U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B)
OR 12(G) OF THE SECURITIES ACT OF 1934
_________________________________
LUXEMBURG BANCSHARES, INC.
(Name of Small Business Issuer in Its Charter)
Wisconsin 39-1457904
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
_________________________________
630 Main Street, Luxemburg, Wisconsin 54217
(Address of Principal Executive Offices) (Zip Code)
_________________________________
(414) 845-2345
(Issuer's Telephone Number)
_________________________________
Securities to be registered under Section 12(b) of the
Act: None
Securities to be registered under Section 12(g) of the
Act:
Common Stock, par value $0.16-2/3 per share
(Title of Class)
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
THE COMPANY
Luxemburg Bancshares, Inc. (the "Company"), a
Wisconsin corporation, was formed June 10, 1983 for the
purpose of owning a Wisconsin bank. On December 30,
1983, the Company acquired a controlling interest in
the Bank of Luxemburg (the "Bank"). The Bank is now a
wholly-owned subsidiary of the Company.
THE BANK
The Bank was chartered by the Wisconsin Banking
Department (now the Wisconsin Department of
Financial Institutions ("DFI")) on October 6, 1903.
Bank deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC"). The Bank conducts
business at the Main Office at 630 Main Street,
Luxemburg, Wisconsin with other offices located at E166
County Hwy. S., Luxemburg ("Dyckesville office") and
602 Center Drive, Luxemburg ("IGA Supermarket office")
in Kewaunee County and 1311 Bellevue Street, Green Bay
("Bellevue office") in Brown County. The Bank also
maintains four automated teller machines ("ATMs") in
Kewaunee, Brown and Door Counties.
The Bank provides a full range of consumer and
commercial banking services to individuals, businesses
and farms. The basic services offered include: demand
deposit accounts, money market deposit accounts, NOW
accounts, time deposits, safe deposit services, credit
cards, direct deposits, notary services, money orders,
night depository, travelers' checks, cashier's checks,
savings bonds, secured and unsecured consumer,
commercial and real estate loans and stand-by letters
of credit. The Bank offers automated teller machine
cards through the TYME and Cirrus ATM networks. In
addition, the Bank purchased the financial planning and
alternative investment marketing of Total Financial
Concepts in January of 1996 to provide financial
planning, estate planning and retirement planning
services and to market mutual funds, annuities, life
insurance products, Individual Retirement Accounts
(IRAs) and other pension programs.
As is the case with banking institutions
generally, the Bank derives its revenues from interest
on the loan and investment portfolios and fee income
related to loans and deposits. Income derived from the
sale of alternative investment products and financial
planning fees provides additional fee income. The
source of funds for the lending activities are
deposits, repayment of loans, sale and maturity of
investment securities and borrowing from the Federal
Home Loan Bank of Chicago. Principal expenses are the
interest paid on deposits and borrowings and operating
and general administrative expenses.
The Bank's business plan is based on being a
strong, established, locally owned bank providing
financial services to its local communities. The
Bank's main office and two branch offices are located
in western Kewaunee County, serving approximately 25%
of the county's 19,000 population. The Bank also
serves a small portion of southern Door County from
these locations and eastern Brown County with these
locations and an office in the Green Bay, Wisconsin
market. The Bank targets the individual and small
business customers within these markets and emphasizes
the advantages of local ownership, (i.e., responsive
local loan decisions and community involvement).
As of December 31, 1996, the Company had total
consolidated assets of $75.9 million and total
shareholders' equity of $7.7 million.
AREA DEVELOPMENT CORPORATION
The Company formed Area Development Corporation as
a subsidiary to provide the Company with a vehicle to
invest in the community in real estate developments
which assist low and moderate income residents. To
date, the Area Development Corporation has assisted by
working with the low-income housing program in
Luxemburg by providing officers to serve on the board
and to advise on the current and future low-income
housing projects; assisting the low-income housing
development committee in Dyckesville; researching a low-
<PAGE>
income housing project and putting aside funds to
purchase property if necessary to begin the project;
and providing funds to determine the need for library
services locally for all community residents.
LUXEMBURG INVESTMENT CORPORATION.
Luxemburg Investment Corporation ("Investment
Corporation") is a wholly-owned subsidiary of the Bank.
Investment Corporation is a Nevada corporation, the
business of which is to hold, invest and reinvest a
portion of the investment portfolio of the Bank. See
"INVESTMENTS".
LENDING ACTIVITIES
The Bank offers a range of lending services,
including real estate, consumer, commercial and
industrial and agricultural loans to individuals, small
business and other organizations that are located in or
conduct a substantial portion of their business in the
Bank's market area. The Bank's total loans as of
December 31, 1996 were $55.2 million, or approximately
73% of total consolidated assets. In addition, the
Bank services $15 million in consumer real estate loans
sold to the Federal Home Loan Mortgage Corporation
("FHLMC"). Interest rates charged on loans vary with
the degree of risk, maturity, and amount of the loan,
and are further subject to competitive pressures, cost
and availability of funds and government regulations.
The Bank maintains a comprehensive loan policy
that establishes guidelines with respect to all
categories of lending activity. The policy establishes
lending authority for each individual loan officer and
officer and board lending authority. All loans to
directors and executive officers are approved by the
Board of Directors. The loans are concentrated in
four major areas: real estate loans, commercial loans,
consumer loans and agricultural loans. The lending
strategy is development of a high quality loan
portfolio.
The Bank's real estate loans are secured by
mortgages and consist primarily of loans to individuals
for the purchase and improvement of real estate and for
the purchase of residential lots and construction of
single-family residential units. The Bank's
residential real estate loans generally are repayable
in monthly installments based on up to a thirty year
amortization schedule. Typically, loans with terms of
fifteen or thirty years must qualify for and are sold
to the FHLMC.
Commercial loans include loans to individuals and
small businesses including loans for working capital,
machinery and equipment purchases, premise and
equipment acquisitions, purchase, improvement and
investment in real estate development and other
business needs. Commercial lines of credit are
typically for a one year term. Other commercial loans
with terms or amortization schedules of longer than one
year will normally carry interest rates which vary with
the prime lending rate and will become payable in full
and are generally refinanced in three to five years.
Commercial loans typically entail a thorough analysis
of the borrower, its industry, current and projected
economic conditions and other factors. The Bank
typically requires commercial borrowers to have annual
financial statements and requires appraisals or
evaluations in connection with the loans secured by
real estate. The Bank often requires personal
guarantees from principals involved with closely-held
corporate borrowers.
The Bank's consumer loan portfolio consists
primarily of loans to individuals for various consumer
purposes payable on an installment basis. The loans
are generally for terms of five years or less and are
secured by liens on various personal assets of the
borrower. The Bank also provides consumer credit
through its credit card program. These loans are
limited open-ended credits requiring minimum monthly
payments. Credit card loans are unsecured.
The Bank also provides services to support dairy
farms in the rural areas of Kewaunee and southern Door
counties. About thirteen (13%) percent of the Bank's
loan portfolio, $7.3 million, is in agricultural loans
(including agricultural real estate loans). The loans
provide financing for real estate and personal property
purchases, as well as operational lines of credit and
production financing. The credit terms are typically
similar to other commercial loans. The Bank will
provide direct financing, as well as guaranteed
financing through Federal (FmHA) and State of Wisconsin
(WHEDA) sponsored programs.
<PAGE>
DEPOSIT ACTIVITIES
Deposits are the major source of the Bank's funds
for lending and other investment activities. The Bank
considers the majority of its regular savings, demand,
NOW and money market deposit accounts to be core
deposits. These accounts comprised approximately 45%
of the Bank's total deposits at December 31, 1996.
Approximately 55% of the Bank's deposits at December
31, 1996 were certificates of deposit. Generally, the
Bank attempts to maintain the rates paid on its
deposits at a competitive level. Time deposits of
$100,000 and over made up approximately 4% of the
Bank's total deposits at December 31, 1996. The
majority of the deposits of the Bank are generated from
Kewaunee and Brown Counties. The Bank does not accept
brokered deposits. For additional information
regarding the Bank's deposit accounts, see
"Management's Discussion and Analysis or Plan of
Operation - Liquidity and Interest Rate Sensitivity"
and Note 8 of Notes to Consolidated Financial
Statements.
INVESTMENTS
The Bank invests a portion of its assets in U.S.
Treasury and U.S. Governmental agency obligations,
FHLMC, FNMA and FHLB securities, state, county and
municipal obligations, collateralized mortgage
obligations ("CMO's") and federal funds sold. The
investments are managed in relation to the loan demand
and deposit growth and are generally used to provide
for the investment of excess funds at reduced yields
and risks relative to yields and risks of the loan
portfolio, while providing liquidity to fund increases
in loan demand or to offset fluctuations in deposits.
The investments are held in Investment Corporation as
well as in the Bank. The Bank portfolio is to provide
for immediate liquidity needs and therefore maintains
shorter term investments. Investment Corporation
provides for greater investment yields and therefore
maintains longer term investments. For further
information regarding the Company's investment
portfolio, see Note 4 of Notes to Consolidated
Financial Statements.
SUPERVISION AND REGULATION
Bank Holding Company Regulation. The Company is a
one-bank holding company, registered with the Federal
Reserve under the Bank Holding Company Act of 1956, as
amended ("BHC Act"). As such, the Company is subject
to the supervision, examination, and reporting
requirements of the BHC Act and the regulations of the
Federal Reserve. The Company is required to furnish to
the Federal Reserve an annual report of its operations
at the end of each fiscal year, and such additional
information as the Federal Reserve may require pursuant
to the BHC Act.
The BHC Act requires every bank holding company to
obtain the prior approval of the Federal Reserve before
(i) it may acquire direct or indirect ownership or
control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or
indirectly own or control more than 5% of the total
voting shares of the bank, (ii) it or any of its
subsidiaries, other than a bank, may acquire all or
substantially all of the assets of the bank, or (iii)
it may merge or consolidate with any other bank holding
company.
The BHC Act further provides that the Federal
Reserve may not approve any transaction that would
result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to
monopolize the business of banking in any section of
the United States, or the effect of which may be
substantially to lessen competition or to tend to
create a monopoly in any section of the country, or
that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the
proposed transaction are clearly outweighed by the
public interest in meeting the convenience and needs of
the community to be served. The Federal Reserve is
also required to consider the financial and managerial
resources and future prospects of the bank holding
companies and banks concerned, which generally focuses
on capital adequacy. The Federal Reserve must also
consider the convenience and needs of the community to
be served, including the parties' performance under the
Community Reinvestment Act of 1977, as amended (the
"CRA"), which is discussed below.
<PAGE>
The BHC Act generally prohibits the Company from
engaging in activities other than banking or managing
or controlling banks or other permissible subsidiaries
and from acquiring or retaining direct or indirect
control of any company engaged in any activities other
than those activities determined by the Federal Reserve
to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto.
In determining whether a particular activity is
permissible, the Federal Reserve must consider whether
the performance of such an activity reasonably can be
expected to produce benefits to the public, such as
greater convenience, increased competition, or gains in
efficiency, that outweigh possible adverse effects,
such as undue concentration of resources, decreased or
unfair competition, conflicts of interests, or unsound
banking practices. For example, factoring accounts
receivable, acquiring or servicing loans, leasing
personal property, conducting discount securities
brokerage activities, performing certain data
processing services, acting as agent or broker in
selling credit life insurance and certain other types
of insurance in connection with credit transactions,
and performing certain insurance underwriting
activities all have been determined by the Federal
Reserve to be permissible activities of bank holding
companies. Despite prior approval, the Federal Reserve
has the power to order a bank holding company or its
subsidiaries to terminate any activity or to terminate
its ownership or control of any subsidiary when it has
reasonable cause to believe that continuation of such
activity or such ownership or control constitutes a
serious risk to the financial safety, soundness, or
stability of any bank subsidiary of that bank holding
company.
Banks are subject to the provisions of the CRA.
Under the terms of the CRA, the appropriate federal
bank regulatory agency is required, in connection with
its examination of a bank, to assess such bank's record
in meeting the credit needs of the community served by
that bank, including low- and moderate-income
neighborhoods. The regulatory agency's assessment of
the bank's record is made available to the public.
Further, such assessment is required of any bank which
has applied to (i) charter a national bank, (ii) obtain
deposit insurance coverage for a newly chartered
institution, (iii) establish a new branch office that
will accept deposits, (iv) relocate an office, or (v)
merge or consolidate with, or acquire the assets or
assume the liabilities of, a federally regulated
financial institution. In the case of a bank holding
company applying for approval to acquire a bank or
other bank holding company, the Federal Reserve will
assess the record of each subsidiary bank of the
applicant bank holding company, and such records may be
the basis for denying the application.
Bank Regulation. The Bank is chartered under the
laws of the State of Wisconsin and its deposits are
insured by the Federal Deposit Insurance Corporation
(the "FDIC") to the extent provided by law. The Bank
is subject to comprehensive regulation, examination and
supervision by the FDIC and DFI and to other laws and
regulations applicable to banks. Such regulations
include limitations on loans to a single borrower and
to its directors, officers and employees; restrictions
on the opening and closing of branch offices; the
maintenance of required capital and liquidity ratios;
the granting of credit under equal and fair conditions;
and the disclosure of the costs and terms of such
credit. The Bank is examined periodically by the FDIC
and DFI to which it submits periodic reports regarding
its financial condition and other matters. The FDIC
and DFI have a broad range of powers to enforce
regulations under their jurisdiction, and to take
discretionary actions determined to be for the
protection of the safety and soundness of insured
banks, including the institution of cease and desist
orders and the removal of directors and officers. The
FDIC and DFI also have the authority to approve or
disapprove mergers, consolidations, and similar
corporate actions.
Under federal law, federally insured banks are
subject, with certain exceptions, to certain
restrictions on any extension of credit to their parent
holding companies or other affiliates, on investment in
the stock or other securities of affiliates, and on the
taking of such stock or securities as collateral from
any borrower. In addition, such banks are prohibited
from engaging in certain tie-in arrangements in
connection with any extension of credit or the
providing of any property or service.
In 1989, the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA") was
enacted. FIRREA contains major regulatory reforms,
stronger capital standards for savings and loan
associations and stronger civil and criminal
enforcement provisions. FIRREA also provides that a
depository institution insured by the FDIC can be held
liable for any loss incurred by, or reasonably expected
to be incurred by, the FDIC after August 9, 1989 in
connection with (i) the default of a commonly
controlled FDIC insured depository
<PAGE>
institution, or (ii)
any assistance provided by the FDIC to a commonly
controlled FDIC insured institution in danger of
default.
In 1991, the FDIC Improvement Act of 1991
("FDICIA") was enacted. FDICIA made a number of
reforms addressing the safety and soundness of deposit
insurance funds, supervision, accounting, and prompt
regulatory action, and also implements other regulatory
improvements. Annual full-scope, on-site examinations
are required of all insured depository institutions.
The cost for conducting an examination of an
institution may be assessed to that institution, with
special consideration given to affiliates and any
penalties imposed for failure to provide information
requested. Insured state banks also are precluded from
engaging as principal in any type of activity that is
impermissible for a national bank, including activities
relating to insurance and equity investments. FDICIA
also recodified current law restricting extensions of
credit to insiders under the Federal Reserve Act.
Dividends. Dividends from the Bank constitute the
primary source of funds for dividends to be paid by the
Company. There are various statutory and contractual
limitations on the ability of Bank to pay dividends,
extend credit, or otherwise supply funds to the
Company. The Federal Reserve, the FDIC and DFI also
have the general authority to limit the dividends paid
by bank holding companies and insured banks,
respectively, if such payment may be deemed to
constitute an unsafe and unsound practice. In general,
under Wisconsin law applicable to the Bank, the board
of directors of a state bank may declare and pay a
dividend from so much of the bank's undivided profits
as the board deems expedient, provided that the payment
of such dividend does not in any way impair or diminish
the bank's capital, other than by reducing undivided
profits.
