this Section (it being understood,
however, that the indemnifying party shall not be liable for
the expenses of more than one separate counsel approved by the
Underwriter if one or more of the Underwriter or their
controlling persons are the indemnified parties);
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<PAGE> 23
(ii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable
time after notice of commencement of the action; or
(iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense
of the indemnifying party.
(e) Subject to the limitations set forth in paragraph (b)
of this Section, if the indemnification provided for in this Section
is unavailable to or insufficient to hold harmless an indemnified
party under paragraph (a), (b) or (c) of this Section in respect of
any Claim referred to therein, then each indemnifying party, in lieu
of indemnifying such indemnified party, shall, subject to the
limitations hereinafter set forth, contribute to the amount paid or
payable by such indemnified party as a result of such Claim:
(i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the
one hand and the Underwriter on the other hand from the
offering of the Common Shares; or
(ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits
referred to in clause (i) above, but also the relative fault
of the Company on the one hand and the Underwriter on the
other hand in connection with the statements or omissions
which resulted in such Claim as well as any other relevant
equitable considerations.
The respective relative benefits received by the Company on
the one hand and the Underwriter on the other hand shall be deemed to
be in the same proportion, in the case of the Company, as the total
price paid to the Company for the Common Shares by the Underwriter
(net of underwriting discount, but before deducting expenses allocable
thereto) and, in the case of the Underwriter, as the underwriting
discount received by it bears in each case to the total of such
amounts paid to the Company and received by the Underwriter as
underwriting discount in each case as contemplated by the Prospectus.
The relative fault of the Company and the Underwriter shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Company or the
Underwriter and such party's relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the
Claims referred to above shall be deemed to include, subject to the
limitations set forth in paragraphs (c) or (d) of this Section, any
legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
(f) The Company and the Underwriter agree that it would
not be just and equitable if contribution pursuant to this Section
were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations
referred to in paragraph (e) of this Section. Notwithstanding the
other provisions of this Section, the Underwriter shall not be
required to contribute any amount in excess of the amount by which the
total price at which the Common Shares underwritten by it and
distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
SECTION 10. Effective Date.
This Agreement shall become effective upon the execution and delivery
of this Agreement by the parties hereto.
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<PAGE> 24
SECTION 11. Termination
Without limiting the right to terminate this Agreement pursuant to any
other provision hereof, this Agreement may also be terminated by the
Underwriter prior to the First Closing Date, and the option referred to in
Section 3 hereof, if exercised, may be canceled at any time prior to the Second
Closing Date, upon the occurrence of any of the following: (a) any change, or
any development involving a prospective change, in or affecting particularly
the business or properties of the Company or the Bank which, in the reasonable
judgment of the Underwriter materially impairs the investment quality of the
Common Shares; (b) any suspension or limitation of trading in securities
generally on the New York Stock Exchange, or any setting of minimum prices for
trading in securities generally on the New York Exchange, or any suspension of
trading of the common stock of the Company on any exchange or in the
over-the-counter market; (c) any banking moratorium declared by Federal or any
state authorities; or (d) any outbreak or escalation of major hostilities in
which the United States is involved, any declaration of war by Congress or any
other substantial national or international calamity or emergency if, in the
reasonable judgment of the Underwriter, the effect of any such outbreak,
escalation, declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the sale of and payment for the
Common Shares.
Any termination pursuant to this Section shall be without liability on
the part of the Underwriter to the Company or on the part of the Company to the
Underwriter (except for expenses to be paid by the Company pursuant to Section
5 hereof or reimbursed by the Company pursuant to Section 7 hereof and except
as to indemnification to the extent provided in Section 9 hereof).
SECTION 12. Representations and Indemnities to Survive Delivery.
The respective indemnities, agreements, representations, warranties,
covenants and other statements of the Company, its officers or directors, and
of the Underwriter set forth in or made pursuant to this Agreement will remain
in full force and effect, regardless of any investigation made by or on behalf
of the Underwriter, or the Company or any of its or their, officers or
directors or any controlling person, as the case may be, and will survive
delivery of and payment for the Common Shares sold hereunder.
SECTION 13. Notices.
All communications hereunder will be in writing and, if sent to the
Underwriter will be mailed, delivered or telegraphed and confirmed to Robert W.