Effect of Governmental Policies. The earnings and
business of the Company and the Bank are effected by
the policies of various regulatory authorities of the
United States, especially the Federal Reserve. The
Federal Reserve, among other things, regulates the
supply of credit and deals with general economic
conditions within the United States. The instruments
of monetary policy employed by the Federal Reserve for
those purposes influence in various ways the overall
level of investments, loans, other extensions of
credits, and deposits, and the interest rates paid on
liabilities and received on assets.
Enforcement Powers. Congress has provided the
federal bank regulatory agencies with an array of
powers to enforce laws, rules, regulations and orders.
Among other things, the agencies may require that
institutions cease and desist from certain activities,
may preclude persons from participating in the affairs
of insured depository institutions, may suspend or
remove deposit insurance, and may impose civil money
penalties against institution-affiliated parties for
certain violations.
Change of Control. Federal law restricts the
amount of voting stock of a bank holding company and a
bank that a person may acquire without the prior
approval of banking regulators. The overall effect of
such laws is to make it more difficult to acquire a
bank holding company and a bank by tender offer or
similar means than it might be to acquire control of
another type of corporation. Consequently,
shareholders of the Company may be less likely to
benefit from the rapid increases in stock prices that
may result from tender offers or similar efforts to
acquire control of other companies. Federal law also
imposes restrictions on acquisitions of stock in a bank
holding company and a state bank. Under the federal
Change in Bank Control Act and the regulations
thereunder, a person or group must give advance notice
to the Federal Reserve before acquiring control of any
bank holding company and the FDIC and DFI before
acquiring control of an insured state bank (such as the
Bank). Upon receipt of such notice, the Federal
Reserve or the FDIC and DFI, as the case may be, may
approve or disapprove the acquisition. The Change in
Bank Control Act creates a rebuttable presumption of
control if a member or group acquires a certain
percentage or more of a bank holding company's or
bank's voting stock, or if one or more other control
factors set forth in the Act are present.
Insurance of Deposits. The Bank's deposit
accounts are insured by the FDIC up to a maximum of
$100,000 per insured depositor. The FDIC issues
regulations, conducts periodic examinations, requires
the filing of reports and generally supervises the
operations of its insured banks. Any insured bank
which is not operated in accordance with or does not
conform to FDIC regulations, policies and directives
may be sanctioned for non-compliance. Proceedings may
be instituted against any insured bank or any director,
officer, or employee of such
<PAGE>
bank engaging in unsafe
and unsound practices, including the violation of
applicable laws and regulations. The FDIC has the
authority to terminate insurance of accounts pursuant
to procedures established for that purpose.
Capital Requirements. The federal bank regulatory
authorities have adopted risk-based capital guidelines
for banks and bank holding companies that are designed
to make regulatory capital requirements more sensitive
to differences in risk profile among banks and bank
holding companies. The resulting capital ratios
represent qualifying capital as a percentage of total
risk-weighted assets and off-balance sheet items. The
guidelines are minimums, and the federal regulators
have noted that banks and bank holding companies
contemplating significant expansion programs should not
allow expansion to diminish their capital ratios and
should maintain all ratios well in excess of the
minimums. The current guidelines generally require
bank holding companies and federally-regulated banks to
maintain a minimum risk-based total capital ratio equal
to 8%, of which at least 4% must be Tier 1 capital.
For bank holding companies with assets less than $150
million, such as the Company, capital ratios are
determined at the subsidiary bank level. Tier 1
capital includes common stockholders' equity,
qualifying perpetual preferred stock, and minority
interests in equity accounts of consolidated
subsidiaries, less the amounts of goodwill and most
other intangibles. Tier 2 capital includes the excess
of any preferred stock not included in Tier 1 capital,
mandatory convertible securities, hybrid capital
instruments, subordinated debt and intermediate term-
preferred stock, and general reserves for loan and
lease losses up to 1.25% of risk-weighted assets. At
December 31, 1996, the Bank's Tier 1 and total risk-
based capital ratios were 14.5% and 15.8%,
respectively.
FDICIA contains "prompt corrective action"
provisions pursuant to which banks are to be classified
into one of five categories based upon capital
adequacy, ranging from "well capitalized" to
"critically undercapitalized" and which require
(subject to certain exceptions) the appropriate federal
banking agency to take prompt corrective action with
respect to an institution which becomes "significantly
undercapitalized" or "critically undercapitalized".
The FDIC has issued regulations to implement the
"prompt corrective action" provisions of FDICIA. In
general, the regulations define the five capital
categories as follows: (i) an institution is "well
capitalized" if it has a total risk-based capital ratio
of 10% or greater, has a Tier 1 risk-based capital
ratio of 6% or greater, has a leverage ratio of 5% or
greater and is not subject to any written capital order
or directive to meet and maintain a specific capital
level for any capital measures; (ii) an institution is
"adequately capitalized" if it has a total risk-based
capital ratio of 8% or greater, has a Tier 1 risk-based
capital ratio of 4% or greater, and has a leverage
ratio of 4% or greater; (iii) an institution is
"undercapitalized" if it has a total risk-based capital
ratio of less than 8%, has a Tier 1 risk-based capital
ratio that is less than 4% or has a leverage ratio that
is less than 4%; (iv) an institution is "significantly
undercapitalized" if it has a total risk-based capital
ratio that is less than 6%, a Tier 1 risk-based capital
ratio that is less than 3% or a leverage ratio that is
less than 3%; and (v) an institution is "critically
undercapitalized" if its "tangible equity" is equal to
or less than 2% of its total assets. The FDIC also,
after an opportunity for a hearing, has authority to
downgrade an institution from "well capitalized" to
"adequately capitalized" or to subject an "adequately
capitalized" or "under-capitalized" institution to the
supervisory actions applicable to the next lower
category, for supervisory concerns. As of December 31,
1996, the Bank had a total risk-based capital ratio of
15.8%, a Tier 1 risk-based capital ratio of 14.5%, and
a leverage ratio of 10.2%.
Additionally, FDICIA requires, among other things,
that (i) only a "well capitalized" depository
institution may accept brokered deposits without prior
regulatory approval and (ii) the appropriate federal
banking agency annually examine all insured depository
institutions, with some exceptions for small, "well
capitalized" institutions and state-chartered
institutions examined by state regulators. FDICIA also
contains a number of consumer banking provisions,
including disclosure requirements and substantive
contractual limitations with respect to deposit
accounts.
Interstate Banking. The Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 provides
for nationwide interstate banking and branching. Under
the law, interstate acquisitions of banks or bank
holding companies in any state by bank holding
companies in any other state is permissible subject to
certain limitations. Wisconsin also has a law that
allows out-of-state bank holding companies (located in
states that allow Wisconsin
<PAGE>
bank holding companies to
acquire banks and bank holding companies in that state)
to acquire Wisconsin banks and Wisconsin bank holding
companies. The law essentially provides for out-of-
state entry by acquisition only (and not by interstate
branching) and requires the acquired Wisconsin bank to
have been in existence for at least five years.
Interstate branching and consolidation of existing bank
subsidiaries in different states will be permissible
beginning June 1, 1997. Out-of-state banks that do not
operate a branch in Wisconsin are prohibited from
establishing a de novo branch in Wisconsin. Beginning
June 1, 1997, a Wisconsin bank may establish, maintain,
and operate one or more branches in a state other than
Wisconsin pursuant to an interstate merger transaction
in which the Wisconsin bank is the resulting bank. An
interstate merger transaction resulting in the
acquisition by an out-of-state bank of a Wisconsin bank
is not permitted unless the Wisconsin bank has been in
existence and continuously operating, on the day of the
acquisition, for more than five years.
INDUSTRY RESTRUCTURING
For well over a decade, the banking industry has
been undergoing a restructuring process which is
anticipated to continue. The restructuring has been
caused by product and technological innovations in the
financial services industry, deregulation of interest
rates, and increased competition from foreign and
nontraditional banking competitors, and has been
characterized principally by the gradual erosion of
geographic barriers to intrastate and interstate
banking and the gradual expansion of investment and
lending authorities for bank institutions.
COMPETITION
The Bank's service area includes portions of
Kewaunee, Brown and Door Counties. Kewaunee County,
with a population of approximately 19,000 residents,
has five banks with nine offices, one savings bank with
two offices and one credit union with two offices.
Brown County, with a population of approximately
195,000 residents, has fifteen banks with fifty
offices, four saving banks with twenty offices and
thirteen credit unions with nineteen offices. Door
County, with a population of approximately 26,000
residents, has three banks with fourteen offices and
one savings bank with two offices. In addition to the
financial institutions, significant competition comes
from security and brokerage firms, mortgage companies,
insurance companies and other providers of financial
services in the area. The Bank competes as a locally
owned banking institution that responds quickly with
personal service.
EMPLOYEES
As of December 31, 1996, the Company employed 33
full-time employees and 15 part-time employees. The
employees are not represented by a collective
bargaining unit. The Company considers relations with
employees to be good.
STATISTICAL PROFILE AND OTHER FINANCIAL DATA
For additional statistical, financial and other
information regarding the Company, see "Management's
Discussion and Analysis or Plan of Operation" and
"Notes to Consolidated Financial Statements."
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION
The following discussion and analysis of the Company
relates to the years ended December 31, 1996 and 1995
and should be read in conjunction with the Company's
consolidated financial statements and notes thereto
included elsewhere herein.
Results of Operations
Year ended December 31, 1996 Compared to the Year Ended
December 31, 1995
The Company's results of operations depends
primarily on the level of its net interest margin, its
non-interest income and its operating expenses. Net
interest income depends on the volume of and rates
associated with interest earning assets and interest
bearing liabilities which results in the net interest
margin. Net income increased $113,588 or 16.3% to
$810,972 for the year ended December 31, 1996 from
$697,384 for the year ended December 31, 1995. This
increase is primarily due to the growth of the Bank
allowing for more interest earning assets and net
interest income compared to the same period during
1995. During 1996 the Bank adopted SFAS No. 122,
"Accounting for Mortgage Servicing Rights," which
increased income by $43,271. The following table
summarizes the Company's operating performance for the
years specified.
Year Ended December 31,
1996 1995
Return on Assets 1.10% 1.00%
Return on Equity 11.01% 10.28%
Net Interest Income. Net interest income
increased $231,328 or 8.7% to $2,895,434 for the year
ended December 31, 1996 from $2,664,106 for the year
ended December 31, 1995. Total interest income
increased $407,681 for the year ended December 31, 1996
to $5,633,485 from $5,225,804 for the year ended
December 31, 1995. This increase is primarily a result
of average total loans for the year ended December 31,
1996 being approximately $49,900,000 compared to
average total loans of approximately $46,900,000 for
the year ended December 31, 1995. The loan portfolio
produces the highest yield of all earning assets.
Total interest expense increased $176,353 or 6.9%
to $2,738,051 for the year ended December 31, 1996 from
$2,561,698 for the year ended December 31, 1995. This
increase is due to an increase in interest bearing
deposits and a mix shift to a new account first offered
in December, 1995. Total interest bearing liabilities
averaged approximately $58,300,000 for the year ended
December 31, 1996 as compared to approximately
$55,600,000 for the year ended December 31, 1995. The
average cost of interest bearing liabilities for the
year ended December 31, 1996 was approximately 4.69%
compared to an average cost of interest bearing
liabilities of approximately 4.61% for the year ended
December 31, 1995.
The following table details average balances,
interest income/expense and average rates/yields for
the Company's earning assets and interest bearing
liabilities for the years ended December 31, 1996 and
1995.
<PAGE>
Year End December 31, 1996 Year End December 31, 1995
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
ASSETS:
Interest
Bearing
Loans $49,943,001 $4,634,218 9.28% $46,919,851 $4,277,355 9.12%
Taxable
Investments
and Mortgage
Backed
Securities 13,138,565 741,479 5.64% 13,283,075 706,453 5.32%
Fed Funds Sold 2,278,743 121,515 5.33% 2,453,699 140,649 5.73%
Municipal
Loans and
Investments 2,137,525 105,676 4.94% 1,471,530 83,545 5.68%
Other 559,700 30,597 5.47% 366,880 17,802 4.85%
Total 68,057,534 $5,633,485 8.28% 64,495,035 $5,225,804 8.10%
CSV Life
Insurance 1,044,941 994,414
Non-Earning
Assets 4,623,735 4,238,444
TOTAL ASSETS $73,726,210 $69,727,893
LIABILITIES:
Interest
Bearing
Demand $ 4,516,169 $ 95,202 2.11% $ 4,480,440 $ 96,507 2.15%
Savings 11,016,585 395,467 3.59% 6,587,678 185,008 2.81%
CD's under
$100,000 27,936,618 1,575,125 5.64% 25,016,438 1,377,570 5.51%
CD's over
$100,000 1,989,579 128,015 6.43% 4,334,837 271,266 6.26%
Individual
Retirement
Accounts 6,490,642 367,704 5.67% 6,369,954 368,184 5.78%
Money Market
Deposits 4,803,935 123,144 2.56% 6,522,037 170,897 2.62%
Other 1,573,398 53,394 3.39% 2,266,684 92,266 4.07%
Total 58,326,926 $2,738,051 4.69% 55,578,068 $2,561,698 4.61%
Non-Interest-
bearing
Liabilities
Liabilities 7,063,069 6,564,093
Other
Liabilities 968,201 802,401
Total
Liabilities 66,358,196 62,944,562
Equity 7,368,014 6,783,331
TOTAL
LIABILITIES
& EQUITY $73,726,210 $69,727,893
Recap:
Interest Income $5,633,485 8.28% $5,225,804 8.10%
Interest Expense 2,738,051 4.69% 2,561,698 4.61%
Net Interest Income/
Spread $2,895,434 3.59% $2,664,106 3.49%
Contribution of Non-
Interest-bearing Funds 0.66% 0.64%
Net Interest Margin 4.25% 4.13%
Average balances are computed using daily average balances.
<PAGE>
The following table sets forth an analysis of
volume and rate changes in interest income and interest
expense of the Company's average earning assets and
average interest bearing liabilities. The table
distinguishes between the changes related to average
outstanding balances of assets and liabilities (changes
in volume holding the initial average rate constant)
and the changes related to average interest rates
(changes in the average rate holding the initial
average outstanding balance constant). The change in
interest due to both volume and rate has been allocated
to volume and rate changes in proportion to the
relationship of the absolute dollar amounts of the
change in each.
Year ended December 31, 1996 compared to year
ended December 31, 1995.
Increase (Decrease) in Net
Interest Income
Net Due to Due to
Change Rate Volume
Interest Earning
Assets:
Loans $356,863 $77,412 $279,451
Taxable
Investments &
Mortgage Backed
Securities 35,026 42,609 (7,583)
Fed Funds Sold (19,134) (9,459) (9,675)
Municipal Loans
and Investments 22,131 (8,841) 30,972
Other 12,795 2,484 10,311
TOTAL 407,681 104,205 303,476
Interest Bearing
Liabilities:
Interest Bearing
Demand (1,305) (2,084) 779
Savings 210,459 61,602 148,857
CD's under
$100,000 197,555 33,562 163,993
CD's over
$100,000 (143,251) 7,877 (151,128)
Individual
Retirement
Accounts (480) (10,289) 9,809
Money Market
Deposits (47,753) (3,637) (44,116)
Other (38,872) (13,692) (25,180)
TOTAL 176,353 73,339 103,014
Net Change in
Net Interest
Income $231,328 $30,866 $200,462
NOTE: Due to Rate Increase was calculated by
taking the change in rate times prior year average
balance. Due to Volume Increase was calculated by
taking the change in average balance times the
prior year rate.
Provision for Loan Losses. The amount charged to
the provision for loan losses by the Bank is based on
management's evaluation as to the amounts required to
maintain an allowance adequate to provide for potential
losses inherent in the loan portfolio. The level of
this allowance is dependent upon the total amount of
past due and non-performing loans, general economic
conditions and management's assessment of potential
losses based upon internal credit evaluations of loan
portfolios and particular loans. Loans are entirely to
borrowers in Northeast Wisconsin.
<PAGE>
During the year ended December 31, 1996, $109,000
was charged to the provision for loan losses compared
to $95,000 for the year ended December 31, 1995. At
December 31, 1996, the allowance was $654,000 or 1.18%
of total loans. This compares to an allowance of
$574,000 or 1.16% of total loans as of December 31,
1995. Net charge offs were $30,000 for the year ended
December 31, 1996 and $35,000 for the year ended
December 31, 1995. Non-performing loans at December
31, 1996 were $472,000.
Other Operating Income. Other operating income
for the year ended December 31, 1996, increased
$279,891 or 54.1% to $797,253 from $517,362 for the
year ended December 31, 1995. Effective January 1,
1996 the Bank purchased Total Financial Concepts to
expand the marketing of alternative investments.
Alternative Investment Commission Income increased
$165,149 or 475.6% to $199,871 for the year ended
December 31, 1996 from $34,722 for the year ended
December 31, 1995. Mortgage Equity Income for the year
ended December 31, 1996 increased $78,631 or 220.1% to
$114,352 from $35,721 for the year ended December 31,
1995. The adoption of SFAS 122, "Accounting for
Mortgage Servicing Rights" effective January 1, 1996
increased Mortgage Equity Income by $43,271 for the
year ended December 31, 1996.
Other Operating Expenses. Other operating
expenses for the year ended December 31, 1996 increased
$301,424 or 14.6% to $2,359,661 from $2,058,237 for the
year ended December 31, 1995. Salaries and related
benefits increased $231,443 or 20.7% to $1,346,967 for
the year ended December 31, 1996 from $1,115,524 for
the year ended December 31, 1995. This increase is
primarily due to increased staffing resulting from the
purchase of Total Financial Concepts effective January
1, 1996 and the opening of the IGA supermarket office
effective April 17, 1996. Equipment rentals,
depreciation and maintenance increased $39,393 or 35.1%
to $151,662 for the year ended December 31, 1996 from
$112,269 for the year ended December 31, 1995. This
increase is primarily due to personal computer
acquisitions to support the Bank's conversion to in-
house data processing in 1997.
Dividends and Equity Capital. The Company paid
its shareholders dividends of $184,480 or $0.76 per
share for the year ended December 31, 1996 and $167,233
or $0.69 per share for the year ended December 31,
1995. The following table summarizes the Company's
dividend pay out ratio and average capital position for
the years specified.
Year Ended December
31,
1996 1995
Dividend Payout
Ratio 22.75% 23.98%
Equity to Assets
Ratio 9.99% 9.73%
Liquidity and Interest Rate Sensitivity
The Company must maintain an adequate liquidity
position in order to respond to the short-term demand
for funds caused by withdrawals from deposit accounts,
extensions of credit and for the payment of operating
expenses. Maintaining this position of adequate
liquidity is accomplished through the management of a
combination of liquid assets; those which can be
converted into cash and access to additional sources of
funds. Primarily liquid assets of the Company are cash
and due from banks, federal funds sold, investments
held as "available for sale" and maturing loans.
Federal funds sold and loans from the Federal Home Loan
Bank system represent the Company's primary source of
immediate liquidity and were maintained at a level to
meet immediate needs. Federal Funds Sold averaged
approximately $2,300,000 and $2,500,000 for the years
ended December 31, 1996 and 1995, respectively.
Maturities in the Company's loan and investment
portfolios are monitored regularly to avoid matching
short-term deposits and long-term loans and
investments. Other assets and liabilities are also
monitored to provide the proper balance between
liquidity, safety, and profitability. This monitoring
process must be continuous due to the constant flow of
cash which is inherent in a financial institution.
<PAGE>
The Company actively manages its interest rate
sensitive assets and liabilities to reduce the impact
of interest rate fluctuations. At December 31, 1996,
the Company's rate sensitive assets exceed rate
sensitive liabilities due within one year by
$13,048,000.
As part of managing liquidity, the Company
monitors its loan to deposit ratio on a daily basis.
At December 31, 1996 the ratio was 83.4% which is
within the Company's acceptable range.
The Company experienced a decrease in cash and
cash equivalents, its primary source of liquidity, of
$5,322,142 during 1996. The primary source of cash
flow for 1996 was the Company's cash flow from
operations of $855,592. Cash flow from investing
activities used $5,722,025 to fund loan growth in 1996.
The Company's management believes its liquidity sources
are adequate to meet its operating needs and does not
know of any trends, events or uncertainties that may
result in a significant adverse effect on the Company's
liquidity position.
The following table illustrates the projected
maturities and the repricing mechanisms of the major
asset/liability categories of the Company as of
December 31, 1996, based on certain assumptions. No
prepayment assumptions have been made for the loan
portfolio. Maturities and repricing dates for
investments have been projected by applying the
classifications set forth below to contractual
maturities and repricing dates.
1 Year 1 - 5 5 - 10 After 10
or Less Years Years Years
Interest Earning
Assets:
Fed Funds Sold $ 466,000 $ -- $ -- $ --
Investment
Securities 6,524,000 4,612,000 2,436,000 493,000
Loans:
Variable Rate 7,420,000 -- -- --
Real Estate-
Construction 2,286,000 -- -- --
Real Estate-
Other 11,979,000 7,724,000 139,000 94,000
Commercial and
Industrial 10,084,000 3,897,000 259,000
Agricultural 4,344,000 466,000 78,000 70,000
Consumer 2,716,000 3,344,000 271,000 --
Total Loans 38,829,000 15,431,000 747,000 164,000
Other 659,000 -- -- --
Total Interest
Earning Assets 46,478,000 20,043,000 3,183,000 657,000
Interest Bearing
Liabilities:
Interest Bearing
Demand -- -- -- 6,045,000
Savings Deposits 1,427,000 -- -- 10,570,000
Money Market
Accounts 1,399,000 -- -- 3,263,000
Certificates of
Deposit 21,535,000 6,043,000 -- --
Jumbo CD's 2,246,000 306,000 -- --
IRA's 5,892,000 427,000 -- --
Other 931,000 135,000 -- --
Total Interest
Bearing
Liabilities 33,430,000 6,911,000 0 19,878,000
Interest Sensitivity
Gap per Period $13,048,000 $13,132,000 3,183,000 ($19,221,000)
Cumulative Interest
Sensitivity Gap $13,048,000 $26,180,000 $29,363,000 $10,142,000
Interest Sensitivity
Gap as a Percentage
of Earning Assets 18.5% 18.7% 4.5% (27.3%)
Cumulative Sensitivity
Gap as a Percentage
of Earning Assets 18.5% 37.2% 41.7% 14.4%
<PAGE>
CAPITAL RESOURCES
The Company's primary source of capital since
commencing operations has been from issuance of common
stock and retained operating profit. The Company does
not have any long term debt facility arrangements at
December 31, 1996. Capital for the Bank is above
regulatory requirements at December 31, 1996.
Pertinent capital ratios for the Bank as of December
31, 1996 are as follows:
Minimum
Actual Requirements
Tier 1 Risk-Based
Captial Ratio 14.5% 4.0%
Total Risk-Based
Capital Ratio 15.8% 8.0%
Leverage Ratio 10.2% 4.0%
Dividends from the Bank to the Company may not
exceed the undivided profits of the Bank (included in
consolidated retained earnings) without prior approval
of a federal regulatory agency. The Bank paid $225,750
and $183,750 in dividends to the Company for the years
ended December 31, 1996 and 1995, respectively. At
December 31, 1996 the Bank could have paid the Company
approximately $2,575,000 of additional dividends
without prior regulatory approval. In addition,
Federal banking laws limit the amount of loans the bank
may make to the Company, subject to certain collateral
requirements. No loans were made by the Bank to the
Company during 1996 or 1995.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company and the Bank have their main office in
Luxemburg, Wisconsin at 630 Main Street. The building
is a two story building. The Bank owns the main
office.
The Bank opened its Dyckesville, Wisconsin office
(located at E166 County Hwy. S, Luxemburg) during May,
1987. This office was purchased by the Company on
September 30, 1994. The Bank leases this office from
the Company under a five year lease expiring in 1999.
The Bank opened its Bellevue Office (located at
1311 Bellevue Street, Green Bay, Wisconsin) during
August, 1989. The Bank owns its Bellevue Office.
On April 17, 1996, the Bank opened its IGA office
(located at 602 Center Street, Luxemburg). The Bank
has executed a lease for this property expiring in
2001.
The Bank has installed an ATM at its Dyckesville
Office, the Main Street Station in Luxemburg, the Hwy
54 T-Mart in New Franken and FS Fast Stop in
Forestville. These remote ATMs provide additional
banking convenience for the customers of the Bank, and
generate an additional source of fee income.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.
The following table sets forth the beneficial
ownership of outstanding shares of the Company's Common
Stock as of February 27, 1997 by the Company's current
directors, the persons named in the compensation table
in Item 6, current directors and executive officers as
a group, and each person known to the Company to be the
beneficial owner of 5% or more of the Company's Common
Stock.
<PAGE>
Number of Shares Percentage of
Beneficially Owned Shares Outstanding
Richard Dougherty 1,200 *
James Jadin 2,790 1.1%
Ronald Ledvina 1,650 *
Willard Marchant 22,000 9.1%
P.O. Box 31
Brussels, WI 54204
Donald Pritzl 170 *
Thomas Rueckl 2,235 *
John Slatky 2,230 *
Irvin Vincent 19,240 7.9%
P.O. Box 480
Luxemburg, WI 54217
All directors and
executive officers
as a group (10 persons) 52,960 21.8%
- ---------------
*Less than one percent.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS.
The following sets forth information as to each
director and each executive officer of the Company as
of March 31, 1997, including their ages, present
principal occupations, other business experience during
the last five years and directorships in other publicly
held companies. There are no arrangements or
understandings between any of the directors pursuant to
which any of them have been selected for their
respective positions.
Board of Directors. The Board of Directors of the
Company currently consists of eight directors. Each
director serves a one-year term. The following table
sets forth certain information with respect to the
directors. Except as noted, each director has held his
current position for at least the past five years.
RICHARD L. DOUGHERTY, - Age 64. Mr. Dougherty has
been sole proprietor of Green Bay Highway Products, a
highway products supply company, since 1984. Before
then, Mr. Dougherty was employed by Culvert & Supply
Co. He has been a director of the Bank since 1992 and
a director of the Company since 1993.
JAMES J. JADIN, - Age 52. Mr. Jadin has been
employed with Kewaunee County Highway Department since
1963 and he has served as Kewaunee County Highway
Commissioner since 1979. Mr. Jadin has been a director
of the Bank since 1985, a director of the Company since
1986 and one of the Company's Vice Presidents for the
past two years.
RONALD A. LEDVINA, - Age 51. Mr. Ledvina owns and
operates Ledvina Farms in a partnership with his
brother. From 1969 to 1975 he was employed by Sentry
Insurance as a computer programmer and systems
programmer. He was employed by Northwest Engineering
as a computer programming project leader from 1975
through 1980, where he was responsible for financial
and manufacturing computer program development. Mr.
Ledvina has been a director of the Bank since 1989 and
a director of the Company since 1989.
WILLARD MARCHANT, - Age 71. Mr. Marchant has been
retired since 1984. He was the owner of Marchants Red
Owl from 1947 until his retirement. He was extremely
active in civic organizations in the Brussels,
Wisconsin area. Mr. Marchant has been a director of
the Bank since 1966 and a director of the Company since
1983.
<PAGE>
DONALD E. PRITZL, - Age 55. Mr. Pritzl is General
Manager of Casco FS Cooperative, a farm supply
cooperative, with its main office at Casco, Wisconsin
and branches at Luxemburg and Forestville. Casco FS
Cooperative is a member of GROWMARK, INC. of
Bloomington, Illinois. Mr. Pritzl began his career as
a GROWMARK employee in 1969 as sales manager for
Manitowoc Farmco Cooperative and has been manager of
Casco FS Cooperative since 1980. He has been a
director of the Bank since 1992 and a director of the
Company since 1993.
THOMAS J. RUECKL, - Age 56. Mr. Rueckl has been a
director of the Bank since 1985 and a director of the
Company since 1986. He is currently Secretary of the
Company. From 1963 to 1972, Mr. Rueckl was employed as
a Wisconsin licensed funeral director and retail
salesman/buyer for the McMahon Funeral Home/Furniture
Store in Luxemburg. From 1972 to present, he has
served as President and one-third owner of the
business.
JOHN A. SLATKY, - Age 45. Mr. Slatky is
President, Chief Executive Officer and a director of
the Company. He commenced employment with the Bank in
1984 and has held various executive positions with the
Company or the Bank since 1986. He was employed at the
Kimberly State Bank (an Associated Bank) from 1974
through 1983. Mr. Slatky has been a director of the
Company since 1987 and a director of the Bank since
1986.
IRVIN G. VINCENT, - Age 65. Mr. Vincent serves as
Chairman of the Board of the Company and the Bank. He
is president and founder of N.E.W. Plastics Corp., a
Luxemburg business. He also serves as Treasurer of
Calwis Corp., a Green Bay company, and is a partner in
GBCAL Partnership in Green Bay, Wisconsin. Mr. Vincent
is a cost accountant by trade and has served on the
Bank's Board of Directors for 21 years with 10 years as
Chairman of the Board and is a past President of the
Bank. He has been a director of the Company since
1983.
The directors of the Bank are currently the same
as the directors of the Company.
Executive Officers. The following sets forth
information regarding the executive officers of the
Company. The officers of the Company serve at the
pleasure of the Board of Directors.
JOHN A. SLATKY, - Mr. Slatky's biography is
included above.
THOMAS L. LEPINSKI, C.P.A. - Age 42. Mr. Lepinski
is Assistant Vice President-Operations & Finance for
the Bank and is Treasurer of the Company. From 1978
through 1992 he was employed by Wipfli Ullrich Bertelson
LLP where he was responsible for providing tax, audit
and examination services to community banks. He was
Controller-Treasurer of the Sorg Paper Company from 1992
through 1996. At Sorg he was responsible for the company's
financial operations, annual planning and budgeting and
handling shareholder communications and relations. Mr.
Lepinski is a member of the American Institute of CPAs
and is licensed as a CPA in the states of Wisconsin and Minnesota.
DAVID L. LUEBBERS, - Age 47. Mr. Luebbers is Vice
President of loans at the Bank, a position he has held
since 1984. Mr. Luebbers is responsible for overseeing
all loan operations and servicing accounts. Mr.
Luebbers also serves as one of the Company's Vice
Presidents.
ITEM 6. EXECUTIVE COMPENSATION.
The table below sets forth certain information
with respect to compensation paid to Mr. Vincent and
Mr. Slatky during the years presented. No executive
officer of the Company received a total salary and
bonus in excess of $100,000 in 1996.
<PAGE>
Name and Annual Compensation All Other
Principal Position Year Salary (1) Bonus (2) Compensation
Irvin G. Vincent, 1996 $7,275 $13,998 $-----
Chairman of 1995 $6,800 $24,785 $-----
the Board, 1994 $6,600 $25,676 $-----
President and
Chief Executive
Officer (4)
John Slatky, 1996 $63,009 $5,670 $3,893
Vice President(4) 1995 $56,024 $5,040 $3,263
1994 $54,727 $5,000 $3,164
(1) Represents directors' fees paid Mr. Vincent.