Baird & Co. Incorporated at 777 East Wisconsin Avenue, Milwaukee, Wisconsin
53202, Attention: Mr. Steven P. Kent, Managing Director, with a copy to Claudia
V. Swhier, Esq., Barnes & Thornburg, 1313 Merchants Bank Building,
Indianapolis, Indiana 46204; and if sent to the Company will be mailed,
delivered or telegraphed and confirmed to the Company at 2015 Western Avenue,
Suite 113, South Bend, Indiana 46629, Attention: Mr. John W. Rosenthal,
President and Chief Executive Officer, with a copy to John E. Freechack, Esq.,
Barack, Ferrazzano, Kirschbaum & Perlman, 333 West Wacker Drive, Suite 2700,
Chicago, Illinois 60606.
SECTION 14. Successors.
This Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective successors, personal representatives and
assigns, and to the benefit of the officers and directors and controlling
persons referred to in Section 9, and no other person will have any right or
obligation thereunder. The term "successors" shall not include any purchaser
of the Common Shares as such from the Underwriter merely by reason of such
purchase.
SECTION 15. Partial Unenforceability.
If any Section, paragraph or provision of this Agreement is for any
reason determined to be invalid or unenforceable, such determination shall not
affect the validity or enforceability of any other Section, paragraph or
provision hereof.
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<PAGE> 25
SECTION 16. Applicable Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Indiana applicable to contracts made and performed
therein.
SECTION 17. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute
one and the same agreement.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, and the
Underwriter, all in accordance with its terms.
Very truly yours,
ST. JOSEPH CAPITAL CORPORATION
By: /s/ John W. Rosenthal
--------------------------------------
John W. Rosenthal, President and
Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
ROBERT W. BAIRD & CO. INCORPORATED
By: /s/ Steven P. Kent
---------------------------------------------------
Steven P. Kent, Managing Director
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<PAGE> 1
EXHIBIT 4.1
ST. JOSEPH
CAPITAL CORPORATION
COMMON STOCK COMMON STOCK
[LOGO] [LOGO]
Number Shares
SJOE
See Reverse for Certain Definitions
Incorporated Under the Laws of CUSIP 790595 10 2
The State of Delaware
This Certifies that
is the owner of
Fully Paid and Non-Assessable Shares of Common Stock of the Par Value of $.01
each of
ST. JOSEPH CAPITAL CORPORATION
transferable only on the books of the Corporation by the holder hereof in
person or by duly authorized attorney upon surrender of this Certificate
properly endorsed.
This Certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
IN WITNESS WHEREOF, St. Joseph Capital Corporation has caused this
certificate to be executed by the facsimile signatures of its duly authorized
officers and has caused a facsimile of its corporate seal to be hereunto
affixed.
Dated
[ST. JOSEPH'S LOGO]
/s/ Arthur H. Mc Elwee /s/ John Rosenthal
- ---------------------- ------------------------------
Arthur H. Mc Elwee John Rosenthal
Secretary President and Chief Executive
Officer
Countersigned and Registered:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
(Charlotte, North Carolina) Transfer Agent
and Registrar
By
Authorized Signature
<PAGE> 2
EXHIBIT 4.1
ST. JOSEPH CAPITAL CORPORATION
The Corporation shall furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock of the
Corporation or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Such requests shall be made to
the Corporation's Secretary at the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM- as tenants in common UNIF GIFT MIN ACT-________________Custodian__________________________
TEN ENT- as tenants by the entireties (Cust) (Minor)
JT TEN- as joint tenants with under Uniform Gifts to Minors
right of survivorship and
not as tenants in common Act__________________________________________________
(State)
UNIF TRF MIN ACT-_______________Custodian (until age________________)
(Cust)
____________________________under Uniform Transfers
(Minor)
to Minors Act_______________________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ________________hereby sell, assign and transfer unto
Please insert social security or other
identifying number of assignee
- ----------------------------------------------
- ----------------------------------------------
(Please print or typewrite name and address, including zip code, or assignee)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- --------------------------------------------------------------------- Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint_____________________________________________
Attorney to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated_____________________________________
X
------------------------------------------------
X
------------------------------------------------
NOTICE: The signature(s) to this assignment must
correspond with the name(s) as written upon the
face of the certificate in every particular,
without alteration or enlargement or any change
whatever.
SIGNATURE(S) GUARANTEED:
By
- -----------------------------------------------------------------------------
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