(2) Includes consulting fees for Mr. Vincent under an
agreement which ended in the first quarter of
1996. Includes for Mr. Slatky the value of Common
Stock received in lieu of cash bonus.
(3) Represents Company contributions under the
Company's 401(k) and profit sharing plan.
(4) Mr. Vincent retired as President and Chief
Executive Officer of the Company in February 1997.
Mr. John Slatky was named to succeed Mr. Vincent
in these positions. Mr. Vincent remains Chairman
of the Board of the Company.
Director Compensation
Non-employee directors are compensated at a rate
of $500 per month. The monthly compensation is
invested in a deferred compensation program until the
retirement of the director at which time it is paid to
the director over a ten (10) year period. The deferred
compensation interest rate is determined by the Board
of Directors on or before January 31st for the then
current deferral year. The current rate is based on
the prime interest rate plus 2%.
The Chairman of the Board is compensated at a rate
of $600 per month. The compensation is invested in a
deferred compensation program on the same terms as the
other directors.
In addition, all non-employee directors are
compensated $50 per meeting attended and $100 per day
for time spent attending to other banking related
matters.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
The Company has had, and expects to have in the
future, banking transactions in the ordinary course of
business with certain of its directors and executive
officers and their associates. As of December 31,
1996, the directors and executive officers of the
Company and their associates, as a group, were indebted
to the Bank in the aggregate amount of approximately
$1,547,000. All loans included in such transactions
were made in the ordinary course of business, on
substantially the same terms (including interest rate
and collateral) as those prevailing at the time for
comparable transactions with other persons, and in the
opinion of management of the Company did not involve
more than the normal risk of collectibility or present
other unfavorable features.
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES.
GENERAL
The authorized capital stock of Company consists
of 300,000 shares of Common Stock, $0.16-2/3 par value
("Common Stock"), of which 243,051 shares were
outstanding as of February 27, 1997 and held by
approximately 506 shareholders of record.
Common Stock
The following description of the Common Stock
does not purport to be a complete description of the
applicable provisions of the Company Articles of
Incorporation and By-Laws, as amended, or of applicable
statutory or other law, and is qualified in its
entirety by reference thereto.
Voting. Each holder of Common Stock is entitled
at each shareholders' meeting of the Company, as to
each matter to be voted upon, to cast one vote, in
person or by proxy, for each share of Common Stock
registered in his or her name on the stock transfer
books of Company, except to the extent that the voting
power of shares held by any person in excess of 20% of
the voting power in the election of directors may be
limited (in voting on any matter) to one-tenth of the
full voting power of those shares under 180.1150 of
the Wisconsin Business Corporation Law ("WBCL"). Such
voting rights are not cumulative.
Dividends. The holders of Common Stock are
entitled to receive dividends, when, as and if declared
by the Board of Directors of Company out of any funds
legally available therefore.
Liquidation. Upon liquidation of the Company, the
holders of Common Stock are entitled to receive the net
assets of the Company after satisfaction in full of the
prior rights of creditors of the Company.
Miscellaneous. Common Stock is not convertible
into shares of any other class of capital stock.
Holders of Common Stock are not and will not be
entitled to any preemptive rights. The issued and
outstanding shares of Common Stock are fully paid and
non-assessable (except as otherwise provided under
180.0622(2)(b) of the WBCL).
Certain Provisions of the Wisconsin Business
Corporation Law
The WBCL provides that shareholders of Wisconsin
domestic corporations are personally liable, up to the
par value of their shares ($0.16-2/3 per share in the
case of the Common Stock), for all debts owed by the
corporation to employees for services performed but not
exceeding six months' service in any one case. While
the WBCL specifies that such liability is limited to
the par value of the shares, par value has been
interpreted by a Wisconsin court to mean the
consideration paid to the corporation for its shares.
The WBCL prohibits a "business combination"
(defined to include a merger, share exchange or a
disposition of 5% or more of the aggregate market value
of all assets or stock of the corporation) between a
"resident domestic corporation" and an "interested
stockholder" (defined as the beneficial owner of at
least 10% of the voting power of the outstanding stock)
for three years following the stock acquisition date
(i.e., the date the person became an interested
stockholder), unless the board of directors approves
the business combination or the purchase of stock by
the interested stockholder before the stock acquisition
date. Business combinations after the three-year
period following the stock acquisition date are
permitted only if (i) the board of directors approved
the acquisition of the stock prior to the stock
acquisition date; (ii) the business combination is
approved by a majority of the outstanding voting stock
not beneficially owned by the interested stockholder,
or (iii) the consideration to be received by
shareholders meets certain requirements of the statute
with respect to form and amount. The Company is a
"resident domestic corporation" within the meaning of
the WBCL.
The market value of stock for such purposes is
equal to the highest closing price of such stock in the
30 days preceding the date of the valuation. The
highest closing price is that closing price on the
stock exchange or
<PAGE>
quotation system on which the stock
is listed or if the stock is not listed, that value
determined in good faith by the board of directors of
the resident domestic corporation.
Under the WBCL, the voting power of shares,
including shares issuable upon conversion of
convertible securities or exercise of options or
warrants, of an "issuing public corporation" held by
any person or persons acting as a group with more than
20% of the voting power in the election of directors
is limited (in voting on any matter) to 10% of the full
voting power of those excess shares. An issuing public
corporation is defined as a domestic corporation, with
(i) total assets exceeding $1,000,000; (ii) a class of
equity securities held of record by 500 or more
persons; and (iii) at least 100 shareholders of record
who have unlimited voting rights and who reside in
Wisconsin. This restriction does not apply to shares
acquired (a) under an agreement entered into before the
corporation was an "issuing public corporation," (b)
directly from the issuing public corporation, (c) in a
merger or share exchange to which the issuing public
corporation is a party, (d) in certain specified non-
market transactions (i.e., gifts, distributions upon
death and pledges) or (e) in a transaction incident to
which the corporation's shareholders have approved
restoration of the full voting power of the otherwise
restricted shares.
The WBCL provides that, in addition to the vote
otherwise required by law or the articles of
incorporation of an "issuing public corporation"
(defined above), the approval by a majority vote of the
holders of the corporation's shares entitled to vote is
required before such corporation can take certain
actions while a "takeover offer" (as defined in the
WBCL) is being made or after a takeover offer has been
publicly announced and before it is concluded. Under
the WBCL, such shareholder approval is required for the
corporation to (i) acquire more than 5% of the
corporation's outstanding voting shares at a price
above the market price from any individual or
organization that owns more than 3% of the outstanding
voting shares and has held such shares for less than
two years, unless a similar offer is made to acquire
all voting shares or (ii) sell or option assets of the
corporation which amount to at least 10% of the market
value of the corporation, unless the corporation has at
least three independent directors and a majority of the
independent directors vote not to have this provision
apply to the corporation.
The WBCL also provides for certain super-majority
voting and fair price provisions in connection with
certain business combinations involving a person or
group which holds 10% or more of the voting stock of an
"issuing public company." To approve a business
combination the affirmative vote of either: (i) at
least 80% of the votes entitled to be cast by
outstanding voting shares of the corporation voting
together as a single voting group, or (ii) two-thirds
of the votes entitled to be cast by holders of voting
shares voting as a single voting group, other than
those held beneficially by an interested stockholder
who is a party to the business combination, is
required.
Under the WBCL, in discharging his or her duties
to the corporation and in determining what he or she
believes to be in the best interests of the
corporation, a director or officer may, in addition to
considering the effects of any action on the
corporation's shareholders, consider the effects of the
action on employees, suppliers, customers, the
communities in which the corporation operates and any
other factors that the director or officer considers
pertinent.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE
REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS.
There is no established public trading market for
the Common Stock and such trading activity, as it
occurs, takes place in privately negotiated
transactions.
At December 31, 1996 there were approximately 506
shareholders of record of the Common Stock.
The Company has paid the following cash dividends
on its shares of Common Stock since 1992:
<PAGE>
Year Ended December 31 Dividends Per Share
1992 $0.45
1993 $0.52
1994 $0.57
1995 $0.69
1996 $0.76
In determining the dividends to be paid, the Board
of Directors will examine the then-existing
circumstances, including the Company's rate of growth,
profitability, financial condition, existing and
anticipated capital requirements, the amount of funds
legally available for the payment of dividends,
regulatory constraints and such other factors as the
Board determines relevant. The primary source of funds
for payment of dividends by the Company is dividends
paid to the Company by the Bank. The Bank is limited
by Wisconsin statute in the amount of dividends it is
allowed to pay. Under the law, a bank may pay
dividends from its undivided profits after making
provision for payment of all expenses, losses, required
reserves, taxes and interest accrued or due from the
bank. If a bank has declared and paid dividends in
either of two preceding years in excess of its net
income in such year, it may not declare or pay any
dividend which exceeds year-to-date net income except
with the written approval of DFI.
There are no shares of Common Stock of the Company
which are subject to outstanding options or warrants to
purchase, or securities convertible into, Common Stock
of the Company. All 243,051 shares of Common Stock
which have been issued and are outstanding are eligible
for sale in accordance with Rule 144 under the
Securities Act ninety days after the filing of this
Form 10-SB. The Company has not entered into an
agreement to register any Common Stock under the
Securities Act for sale by security holders.
ITEM 2. LEGAL PROCEEDINGS
Neither the Company, the Bank nor any other
subsidiary are subject to any material pending
litigation at this time.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
This item is not applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Over the past three years, the Company sold an
aggregate of 1,025 shares of Common Stock, including
340 shares on January 31, 1995, 370 shares on January
26, 1996 and 315 shares on January 15, 1997.
The shares were sold to employees of the Company
in lieu of cash bonuses aggregating approximately
$30,000. The transactions were exempt from
registration under the Securities Act pursuant to Rule
701, as the Common Stock was sold by the Company to
employees of the Bank pursuant to a written
compensatory benefit plan. The sales of Common Stock
related to services rendered and were not in connection
with capital raising transactions.
The transactions were also exempt pursuant to
Section 3(a)(11) under the Securities Act as involving
an intrastate offering of securities only to employees
of the Bank resident in the state of Wisconsin.
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 180.0850 to 180.0859 of the WBCL require
a corporation to indemnify any director or officer who
is a party to any threatened, pending or completed
civil, criminal, administrative or investigative
action, suit, arbitration or other proceeding, whether
formal or informal, which involves foreign, federal,
state or local law and which is brought by or in the
right of the corporation or by any other person. A
corporation's obligation to indemnify any such person
includes the obligation to pay any judgment,
settlement, penalty, assessment, forfeiture or fine,
including any excise tax assessed with respect to an
employee benefit plan, and all reasonable expenses
including fees, costs, charges, disbursements,
attorney's and other expenses except in those cases in
which liability was incurred as a result of the breach
or failure to perform a duty which the director or
officer owes to the corporation and the breach or
failure to perform constitutes: (i) a willful failure
to deal fairly with the corporation or its shareholders
in connection with a matter in which the director or
officer has a material conflict of interest; (ii) a
violation of criminal law, unless the person has
reasonable cause to believe his conduct was lawful or
had no reasonable cause to believe his conduct was
unlawful; (iii) a transaction from which the person
derived an improper personal profit; or (iv) willful
misconduct.
Unless otherwise provided in a corporation's
articles of incorporation or By-Laws or by written
agreement, an officer or director seeking
indemnification is entitled to indemnification if
approved in any of the following manners: (i) by
majority vote of a disinterested quorum of the board of
directors, or if such quorum of disinterested directors
cannot be obtained, by a majority vote of a committee
of two or more disinterested directors; (ii) by
independent legal counsel; (iii) by a panel of three
arbitrators; (iv) by affirmative vote of shareholders;
(v) by a court; or (vi) with respect to any additional
right to indemnification granted by any other method
permitted in Section 180.0858 of the Wisconsin
Statutes.
Reasonable expenses incurred by a director or
officer who is a party to a proceeding may be
reimbursed by a corporation at such time as the
director or officer furnishes to the corporation
written affirmation of his good faith belief that he
has not breached or failed to perform his duties and a
written undertaking to repay any amounts advanced if it
is determined that indemnification by the corporation
is not required.
The indemnification provisions of Sections
180.0850 to 180.0859 are not exclusive. A corporation
may expand an officer's or director's right to
indemnification (i) in its articles of incorporation or
by-laws; (ii) by written agreement; (iii) by resolution
of its board of directors; or (iv) by resolution of a
majority of all of the corporation's voting shares then
issued and outstanding. Article VIII of the Company's
By-Laws provides, among other things, that the
Company's officers and directors be indemnified against
all liabilities and expenses incurred by the officer or
director in a proceeding to which the officer or
director is a party because he or she is an officer or
director, unless prohibited by the WBCL.
<PAGE>
Luxemburg Bancshares, Inc.
and Subsidiaries
Luxemburg, Wisconsin
CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1996 and 1995
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1996 and 1995
TABLE OF CONTENTS
Page
Independent Auditor's Report 23
Financial Statements:
Consolidated Balance Sheets 24-25
Consolidated Statements of Income 26
Consolidated Statements of Changes in Stockholders'
Equity 27
Consolidated Statements of Cash Flows 28-29
Notes to Consolidated Financial Statements 30-48
<PAGE>
Wipfli Ullrich
Bertelson LLP
CPAs * CONSULTANTS * ADVISORS
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Luxemburg Bancshares, Inc.
Luxemburg, Wisconsin
We have audited the accompanying consolidated balance
sheets of Luxemburg Bancshares, Inc. and Subsidiaries
as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in
stockholders' equity, and cash flows for the years then
ended. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material
respects, the financial position of Luxemburg
Bancshares, Inc. and Subsidiaries at December 31, 1996
and 1995, and the results of their operations and their
cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Wipfli Ullrich
----------------------------
Bertelson LLP
Wipfli Ullrich Bertelson LLP
February 11, 1997
Green Bay, Wisconsin
<PAGE>
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
Cash and due from banks $2,858,813 $3,614,997
Interest-bearing deposits 407,688 39,646
Federal funds sold 466,000 5,400,000
Cash and cash equivalents 3,732,501 9,054,643
Investment securities available for sale -
Stated at fair value 14,064,569 14,353,462
Total loans 55,170,942 49,478,668
Allowance for credit losses (653,535) (574,286)
Net loans 54,517,407 48,904,382
Premises and equipment 1,380,788 1,251,628
Other investments at cost 251,650 205,250
Other assets 1,953,724 1,696,884
TOTAL ASSETS $75,900,639 $75,466,249
<PAGE>
CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1996 AND 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
Liabilities:
Non-interest-bearing deposits $7,004,277 $7,897,224
Interest-bearing deposits 59,153,184 58,930,924
Total deposits 66,157,461 66,828,148
Short-term borrowings 880,076 393,271
Borrowed funds 185,558 112,490
Other liabilities 997,528 1,088,937
Total liabilities 68,220,623 68,422,846
Stockholders' equity:
Common stock - $.1667 par value:
Authorized - 300,000 shares
Issued - 270,500 shares 45,083 45,083
Capital surplus 3,416,080 3,410,071
Retained earnings 4,579,875 3,953,383
Unrealized loss on investment
securities available for sale -
Net of tax (6,913) (6,304)
Less - 27,764 shares and 28,134 shares,
respectively, of treasury common stock,
at cost (354,109) (358,830)
Total stockholders' equity 7,680,016 7,043,403
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $75,900,639 $75,466,249
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1996 and 1995
1996 1995
Interest income:
Interest and fees on loans $4,690,655 $4,326,739
Interest on investment securities:
Taxable 741,479 706,453
Tax-exempt 49,239 34,161
Other interest and dividend income 152,112 158,451
Total interest income 5,633,485 5,225,804
Interest expense:
Deposits 2,702,128 2,486,490
Short-term borrowings 21,352 66,190
Borrowed funds 14,571 9,018
Total interest expense 2,738,051 2,561,698
Net interest income 2,895,434 2,664,106
Provision for credit losses 109,000 95,000
Net interest income after provision
for credit losses 2,786,434 2,569,106
Other income:
Service charges on deposit accounts 185,917 157,518
Mortgage underwriting fees -
Secondary market 114,352 35,721
Loan servicing fee income 39,088 33,818
Other operating income 457,896 290,305
Total other income 797,253 517,362
Operating expenses:
Salaries and related benefits 1,346,967 1,115,524
Net occupancy expense 147,201 130,859
Equipment rentals, depreciation,
and maintenance 151,662 112,269
Data processing 192,963 199,833
Other operating expenses 520,868 499,752
Total operating expenses 2,359,661 2,058,237
Income before provision for income taxes 1,224,026 1,028,231
Provision for income taxes 413,054 330,847
Net income $ 810,972 $ 697,384
Earnings per common share $ 3.34 $ 2.88
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1996 and 1995
Unrealized
Loss on
Investment
Securities
Available Treasury
Common Capital Retained for Sale- Common
Stock Surplus Earnings Net of Tax Stock Total
Balance,
January 1,
1995 $45,083 $3,405,230 $3,423,232 $(15,188) $(363,169) $6,495,188
Net income 697,384 697,384
Change in unrealized
loss on investment
securities available
for sale - Net of tax 8,884 8,884
Dividends paid (167,233) (167,233)
Employee stock
bonus - 340 shares 4,841 4,339 9,180
Balance,
December 31,
1995 45,083 3,410,071 3,953,383 (6,304) (358,830) 7,043,403
Net income 810,972 810,972
Change in unrealized
loss on investment
securities available
for sale - Net of tax (609) (609)
Dividends paid (184,480) (184,480)
Employee stock
bonus - 370 shares 6,009 4,721 10,730
Balance,
December 31,
1996 $45,083 $3,416,080 $4,579,875 $(6,913) $(354,109 $7,680,016
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996 and 1995
1996 1995
Cash flows from operating activities:
Net income $ 810,972 $ 697,384
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 131,713 100,195
Accretion of discounts on securities (60,178) (15,929)
Amortization of premiums on securities 57,919 59,971
Provision for credit losses 109,000 95,000
Employee stock bonus 10,730 9,180
Credit for deferred taxes (27,661) (16,024)
Change in other operating assets (85,494) (357,570)
Change in other operating liabilities (91,409) 537,993
Total adjustments 44,620 412,816
Net cash provided by operating activities 855,592 1,110,200
Cash flows from investing activities:
Proceeds from sale of securities available
for sale -0- 500,000
Proceeds from maturities of securities
held to maturity -0- 1,081,009
Proceeds from maturities of securities
available for sale 7,289,758 1,025,821
Purchase of securities held to maturity -0- (964,471)
Purchase of securities available for
sale (6,996,800) (2,395,482)
Net increase in loans (5,722,025) (3,461,759)
Purchase of additional life insurance (17,300) -0-
Capital expenditures (260,873) (157,500)
Purchase of other investments (46,400) (179,500)
Net cash used in investing activities (5,753,640) (4,551,882)
Cash flows from financing activities:
Net increase (decrease) in deposits (670,687) 10,258,883
Net increase (decrease) in short-term
borrowings 486,805 (1,704,910)
Principal payments on borrowed funds (55,732) (25,582)
Dividends paid (184,480) (167,233)
Net cash provided by (used in)
financing activities (424,094) 8,361,158
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 1996 and 1995
1996 1995
Net increase (decrease) in cash and
cash equivalents $(5,322,142) $4,919,476
Cash and cash equivalents at beginning 9,054,643 4,135,167
Cash and cash equivalents at end $3,732,501 $9,054,643
Supplemental information:
Cash paid during the year for:
Interest $2,770,797 $2,175,344
Income taxe $ 471,069 $ 318,380
The Bank purchased the assets of Total Financial
Concepts, Inc. for $135,800. In conjunction with the
acquisition, the Bank incurred debt of $128,800.
See accompanying notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Luxemburg
Bancshares, Inc. (the "Company") and its subsidiaries
conform to generally accepted accounting principles and
general practices within the banking industry.
Significant accounting and reporting policies are
summarized below.
Organization
The Company provides banking services to individual and
corporate customers through its wholly owned
subsidiary, Bank of Luxemburg (the "Bank"). The Bank
operates as a full-service financial institution with a
primary market area including, but not limited to, west
Kewaunee County and northeast Brown County. The Bank
emphasizes variable rate commercial and consumer real
estate loans. In addition, the Bank holds a variety of
securities through its wholly owned subsidiary,
Luxemburg Investment Corporation, a Nevada investment
corporation. The Company is subject to the regulations
of certain federal and state agencies and undergoes
periodic examinations by those regulatory authorities.
Principles of Consolidation
The consolidated financial statements include the
accounts of Luxemburg Bancshares, Inc. and
Subsidiaries, Bank of Luxemburg, Luxemburg Investment
Corporation, and Area Development Corporation. All
significant intercompany balances and transactions have
been eliminated.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities
at the date of the financial statements and the
reported amounts of revenue and expenses during the
reporting period. Actual results may differ from these
estimates.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, interest-bearing and
non-interest-bearing deposits in banks, and federal
funds sold. Generally, federal funds are purchased and
sold for one-day periods.
Investment in Securities
The Company's investments in securities are classified
as available for sale and accounted for as follows:
Securities available for sale consist of debt,
equity, and mortgage-related securities. These
securities are stated at fair value. Unrealized
holding gains and losses, net of tax, on securities
available for sale are reported as a net amount in
a separate component of stockholders' equity until
realized.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Gains and losses on the sale of securities available
for sale are determined using the specific-
identification method.
Loans and Related Interest Income and Fees
Interest on loans is credited to income as earned.
Interest income is not accrued on loans where
management has determined collection of such interest
is doubtful. When a loan is placed on nonaccrual
status, previously accrued but unpaid interest deemed
uncollectible is reversed and charged against current
income. Loan-origination fees and certain direct
origination costs are capitalized and recognized as an
adjustment of the yield on the related loan.
Allowance for Credit Losses
The allowance for credit losses includes specific
allowances related to commercial loans which have been
judged to be impaired. A loan is impaired when, based
on current information, it is probable that the Company
will not collect all amounts due in accordance with the
contractual terms of the loan agreement. These
specific allowances are based on discounted cash flows
of expected future payments using the loan's initial
effective interest rate or the fair value of the
collateral if the loan is collateral dependent.
The Company continues to maintain a general allowance
for credit losses for loans not considered impaired.
The allowance for credit losses is maintained at a
level which management believes is adequate to provide
for possible credit losses. Management periodically
evaluates the adequacy of the allowance using the
Company's past loan loss experience, known and inherent
risks in the portfolio, composition of the portfolio,
current economic conditions, and other relevant
factors. This evaluation is inherently subjective
since it requires material estimates that may be
susceptible to significant change.
Mortgage Servicing Rights
The cost of mortgage servicing rights is amortized in
proportion to, and over the period of, estimated net
servicing revenue. Impairment of mortgage servicing
rights is assessed based on the fair value of those
rights. Fair values are estimated using discounted
cash flows based on a current market interest rate.
For purposes of measuring impairment, the rights are
stratified by rate in the quarter in which the related
mortgage loans were sold.
Premises and Equipment
Premises and equipment are stated at cost. Maintenance
and repair costs are charged to expense as incurred.
Gains or losses on disposition of premises and
equipment are reflected in income. Depreciation is
computed on the straight-line method and is based on
the estimated useful lives of the assets which range
from three to thirty-five years.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Other Investments
Other investments consist of Federal Home Loan Bank
stock and Bankers Bank stock which are carried at cost.
Other investments are evaluated for impairment on an
annual basis.
Goodwill
Goodwill acquired in a business acquisition is being
amortized on a straight-line basis over five years.
Income Taxes
Deferred income taxes have been provided under the
liability method. Deferred tax assets and liabilities
are determined based on the difference between the
consolidated financial statement and tax bases of
assets and liabilities as measured by the current
enacted tax rates which will be in effect when these
differences are expected to reverse. Deferred tax
expense (benefit) is the result of changes in the net
deferred tax asset and liability.
Advertising Costs
Advertising costs are expensed as incurred.
Off-Balance-Sheet Financial Instruments
In the ordinary course of business, the Bank has
entered into off-balance-sheet financial instruments
consisting of commitments to extend credit, commitments
under credit card arrangements, commercial letters of
credit, and standby letters of credit. Such financial
instruments are recorded in the consolidated financial
statements when they become payable.
Earnings Per Share
Earnings per common share are based upon the weighted
average number of common shares outstanding. The
weighted average number of shares outstanding was
242,736 in 1996 and 242,366 in 1995.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Future Accounting Changes
The Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No.
125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities,"
in June 1996. SFAS No. 125 provides accounting and
reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities.
The statement provides guidelines for classification of
a transfer as a sale. The statement also requires
liabilities incurred or obtained by transferors as part
of a transfer of financial assets be initially recorded
at fair value. Subsequent to acquisition, the
servicing assets and liabilities are to be amortized
over the estimated net servicing period. This
statement is required to be adopted for transfers and
servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996.
In December 1996, the FASB issued SFAS No. 127,
"Deferral of the Effective Date of Certain Provisions
of FASB Statement No. 125." This statement defers
implementation of certain provisions of SFAS No. 125
for one year.
NOTE 2 - CHANGE IN ACCOUNTING PRINCIPLE
The FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights," in May 1995. As required under the
statement, the Company adopted the provisions of the
new standard effective January 1, 1996. SFAS No. 122
requires accounting recognition of the rights to
service mortgage loans for others. In accordance with
SFAS No. 122, prior-period consolidated financial
statements have not been restated to reflect the change
in accounting principle.
NOTE 3 - RESTRICTIONS ON CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the amount of $194,000
were restricted at December 31, 1996, to meet the
reserve requirements of the Federal Reserve System.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - INVESTMENT SECURITIES
The amortized cost and estimated fair value of
investment securities are as follows:
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
Securities Available
for Sale:
1996
U.S. Treasury securities and
obligations of U.S.
government agencies
and corporations $ 5,993,060 $ 38,374 $ 15,733 $ 6,015,701
Obligations of states
and political subdivisions 2,437,075 7,114 17,362 2,426,827
Mortgage-related securities 5,645,928 16,966 40,853 5,622,041
Total $ 14,076,063 $ 62,454 $ 73,948 $ 14,064,569
1995
U.S. Treasury securities and
obligations of U.S.
government agencies
and corporations $ 6,792,333 $ 63,143 $ 21,246 $ 6,834,230
Obligations of states
and political subdivisions 375,654 -0- 2,060 373,594
Mortgage-related securities 7,198,776 5,570 58,708 7,145,638
Total $ 14,366,763 $ 68,713 $ 82,014 $ 14,353,462
Fair values of securities are estimates based on
financial models or prices paid for similar securities.
It is possible interest rates could change considerably
resulting in a material change in the estimated fair
value.
As of December 1, 1995, securities with a book value of
$11,663,275 and an estimated fair value of $11,621,299
were transferred from the held-to-maturity
classification to the available-for-sale
classification. The transfer was made in accordance
with the Financial Accounting Standards Board Guide to
Implementation of SFAS No. 115.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - INVESTMENT SECURITIES (CONTINUED)
The amortized cost and estimated fair value of
investment securities at December 31, 1996, by
contractual maturity, are shown below. Expected
maturities will differ from contractual maturities
because borrowers may have the right to call or prepay
obligations with or without call or prepayment
penalties.
Amortized Estimated
Cost Fair Value
Securities Available for Sale:
Due in one year or less $3,554,692 $3,552,645
Due after one year through five years 1,928,818 1,944,668
Due after five years through ten years 2,946,625 2,945,215
8,430,135 8,442,528
Mortgage-related securities 5,645,928 5,622,041
Total investment securities $14,076,063 $14,064,569
In 1995, one available-for-sale debt security with an
amortized cost of $500,000 was sold. There was no gain
or loss on the sale. There were no sales of debt
securities during 1996.
Investment securities with an amortized cost of
$994,833 and estimated fair value of $995,200 were
pledged to secure public deposits, short-term
borrowings, and other purposes required by law as of
December 31, 1996.
NOTE 5 - LOANS
The composition of loans at December 31 follows:
1996 1995
Real estate:
Construction $2,402,000 $2,087,000
Other 20,246,000 19,504,000
Commercial and industrial 20,280,000 15,586,000
Agricultural 5,873,000 5,722,000
Consumer 6,369,942 6,579,668
Total loans $55,170,942 $49,478,668
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - LOANS (CONTINUED)
The aggregate amount of nonperforming loans was
approximately $472,000 and $358,000 at December 31,
1996 and 1995, respectively. Nonperforming loans are
those which are contractually past due 90 days or more
as to interest or principal payments, on a nonaccrual
of interest status, or loans the terms of which have
been renegotiated to provide a reduction or deferral of
interest or principal. The interest income recorded
and that which would have been recorded had nonaccrual
and renegotiated loans been current, or not troubled,
are not material to the consolidated financial
statements for the years ended December 31, 1996 and
1995.
At December 31, 1996 and 1995, there were no loans
considered to be impaired. There were also no impaired
loans during 1996 and 1995.
The subsidiary bank in the ordinary course of banking
business grants loans to the Company's executive
officers and directors, including their families and
firms in which they are principal owners.
Substantially all loans to employees, officers,
directors, and stockholders owning 5% or more of the
Company were made on the same terms, including interest
rates and collateral, as those prevailing at the time
for comparable transactions with others and did not
involve more than the normal risk of collectibility or
present other unfavorable features.
Activity in such loans during 1996 is summarized below:
Loans outstanding, December 31, 1995 $2,652,064
New loans 846,360
Repayment 1,326,044
Loans outstanding, December 31, 1996 $2,172,380
An analysis of the allowance for credit losses for the
years ended December 31 follows:
1996 1995
Balance at beginning $ 574,286 $ 514,103
Provision charged to operating expense 109,000 95,000
Recoveries on loans 21,426 28,094
Loans charged off (51,177) (62,911)
Balance at end $ 653,535 $ 574,286
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - LOAN SERVICING
The following is an analysis of changes in mortgage
servicing rights in 1996:
Balance January 1, 1996 $ -0-
Capitalized amounts 51,228
Less - Amortization (7,957)
Balance December 31, 1996 $ 43,271
No impairment of mortgage servicing rights existed at
December 31, 1996; therefore, no valuation allowance
was recorded.
NOTE 7 - PREMISES AND EQUIPMENT
Details of premises and equipment at December 31
follow:
1996 1995
Land $ 70,246 $ 70,246
Buildings and improvements 1,376,602 1,309,364
Furniture and equipment 960,491 766,856
Totals 2,407,339 2,146,466
Less - Accumulated depreciation 1,026,551 894,838
Net depreciated value $1,380,788 $1,251,628
Depreciation charged to operating expense totaled
$131,713 in 1996 and $100,195 in 1995.
NOTE 8 - DEPOSITS
The distribution of deposits at December 31 is as
follows:
1996 1995
Non-interest-bearing demand deposits $7,004,277 $7,897,224
Interest-bearing demand deposits 6,044,927 6,093,358
Savings deposits 11,997,553 8,527,000
Money market deposits 4,662,156 5,672,000
Time deposits 36,448,548 38,638,566
Total deposits $66,157,461 $66,828,148
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - DEPOSITS (CONTINUED)
Time deposits of $100,000 or more were approximately
$2,552,000 and $3,792,000 at December 31, 1996 and
1995, respectively. Interest expense on time deposits
of $100,000 or more was approximately $128,000 and
$271,000 for the years ended December 31, 1996 and
1995, respectively.
At December 31, 1996, the scheduled maturities of time
deposits are as follows:
1997 $29,692,623
1998 4,687,548
1999 1,254,820
2000 507,049
Thereafter 306,508
Total $36,448,548
NOTE 9 - SHORT-TERM BORROWINGS
As a member of the Federal Home Loan Bank (FHLB)
system, the Bank may utilize various borrowing
alternatives secured by pledges of mortgage loans and
FHLB stock. At December 31, 1996, the advance of
$500,000 has an original maturity of 99 days with
interest at 5.5%. Interest is payable monthly. There
were no FHLB borrowings outstanding at December 31,
1995.
Other short-term borrowings consist of treasury tax and
loan deposits of $380,076 and $393,271 at December 31,
1996 and 1995, respectively, which generally mature
within 1 to 120 days from the transaction date.
NOTE 10 - BORROWED FUNDS
Borrowed funds consist of the following:
1996 1995
6.63% land contract,
payable at $2,831 per month
including interest,
due September 1, 1999 $85,179 $ 112,490
8.0% note, payable at $2,408
per month including interest,
due December 31, 2000 100,379 -0-
Totals $ 185,558 $ 112,490
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - BORROWED FUNDS (CONTINUED)
Required payments of principal on the borrowed funds at
December 31, 1996, are summarized as follows:
1997 $ 50,844
1998 54,636
1999 50,175
2000 29,903
Total $ 185,558
NOTE 11 - INCOME TAXES
The provision for income taxes consists of the
following:
1996 1995
Current tax expense:
Federal $387,012 $ 310,348
State 53,703 36,523
Total current 440,715 346,871
Deferred tax credit:
Federal (18,734) (12,796)
State (4,684) (3,228)
Total deferred (23,418) (16,024)
Change in valuation allowance (4,243) -0-
Total provision for income taxes $ 413,054 $ 330,847
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - INCOME TAXES (CONTINUED)
Deferred income taxes are provided for the temporary
differences between the financial reporting basis and
the tax basis of the Company's assets and liabilities
net of a valuation allowance for deferred tax assets
not likely to be realized. The major components of net
deferred tax assets at December 31 are as follows:
1996 1995
Deferred tax assets:
Reserve for loan losses $ 153,157 $ 122,080
Deferred compensation 78,877 53,697
Intangible assets 6,595 -0-
Net operating loss carryovers 18,808 23,051
Other 701 178
Unrealized loss on investment
securities available for sale 4,581 6,997
Total deferred tax assets 262,719 206,003
Deferred tax liabilities:
Depreciation (142,552) (126,023)
Accretion (11,597) (8,612)
Mortgage servicing rights (16,968) -0-
Other 769 -0-
Total deferred tax liabilities (170,348) (134,635)
Total valuation allowance recognized
for net deferred tax assets (18,808) (23,051)
Net deferred tax asset $ 73,563 $ 48,317
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - INCOME TAXES (CONTINUED)
A summary of the source of differences between income
taxes at the federal statutory rate and the provision
for income taxes for the years ended December 31
follows:
1996 1995
% OF % OF
Pretax Pretax
Amount Income Amount Income
Tax expense at statutory rate $ 416,169 34.0 $ 349,599 34.0
Increase (decrease) in taxes
resulting from:
Tax-exempt interest (26,926) (2.2) (28,520) (2.8)
State income taxes -
Net of federal tax benefit 32,804 2.7 20,409 2.0
Cash surrender value of
life insurance premiums (15,659) (1.2) (9,020) (.9)
Other 6,666 .5 (1.621) (.1)
Provision for income taxes $413,054 33.8 $ 330,847 32.2
The Company has state net operating loss carryforwards
of approximately $342,000. The net operating losses
fully expire in 2011.
NOTE 12 - PROFIT-SHARING PLAN
The Bank has a 401(k) profit-sharing plan covering
substantially all employees. The plan provides for
discretionary contributions and matching contributions
up to 8% of employee compensation; however, all
contributions are at the discretion of the Board of
Directors. Profit-sharing expense for 1996 and 1995
was $41,400 and $34,832, respectively.
NOTE 13 - DEFERRED COMPENSATION
The Company has a deferred compensation plan which
permits directors to defer a portion of their
compensation. The deferred compensation is accrued but
unfunded, is distributable in cash after retirement,
and amounted to $201,144 and $136,934 at December 31,
1996 and 1995, respectively. The Company has insured
the lives of the directors who participate in the
deferred compensation plan to assist in the funding of
the deferred compensation liability. The Company is
the owner and beneficiary of the insurance policies.
At December 31, 1996 and 1995, the cash surrender value
of these policies was $1,071,908 and $1,008,000,
respectively. The amount charged to operations for
deferred compensation was $64,210 and $53,277 for the
years ended December 31, 1996 and 1995, respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - COMMITMENTS AND CONTINGENCIES
Stock Redemption Policy
Luxemburg Bancshares, Inc. adopted a stock redemption
policy to assist in the establishment of a fair price
for its shares. The Company can redeem stock up to 10%
of stockholders' equity in any 12-month period without
specific prior approval from the Federal Reserve Bank.
At December 31, 1996, the redemption price was
determined to be 80% of the book value of the stock.
Thus the maximum commitment at December 31, 1996, would
be $25.31 per share.
Financial Instruments With Off-Balance-Sheet Risk
The Bank's financial statements do not reflect various
commitments and contingent liabilities which arise in
the normal course of business and which involve
elements of credit risk, interest rate risk, and
liquidity risk. These commitments and contingent
liabilities are commitments to extend credit and
standby letters of credit. A summary of the Bank's
commitments and contingent liabilities at December 31
is as follows:
Notional Amount
1996 1995
Commitments to extend credit $4,676,000 $4,703,000
Credit card arrangements 865,000 520,000
Standby letters of credit 84,000 40,000
Commitments to extend credit and credit card
arrangements are agreements to lend to a customer as
long as there is no violation of any condition
established in the contract. Commitments generally
have fixed expiration dates or other termination
clauses and may require payment of a fee. A portion of
the commitments are expected to be drawn upon, thus
representing future cash requirements. The Bank
evaluates each customer's creditworthiness on a case-by-
case basis. The amount of collateral obtained upon
extension of credit is based on management's credit
evaluation of the counterparty. Collateral held varies
but may include accounts receivable; inventory;
property, plant, and equipment; real estate; and stocks
and bonds.
Standby letters of credit are conditional commitments
issued by the Bank to guarantee the performance of a
customer to a third party. The credit risk involved in
issuing letters of credit is essentially the same as
that involved in extending loan facilities to
customers. The Bank holds collateral supporting those
commitments for which collateral is deemed necessary.
Because these instruments have fixed maturity dates and
because many of them expire without being drawn upon,
they do not generally present any significant liquidity
risk to the Bank.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - CONCENTRATIONS OF CREDIT RISK
All of the Bank's loans, commitments, and standby
letters of credit have been granted to customers in the
Bank's market area. The concentrations of credit by
type are set forth in Note 5. Standby letters of
credit were granted primarily to commercial borrowers.
NOTE 16 - REGULATORY MATTERS
At December 31, 1996, Bank of Luxemburg could have paid
approximately $2,575,000 of additional dividends to the
Company without prior regulatory approval. The payment
of dividends is subject to the statutes governing state
chartered banks and may be further limited because of
the need for the Bank to maintain capital ratios
satisfactory to applicable regulatory agencies.
The Bank is subject to various regulatory capital
requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements
can initiate certain mandatory_and possibly additional
discretionary_actions by regulators that, if
undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital
guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance-
sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and
classification are also subject to qualitative
judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to
ensure capital adequacy require the Bank to maintain
minimum amounts and ratios (set forth in the table
below) of total and Tier I capital to risk-weighted
assets and of Tier I capital to average assets.
Management believes, as of December 31, 1996, that the
Bank meets all capital adequacy requirements to which
it is subject.
As of December 31, 1996, the most recent notification
from the Office of the Commissioner of Banking
categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To
be categorized as well capitalized, the Bank must
maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios of 8.0%, 4.0%, and 4.0%,
respectively. There are no conditions or events since
that notification that management believes have changed
the institution's category.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 - REGULATORY MATTERS (CONTINUED)
The Bank's actual capital amounts and ratios as of
December 31, 1996, are also presented in the table.
For Capital
Actual Adequacy Purposes
Amount Ratio Amount Ratio
Total capital
(to risk-weighted assets) $ 8,332,000 15.8% >$4,230,000 >38.0%
- -
Tier I capital
(to risk-weighted assets) $ 7,678,000 14.5% >$2,115,000 >34.0%
- -
Tier I capital
(to average assets) $ 7,678,000 10.2% >$3,024,000 >34.0%
- -
NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures About Fair Value of
Financial Instruments," requires the Company to
disclose estimated fair values for its financial
instruments. Fair value estimates, methods, and
assumptions for the Company's financial instruments are
summarized as follows.
Cash and Cash Equivalents
The carrying values approximate the fair values for
these assets.
Investment Securities Available for Sale
Fair value is based on quoted market prices, where
available. If a quoted market price is not available,
fair value is estimated using quoted market prices for
similar securities.
Loans
Fair value is estimated for portfolios of loans with
similar financial characteristics. Loans are
segregated by type, such as commercial, residential
mortgage, and other consumer. The fair value of the
loans is calculated by discounting scheduled cash flows
using discount rates reflecting the credit and interest
rate risk inherent in the loan.
Impaired loans are measured at the estimated fair value
of the expected future cash flows at the loan's
effective interest rate, the loan's observable market
price, or the fair value of the collateral for loans
which are collateral dependent. Therefore, the
carrying values of impaired loans approximate the
estimated fair values for these assets.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS
(CONTINUED)
Mortgage Servicing Rights
The fair value of mortgage servicing rights is based on
the present value of future cash flows using discounted
rates applicable to the level of risk of the underlying
loans.
Deposits
The fair value of deposits with no stated maturity,
such as demand deposits, savings, and money market
accounts, is the amount payable on demand at the
reporting date. The fair value of fixed-rate time
deposits is calculated using discounted cash flows
applying interest rates currently being offered on
similar certificates.
Short-Term Borrowings and Borrowed Funds
The carrying amount reported in the balance sheets for
short-term and borrowed funds approximates the fair
value of the liabilities.
Off-Balance-Sheet Instruments
The fair value of commitments is estimated using the
fees currently charged to enter into similar
agreements, taking into account the remaining terms of
the agreements, the current interest rates, and the
present creditworthiness of the counterparties. Since
this amount is immaterial, no amounts for fair value
are presented.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS
(CONTINUED)
The carrying value and estimated fair value of
financial instruments at December 31, 1996 and 1995,
were as follows:
1996 1995
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
Financial assets:
Cash and cash
equivalents $ 3,732,501 $ 3,732,501 $ 9,054,643 $9,054,643
Investment
securities
available
for sale 14,064,569 14,064,569 14,353,462 14,353,462
Net loans
receivable 54,517,407 54,668,690 48,904,382 49,114,052
Mortgage servicing
rights 43,271 58,930 -0- -0-
Other investments 251,650 251,650 205,250 205,250
Total financial
assets $ 72,609,398 $ 72,776,340 $ 72,517,737 $ 72,727,407
Financial liabilities:
Deposits $ 66,157,461 $ 66,266,218 $ 66,828,148 $ 67,091,456
Short-term
borrowings 880,076 880,076 393,271 393,271
Borrowed funds 185,558 185,558 112,490 112,490
Total financial
liabilities $ 67,223,095 $ 67,331,852 $ 67,333,909 $ 67,597,217
Limitations
Fair value estimates are made at a specific point in
time based on relevant market information and
information about the financial instrument. These
estimates do not reflect any premium or discount that
could result from offering for sale at one time the
Company's entire holdings of a particular instrument.
Because no market exists for a significant portion of
the Company's financial instruments, fair value
estimates are based on judgments regarding future
expected loss experience, current economic conditions,
risk characteristics of various financial instruments,
and other factors. These estimates are subjective in
nature and involve uncertainties and matters that could
affect the estimates. Fair value estimates are based
on existing on- and off-balance-sheet financial
instruments without attempting to estimate the value of
anticipated future business and the value of assets and
liabilities that are not considered financial
instruments. Deposits with no stated maturities are
defined as having a fair value equivalent to the amount
payable on demand. This prohibits adjusting fair value
derived from retaining those deposits for an expected
future period of time. This component, commonly
referred to as a deposit base intangible, is neither
considered in the above amounts nor is it recorded as
an intangible asset on the balance sheet. Significant
assets and liabilities that are not considered
financial assets and liabilities include premises and
equipment. In addition, the tax ramifications related
to the realization of the unrealized gains and losses
can have a significant effect on fair value estimates
and have not been considered in the estimates.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - PARENT COMPANY ONLY FINANCIAL STATEMENTS
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
Cash $ 19,632 $ 12,713
Premises and equipment 149,125 153,958
Investment in subsidiary 7,598,257 6,992,474
TOTAL ASSETS $7,767,014 $7,159,145
LIABILITIES AND STOCKHOLDERS' EQUITY
Borrowed funds $ 85,179 $ 112,490
Other liabilities 1,819 3,252
Total stockholders' equity 7,680,016 7,043,403
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 7,767,014 $ 7,159,145
STATEMENTS OF INCOME
Years Ended December 31, 1996 and 1995
1996 1995
Dividends from subsidiaries $ 225,750 $ 183,750
Undistributed equity in earnings
of subsidiaries 606,392 513,989
Other operating income 19,280 19,280
Total income 851,422 717,019
Operating expenses 33,947 10,617
Interest expense 6,503 9,018
Total expenses 40,450 19,635
Net income $ 810,972 $ 697,384
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - PARENT COMPANY ONLY FINANCIAL STATEMENTS
(CONTINUED)
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996 and 1995
1996 1995
Cash flows from operating activities:
Net income $ 810,972 $ 697,384
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 4,833 4,833
Accretion (1,280) (1,280)
Employee stock bonuses 10,730 9,180
Undistributed earnings of subsidiary (606,392) (513,989)
Change in other liabilities (153) 634
Total adjustments (592,262) (500,622)
Net cash provided by operating activities 218,710 196,762
Cash flows from financing activities:
Principal payments on borrowed funds (27,311) (25,582)
Dividends paid (184,480) (167,233)
Net cash used in financing activities (211,791) (192,815)
Net increase in cash 6,919 3,947
Cash at beginning 12,713 8,766
Cash at end $ 19,632 $ 12,713
Supplemental Information:
Cash paid during the year for interest $ 6,656 $ 8,385
NOTE 19 - RECLASSIFICATIONS
Certain reclassifications have been made to the 1995
consolidated financial statements to conform to the
1996 classifications.
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
3.1 Articles of Incorporation.
3.2 Bylaws.
10.1 Director Deferred Compensation Plan for
Bank of Luxemburg
21 Subsidiaries of the Registrant
27 Financial Data Schedule
ITEM 2. DESCRIPTION OF EXHIBITS
The description of exhibits is included in Item 1
of Part III of this registration statement and is
incorporated herein by reference.
SIGNATURES
In accordance with Section 12 of the Securities
Exchange Act of 1934, the Registrant caused this
registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
LUXEMBURG BANCSHARES, INC.
Date: April 29, 1997 By:/s/ John Slatky
--------------------
John Slatky
President and Chief
Executive Officer
By:/s/ Thomas L. Lepinski
---------------------
Thomas L. Lepinski
Treasurer
ARTICLES OF INCORPORATION
OF
LUXEMBURG BANCSHARES, INC.
I, the undersigned, being a person of full age,
for the purpose of forming a corporation under the
Wisconsin Business Corporation Act, as amended, hereby
adopt the following Articles of Incorporation:
ARTICLE I.
Name
The name of the corporation shall be Luxemburg
Bancshares, Inc.
ARTICLE II.
Business Purposes
The purposes for which this corporation is
organized are as follows:
a. To engage in any lawful activity within the
purposes for which a corporation may be
organized under the Wisconsin Business
Corporation Law.
b. To do everything necessary, proper, advisable
or convenient for the accomplishment of the
purposes hereinabove set forth, and to do all
other things incidental thereto or connected
therewith, which are not forbidden by the
laws under which this corporation is
organized, by other laws, or by these
Articles of Incorporation.
c. To carry out the purposes hereinabove set
forth in any state, territory, district or
possession of the United States, or in any
foreign country, to the extent that such
purposes are not forbidden by law, to limit
in any certificate for application to do
business, the purposes or purpose which the
corporation proposes to carry on therein to
such extent as are not forbidden by law
thereof.
ARTICLE III.
Duration
The duration of the corporation shall be
perpetual.
ARTICLE IV.
Registered Office and Registered Agent
The location and post office address of the
registered office of the corporation in the State of
Wisconsin is c/o Bank of Luxemburg, Kewaunee County,
630 Main Street, Luxemburg, Wisconsin, 54217 and the
corporation's registered agent at said office and
address is Duane W. Pike.
ARTICLE V.
Powers of the Corporation
This corporation shall have the powers granted to
private corporations organized for profit by said
Wisconsin Business Corporation Act, and in furtherance
and not in limitation of the powers conferred by the
laws of the State of Wisconsin upon corporations
organized for the foregoing purposes, the corporation
shall have the power:
a. To acquire, hold, mortgage, pledge or dispose
of the shares, bonds, securities or other
evidences of indebtedness of the United
States of America, or of any domestic or
foreign corporation, and while the holder of
such shares to exercise all the privileges of
ownership, including the right to vote
thereof, to the same extent as a natural
person might or could do, by the president of
this corporation or by proxy appointed by
him, unless some other person, by resolution
of the Board of Directors, shall be appointed
to vote such shares.
b. To purchase or otherwise acquire on such
terms and in such manner as the Bylaws of
this corporation from time to time provide,
and to own all shares of the capital stock of
this corporation, and to reissue the same
from time to time.
c. When and as authorized by the vote of the
holders of not less than a majority of the
shares entitled to vote, at a shareholders'
meeting called for that purpose, or when
authorized upon the written consent of the
holders of a majority of such shares, to
sell, lease, exchange or otherwise dispose of
all, or substantially all, of its property
and assets, including its goodwill, upon such
terms and for such consideration which may be
money, shares, bonds or other instruments for
the payment of money or other property as the
Board of Directors deems expedient or
advisable.
d. To acquire, hold, lease, encumber, convey or
otherwise dispose of, either alone or in
conjunction with others, real and personal
property within or without the state; and to
take real and personal property by will or
gift.
e. To acquire, hold, take over as a going
concern and thereafter to carry on, mortgage,
sell or otherwise dispose of, either alone or
in conjunction with others, the rights,
property and business of any person, entity,
partnership, association or corporation
heretofore or hereafter engaged in any
business, the purpose of which is similar to
the purposes set forth in Article II of these
Articles of Incorporation.
f. To enter into any lawful arrangement for
sharing profits, union of interests,
reciprocal association or cooperative
association with any corporation,
association, partnership, individual or other
legal entity, for the carrying on of any
business, the purpose of which is similar to
the purposes set forth in Article II of these
Articles of Incorporation.
ARTICLE VI.
Mergers and Consolidation
Any agreement for consolidation or merger with one
or more foreign or domestic corporations may be
authorized by vote of the holders of a majority of the
shares entitled to vote.
ARTICLE VII.
Capital Stock
The aggregate number of shares which this
corporation shall have authority to issue is 50,000
shares, par value $1.00 each, which shall be known as
"common stock."
a. The holders of the common stock shall be
entitled to receive when and as declared by
the Board of Directors, out of earnings or
surplus legally available therefor,
dividends, payable either in cash, in
property, or in shares of the capital stock
of the corporation.
b. The common stock may be allotted as and when
the Board of Directors shall determine, and,
under and pursuant to the laws of the State
of Wisconsin, the Board of Directors shall
have the power to fix or alter, from time to
time, in respect to shares then unallotted,
any or all of the following: the dividend
rate, the redemption price, the liquidation
price, the conversion rights and the sinking
or purchase fund rights of shares of any
class, or of any series of any class, or the
number of shares constituting any series of
any class. The Board of Directors shall also
have the power to fix the terms, provisions
and conditions of options to purchase or
subscribe for shares of any class or classes,
including the price and conversion basis
thereof, and to authorize the issuance
thereof. The Board of Directors shall also
have the power to issue shares of stock of
the corporation for cash, services, property,
the securities or assets of other business
enterprises, as it may from time to time deem
expedient.
c. No holder of stock in the corporation shall
be entitled to any cumulative voting rights.
d. No holder of stock of the corporation shall
have any preferential, preemptive or other
rights of subscription to any shares of any
class of stock of the corporation allotted or
sold or to be allotted or sold now or
hereafter authorized, or to any obligations
convertible into the stock of the corporation
of any class, or any right of subscription to
any part thereof.
ARTICLE VIII.
Management and Additional Powers
Section 1. The management and conduct of the
business of the corporation shall be vested in a Board
of Directors, which shall consist of such number of
directors, not less than the minimum permitted by law,
as shall be fixed in the Bylaws, or in the absence of
such provision in the Bylaws, as shall be determined by
the shareholders at any annual or special meeting
thereof. The term of the first Board of Directors, as
hereinafter identified, shall extend until the first
shareholders' meeting subsequent to incorporation.
Section 2. Except as otherwise herein provided,
the term of office of each director of the corporation
shall be for a period of one year and until his
successor is elected and qualified, unless the director
is removed as provided by law.
Section 3. At the first shareholders' meeting of
the corporation subsequent to incorporation, a director
or directors shall be elected to serve until the next
annual meeting of shareholders and until a successor or
successors are elected and qualified. Thereafter, all
directors shall be elected for the full term of one
year and until their respective successors are elected
and qualified, unless removed as provided by law. If a
vacancy in the Board of Directors occurs during the
term of any director, a successor director to serve
during the unexpired portion of said term may be
elected by the remaining directors.
Section 4. The Board of Directors shall have the
authority to accept or reject subscriptions for capital
made after incorporation and may grant options to
purchase or subscribe for capital stock. The Board of
Directors shall from time to time fix and determine the
consideration for which the corporation shall issue and
sell its capital stock, and also the dividends to be
paid by the corporation upon the capital stock. The
Board of Directors shall have authority to fix the
terms and conditions of rights to convert any
securities of this corporation into shares and to
authorize the issuance of such conversion rights.
Section 5. The Board of Directors shall have the
authority to issue bonds, debentures or other
securities convertible into capital stock or other
securities of any class, or bearer warrants or other
evidences of optional rights to purchase and/or
subscribe to capital stock or other securities of any
class, upon such terms, in such manner, and under such
conditions as may be fixed by resolution of the Board
prior to the issuance thereof.
Section 6. The Board of Directors shall have the
authority to make and alter the Bylaws, subject to the
power of the shareholders to change or repeal the
Bylaws.
Section 7. A quorum for any meeting of
shareholders to transact business of this corporation
except as otherwise specifically provided herein or by
law shall be the presence in person or by proxy of the
holders of a majority of the shares of common stock of
the corporation outstanding and of record on the record
date set for such meeting.
Section 8. No contract or other transaction
between the corporation and any person, firm,
association or corporation shall, in the absence of
fraud, be invalidated or in any way affected by the
fact that any of the directors of the corporation are,
directly or indirectly, pecuniarily or otherwise
interested in such contract, transaction or other act
or related to or interested in such person, firm,
association or corporation, as director, stockholder,
officer, employee, member or otherwise. Any director of
the corporation, individually, or any firm or
association of which any director may be a member may
be a party to or may be pecuniarily or otherwise
interested in any contract or transaction of the
corporation, provided that the fact that he
individually or such firm or association is so
interested shall be disclosed or known to the Board of
Directors or a majority of such members thereof as
shall be present at any meeting of the Board of
Directors, or of any committee of directors having the
powers of the full Board, at which action upon any such
contract, transaction or other act is taken, and if
such fact shall be so disclosed or known, any director
of this corporation so related or otherwise interested
may be counted in determining the presence of a quorum
at any meeting of the Board of Directors or such
committee at which action upon any such contract,
transaction or act shall be taken and may vote thereat
with respect to such action with like force and effect
as if he were not so related or interested. Any
director of the corporation may vote upon any contract
or other transaction between the corporation and any
subsidiary or affiliated corporation.
Section 9. Officers and directors of this
corporation may hold positions as officers and
directors of any other corporations in related
businesses, and their efforts to advance such
corporations will not constitute a breach of fiduciary
loyalty to this corporation in the absence of a showing
of bad faith.
ARTICLE IX.
Directors
The first Board of Directors shall be comprised of
six (6) persons whose names and addresses are as
follows:
Duane W. Pike Leo Seidl
Luxemburg, WI 54217 Luxemburg, WI 54217
Clem Barbiaux George Paider
Luxemburg, WI 54217 Luxemburg, WI 54217
Irvin Vincent Willard Marchant
Luxemburg, WI 54217 Brussels, WI 54204
ARTICLE X.
Incorporator
The incorporator's name and address are as
follows:
Duane W. Pike
Luxemburg, WI 54217
ARTICLE XI.
Amendment
Any provisions contained in these Articles of
Incorporation may be amended solely by the affirmative
vote of the holders of a majority of the stock entitled
to vote.
MW1-68372-1
IN WITNESS WHEREOF, the undersigned has set his
hand this 1st day of June, 1983.
/s/ Duane W. Pike
--------------------
Duane W. Pike
STATE OF WISCONSIN )
)ss.
COUNTY OF Kewaunee )
On this 1st day of June, 1983, before me, a Notary
Public within and for said County, personally appeared
Duane W. Pike, to me known to be the person described
in and who executed the foregoing instrument and
acknowledged that he executed the same as his free act
and deed.
/s/ Carol Bauil
----------------------
Notary Public
My Commission Expires: 10/2/83
This instrument drafted by:
J. Kevin Costley, Esq.
LINDQUIST & VENNUM
4200 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
Form 4
Secretary of State
WISCONSIN
5/91
ARTICLES OF AMENDMENT
Stock (for profit)
A. Name of Corporation: LUXEMBURG BANCSHARES, INC.
prior to any change effected by this amendment)
Test of Amendment (Refer to the existing articles of
incorporation and instruction A. Determine those items
to be changed and set forth below the number
identifying the paragraph being changed and how the
amended paragraph is to read.)
RESOLVED, THAT, Article VII of the Articles of
Incorporation entitled, "Capital Stock," is hereby
amended to read as follows:
"The aggregate number of shares which this
corporation shall have authority to issue is 300,000
shares, par value $0.16-2/3 each, which shall be known
as `common stock.'"
And that the remainder of said article continues
unchanged.
B. Amendment to the articles of incorporation adopted
on May 18, 1991
Indicate the method of adoption by checking the
appropriate choice below:
( ) By the Board of Directors (In accordance with
sec. 180.1002, Wis. Stats.)
OR
(X) By the Board of Directors and Shareholders (In
accordance with sec. 180.1003, Wis. Stats.)
OR
( ) By Incorporators of Board of Directors,
before issuance of shares (In accordance with
sec. 180.1005, Wis. Stats.)
C. Executed on behalf of the corporation on May 24,
1991
/s/ Irvin Vincent
------------------------
Irvin Vincent
President
D. This document was drafted by Atty. Glenn J. Slatky
of SLATKY, WOLSKE & MEHN
BYLAWS
OF
LUXEMBURG BANCSHARES, INC.
TABLE OF CONTENTS
Page
ARTICLE I. OFFICES; RECORDS 1
1.01. Principal and Business Offices 1
1.02. Registered Office 1
1.03. Corporate Records 1
ARTICLE II. SHAREHOLDERS 1
2.01. Annual Meeting 1
2.02. Special Meetings 3
2.03. Place of Meeting 5
2.04. Notices to Shareholders 6
(a) Required Notice 6
(b) Adjourned Meeting 6
(c) Waiver of Notice 6
(d) Contents of Notice 6
(e) Fundamental Transactions 6
2.05. Fixing of Record Date 7
(a) Meetings 7
(b) Distributions 7
2.06. Shareholder List 7
2.07. Quorum 7
2.08. Conduct of Meetings 8
2.09. Proxies 8
2.10. Voting of Shares 8
2.11. No Nominee Procedures 8
ARTICLE III. BOARD OF DIRECTORS 8
3.01. General Powers 8
3.02. Resignations and Qualifications 9
3.03. Regular Meetings 9
3.04. Special Meetings 9
3.05. Meetings By Telephone or Other
Communication Technology 9
3.06. Notice of Meetings 9
3.07. Quorum 10
3.08. Manner of Acting 10
3.09. Conduct of Meetings 10
3.10. Vacancies 10
3.11. Compensation 10
3.12. Presumption of Assent 10
3.13. Committees 10
ARTICLE IV. OFFICERS 11
4.01. Appointment 11
4.02. Resignation and Removal 11
4.03. Chairman of the Board 11
4.04. President 12
4.05. Shared Duties of Chairman of the Board
and President 12
4.06. Vice Presidents 12
4.07. Secretary 12
4.08. Treasurer 13
4.09. Assistants and Acting Officers 13
4.10. Salaries 13
ARTICLE V. CERTIFICATES FOR SHARES AND THEIR
TRANSFER 13
5.01. Certificates for Shares 13
5.02. Signature by Former Officer, Transfer
Agent or Registrar 13
5.03. Transfer of Shares 14
5.04. Restrictions on Transfer 14
5.05. Lost, Destroyed or Stolen Certificates 14
5.06. Consideration for Shares 14
5.07. Stock Regulations 14
ARTICLE VI. WAIVER OF NOTICE 14
6.01. Shareholder Written Waiver 14
6.02. Shareholder Waiver by Attendance 15
6.03. Director Written Waiver 15
6.04. Director Waiver by Attendance 15
ARTICLE VII. ACTION WITHOUT MEETINGS 15
7.01. Director Action Without Meeting 15
ARTICLE VIII. INDEMNIFICATION 16
8.01. Indemnification for Successful Defense 16
8.02. Other Indemnification 16
8.03. Written Request 16
8.04. Nonduplication 16
8.05. Determination of Right to
Indemnification 17
8.06. Advance of Expenses 18
8.07. Nonexclusivity 18
8.08. Court-Ordered Indemnification 19
8.09. Indemnification and Allowance of
Expenses of Employees and Agents 19
8.10. Insurance 19
8.11. Securities Law Claims 19
8.12. Liberal Construction 19
8.13. Definitions Applicable to this Article 20
ARTICLE IX. SEAL 21
ARTICLE X. AMENDMENTS 21
10.01. By Shareholders 21
10.02. By Directors 21
10.03. Implied Amendments 21
BYLAWS
OF
LUXEMBURG BANCSHARES, INC.
ARTICLE I.
OFFICES; RECORDS
1.01. Principal and Business Offices. The
corporation may have such principal and other business
offices, either within or without the State of
Wisconsin, as the Board of Directors may designate or
as the business of the corporation may require from
time to time.
1.02. Registered Office. The registered office
of the corporation required by the Wisconsin Business
Corporation Law to be maintained in the State of
Wisconsin may be, but need not be, identical with the
principal office in the State of Wisconsin. The address
of the registered office may be changed from time to
time by any officer or by the registered agent. The
office of the registered agent of the corporation shall
be identical to such registered office.
1.03. Corporate Records. The following documents
and records shall be kept at the corporation's
principal office or at such other reasonable location
as may be specified by the corporation:
(a) Minutes of shareholders' and Board of
Directors' meetings and any written notices
thereof.
(b) Records of actions taken by the shareholders
or directors without a meeting.
(c) Records of actions taken by committees of the
Board of Directors.
(d) Accounting records.
(e) Records of its shareholders.
(f) Current Bylaws.
(g) Written waivers of notice by shareholders or
directors (if any).
(h) Written consents by shareholders or directors
for actions without a meeting (if any).
(i) Voting trust agreements (if any).
(j) Stock transfer agreements to which the
corporation is a party or of which it has
notice (if any).
ARTICLE II.
SHAREHOLDERS
2.01. Annual Meeting. The annual meeting of the
shareholders (an "Annual Meeting") shall be held on
such date and at such time as may be fixed by or under
the authority of the Board of Directors, for the
purpose of electing directors and for the transaction
of such other business as may come before the meeting.
If the election of directors is not held on the day
fixed as herein provided for any annual meeting of the
shareholders, or at any adjournment thereof, the Board
of Directors shall cause the election to be held at a
meeting of the shareholders as soon thereafter as may
be convenient.
At an annual meeting of the shareholders, only
such business shall be conducted as shall have been
properly brought before the meeting. To be properly
brought before an annual meeting, business must be (a)
specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of
Directors; (b) otherwise brought before the meeting by
or at the direction of the Board of Directors; or (c)
brought before the meeting by a shareholder pursuant to
this Section 2.01.
Only persons who are nominated in accordance with
the procedures set forth in this Section 2.01 shall be
eligible for election as directors. Nominations of
persons for election to the Board of Directors of the
corporation may be made at a meeting of shareholders by
or at the direction of the Board of Directors or by any
shareholder of the corporation entitled to vote for the
election of directors at the meeting who complies with
the procedures set forth in this bylaw.
For business to be properly brought before an
annual meeting by a shareholder, and for nominations by
shareholders for the election of directors, the
shareholder must have given timely notice thereof in
writing to the Secretary of the corporation. All
notices given pursuant to this Section shall be in
writing and must be received by the Secretary of the
corporation not later than ninety days prior to the
anniversary date of the annual meeting of shareholders
in the immediately preceding year. All such notices
shall include (i) a representation that the person
sending the notice is a shareholder of record and will
remain such through the Meeting Record Date (defined in
Section 2.05); (ii) the name and address, as they
appear on the corporation's books, of such shareholder;
(iii) the class and number of the corporation's shares
which are owned beneficially and of record by such
shareholder; and (iv) a representation that such
shareholder intends to appear in person or by proxy at
such meeting to make the nomination or move the
consideration of other business set forth in the
notice. Notice as to proposals with respect to any
business to be brought before the meeting other than
election of directors shall also set forth the text of
the proposal and may set forth any statement in support
thereof that the shareholder wishes to bring to the
attention of the corporation, and shall specify any
material interest of such shareholder in such business.
The person providing the notice shall also be required
to provide such further information as may be requested
by the corporation to comply with federal securities
laws, rules and regulations. Notice as to nominations
shall set forth the name(s) of the nominee(s), address
and principal occupation or employment of each, a
description of all arrangements or understandings
between the shareholder and each nominee and any person
or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by
the shareholder, the written consent of each nominee to
serve as a director if so elected and such other
information as would be required to be included in a
proxy statement soliciting proxies for the election of
the nominee(s) of such shareholder.
The chairman of the meeting shall refuse to
acknowledge the nomination of any person or the
consideration of any business not made in compliance
with the foregoing procedures. Any business proposed
to be considered at the meeting must be a proper
subject for action by shareholders.
2.02. Special Meetings. (a) A special meeting of
shareholders (a "Special Meeting") may be called only
by the Board of Directors pursuant to a resolution
adopted by three-quarters (3/4) of the entire Board of
Directors and shall be called by the Board of Directors
upon the demand, in accordance with this Section 2.02,
of the holders of record of shares representing at
least 10% of all the votes entitled to be cast on any
issue proposed to be considered at the Special Meeting.
(b) In order that the corporation may determine
the shareholders entitled to demand a Special Meeting,
the Board of Directors may fix a record date to
determine the shareholders entitled to make such a
demand (the "Demand Record Date"). The Demand Record
Date shall not precede the date upon which the
resolution fixing the Demand Record Date is adopted by
the Board of Directors and shall not be more than 10
days after the date upon which the resolution fixing
the Demand Record Date is adopted by the Board of
Directors. Any shareholder of record seeking to have
shareholders demand a Special Meeting shall, by sending
written notice to the Secretary of the corporation by
hand or by certified or registered mail, return receipt
requested, request the Board of Directors to fix a
Demand Record Date. The Board of Directors shall
promptly, but in all events within 30 days after the
date on which a valid request to fix a Demand Record
Date is received, adopt a resolution fixing the Demand
Record Date and shall make a public announcement of
such Demand Record Date. If no Demand Record Date has
been fixed by the Board of Directors within 30 days
after the date on which such request is received by the
Secretary, the Demand Record Date shall be the 30th day
after the first day on which a valid written request to
set a Demand Record Date is received by the Secretary.
To be valid, such written request shall set forth the
purpose or purposes for which the Special Meeting is to
be held, shall be signed by one or more shareholders of
record (or their duly authorized proxies or other
representatives), shall bear the date of signature of
each such shareholder (or proxy or other
representative) and shall set forth all information
about each such shareholder and about the beneficial
owner or owners, if any, on whose behalf the request is
made that would be required to be set forth in a
shareholder's notice described in Section 2.01. Any
business proposed to be brought before the meeting must
be a subject for which a special meeting must be called
under Wisconsin law upon the demand of a 10%
shareholder.
(c) In order for a shareholder or shareholders to
demand a Special Meeting, a written demand or demands
for a Special Meeting by the holders of record as of
the Demand Record Date of shares representing at least
10% of all the votes entitled to be cast on any issue
proposed to be considered at the Special Meeting must
be delivered to the corporation. To be valid, each
written demand by a shareholder for a Special Meeting
shall set forth the specific purpose or purposes for
which the Special Meeting is to be held (which purpose
or purposes shall be limited to the purpose or purposes
set forth in the written request to set a Demand Record
Date received by the corporation pursuant to paragraph
(b) of this Section 2.02), shall be signed by one or
more persons who as of the Demand Record Date are
shareholders of record (or their duly authorized
proxies or other representatives), shall bear the date
of signature of each such shareholder (or proxy or
other representative), and shall set forth the name and
address, as they appear in the corporation's books, of
each shareholder signing such demand and the class or
series and number of shares of the corporation which
are owned of record and beneficially by each such
shareholder, shall be sent to the Secretary by hand or
by certified or registered mail, return receipt
requested, and shall be received by the Secretary not
before and within 70 days after the Demand Record Date.
(d) The corporation shall not be required to call
a Special Meeting upon shareholder demand unless, in
addition to the documents required by paragraph (c) of
this Section 2.02, the Secretary receives a written
agreement signed by each Soliciting Shareholder (as
defined herein), pursuant to which each Soliciting
Shareholder, jointly and severally, agrees to pay the
corporation's costs of holding the Special Meeting,
including the costs of preparing and mailing proxy
materials for the corporation's own solicitation,
provided that if each of the resolutions introduced by
any Soliciting Shareholder at such meeting is adopted,
and each of the individuals nominated by or on behalf
of any Soliciting Shareholder for election as director
at such meeting is elected, then the Soliciting
Shareholders shall not be required to pay such costs.
For purposes of this paragraph (d), the following terms
shall have the meanings set forth below:
(i)"Affiliate" shall have the meaning assigned to
such term in Rule 12b-2 promulgated under the
Securities Exchange Act of 1934, as amended
(the "Exchange Act").
(ii) "Participant in a Solicitation" shall
have the meaning assigned to such term in Item
4 of Schedule 14A promulgated under the
Exchange Act.
(iii) "Person" shall mean any individual, firm,
corporation, partnership, joint venture,
association, trust, unincorporated
organization or other entity.
(iv) "Proxy" shall have the meaning assigned
to such term in Rule 14a-1 promulgated under
the Exchange Act.
(v)"Solicitation" shall have the meaning assigned
to such term in Rule 14a-1 promulgated under
the Exchange Act.
(vi) "Soliciting Shareholder" shall mean, with
respect to any Special Meeting demanded by a
shareholder or shareholders, any of the
following Persons:
(A) each shareholder signing any such demand;
(B) if the number of shareholders signing the
demand or demands for a meeting delivered
to the corporation pursuant to paragraph
(c) of this Section 2.02 is more than 10,
each Person who is or intends to be a
Participant in a Solicitation in
connection with the Special Meeting
(other than a Solicitation of Proxies on
behalf of the corporation); or
(C) any Affiliate of a Soliciting
Shareholder, if a majority of the
directors then in office determine, in
good faith, that such Affiliate should be
required to sign the written notice
described in paragraph (c) of this
Section 2.02 and/or the written agreement
described in this paragraph (d) in order
to prevent the purposes of this Section
2.02 from being evaded.
(e) Except as provided in the following sentence,
any Special Meeting shall be held at such hour and day
as may be designated by the Board of Directors. In the
case of any Special Meeting called by the Board of
Directors upon the demand of shareholders (a "Demand
Special Meeting"), the date of the Demand Special
Meeting shall be not more than 70 days after the
Meeting Record Date (as defined in Section 2.05 of
these Bylaws); provided that in the event that the
directors then in office fail to designate an hour and
date for a Demand Special Meeting within 30 days after
the date that valid written demands for such meeting by
the holders of record as of the Demand Record Date of
shares representing at least 10% of all the votes
entitled to be cast on any issue proposed to be
considered at the Special Meeting, as well as the
agreement described in paragraph (d), are delivered to
the corporation (the "Delivery Date"), then such
meeting shall be held at 2:00 p.m. (local time) on the
100th day after the Delivery Date or, if such 100th day
is not a Business Day (as defined below), on the first
preceding Business Day. In fixing a meeting date for
any Special Meeting, the Board of Directors may
consider such factors as it deems relevant within the
good faith exercise of its business judgment,
including, without limitation, the nature of the action
proposed to be taken, the facts and circumstances
surrounding any demand for such meeting, and any plan
of the Board of Directors to call an Annual Meeting or
a Special Meeting.
(f) The corporation may engage independent
inspectors of elections to act as an agent of the
corporation for the purpose of promptly performing a
ministerial review of the validity of any purported
written demand or demands for a Special Meeting
received by the Secretary. For the purpose of
permitting the inspectors to perform such review, no
purported demand shall be deemed to have been delivered
to the corporation until the earlier of (i) 5 Business
Days following receipt by the Secretary of such
purported demand and (ii) such date as the independent
inspectors certify to the corporation that the valid
demands received by the Secretary represent at least
10% of all the votes entitled to be cast on each issue
proposed to be considered at the Special Meeting.
Nothing contained in this paragraph shall in any way be
construed to limit the ability of the Board of
Directors or any shareholder to contest the validity of
any demand, whether during or after such 5 Business Day
period, or to take any other action (including, without
limitation, the commencement, prosecution or defense of
any litigation with respect thereto).
(g) Only business within the purpose described in
the meeting notice given in accordance with Section
2.04 of these Bylaws may be conducted at a Special
Meeting.
(h) For purposes of these Bylaws, "Business Day"
shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions in the State of
Wisconsin are authorized or obligated by law or
executive order to close.
2.03. Place of Meeting. The Board of Directors
may designate any place, either within or without the
State of Wisconsin, as the place of meeting for any
annual meeting or any special meeting. If no
designation is made, the place of meeting shall be the
principal office of the corporation. Any meeting may
be adjourned to reconvene at any place designated by
vote of the Board of Directors.
2.04. Notices to Shareholders.
(a) Required Notice. Written notice stating
the place, day and hour of the meeting and, in
case of a Special Meeting, the purpose or purposes
for which the meeting is called, shall be
delivered not less than ten (10) days nor more
than seventy (70) days before the date of the
meeting (unless a different time is provided by
law or the Articles of Incorporation), by or at
the direction of the Chairman of the Board, the
President or the Secretary, to each shareholder
entitled to vote at such meeting or, for the
fundamental transactions described in subsections
(e)(l) to (4) below (for which the Wisconsin
Business Corporation Law requires that notice be
given to shareholders not entitled to vote), to
all shareholders. If mailed, such notice is
effective when deposited in the United States
mail, and shall be addressed to the shareholder's
address shown in the current record of
shareholders of the corporation, with postage
thereon prepaid. At least twenty (20) days'
notice shall be provided if the purpose, or one of
the purposes, of the meeting is to consider a plan
of merger or share exchange for which shareholder
approval is required by law, or the sale, lease,
exchange or other disposition of all or
substantially all of the corporation's property,
with or without good will, otherwise than in the
usual and regular course of business.
(b) Adjourned Meeting. Except as provided in
the next sentence, if any shareholder meeting is
adjourned to a different date, time, or place,
notice need not be given of the new date, time,
and place, if the new date, time, and place is
announced at the meeting before adjournment. If a
new record date for the adjourned meeting is or
must be fixed, then notice must be given pursuant
to the requirements of paragraph (a) of this
Section 2.04, to those persons who are
shareholders as of the new record date.
(c) Waiver of Notice. A shareholder may
waive notice in accordance with Article VI of
these Bylaws.
(d) Contents of Notice. The notice of each
Special Meeting shall include a description of the
purpose or purposes for which the meeting is
called. Except as otherwise provided in these
Bylaws, in the Articles of Incorporation, or in
the Wisconsin Business Corporation Law, the notice
of an annual shareholder meeting need not include
a description of the purpose or purposes for which
the meeting is called.
(e) Fundamental Transactions. If a purpose
of any shareholder meeting is to consider either:
(1) a proposed amendment to the Articles of
Incorporation (including any restated articles);
(2) a plan of merger or share exchange for which
shareholder approval is required by law; (3) the
sale, lease, exchange or other disposition of all
or substantially all of the corporation's
property, with or without good will, otherwise
than in the usual and regular course of business;
(4) the dissolution of the corporation; or (5) the
removal of a director, the notice must so state
and in cases (1), (2) and (3) above must be
accompanied by, respectively, a copy or summary of
the: (1) proposed articles of amendment or a copy
of the restated articles that identifies any
amendment or other change; (2) proposed plan of
merger or share exchange; or (3) proposed
transaction for disposition of all or
substantially all of the corporation's property.
If the proposed corporate action creates
dissenters' rights, the notice must state that
shareholders and beneficial shareholders are or
may be entitled to assert dissenters' rights, and
must be accompanied by a copy of Sections 180.1301
to 180.1331 of the Wisconsin Business Corporation
Law.
2.05. Fixing of Record Date. (a) Meetings. The
Board of Directors may fix in advance a date as the
record date for any determination of shareholders
entitled to notice of, and to vote at, a shareholders'
meeting, such date in any case to be not more than
seventy (70) days prior to the meeting (the "Meeting
Record Date"). In the case of any Demand Special
Meeting, (i) the Meeting Record Date shall be not later
than the 30th day after the Delivery Date and (ii) if
the Board of Directors fails to fix the Meeting Record
Date within 30 days after the Delivery Date, then the
close of business on such 30th day shall be the Meeting
Record Date. When a determination of shareholders
entitled to vote at any meeting of shareholders has
been made as provided in these Bylaws, such
determination shall be applied to any adjournment
thereof unless the Board of Directors fixes a new
record date and except as otherwise required by law. A
new record date must be set if a meeting is adjourned
to a date more than 120 days after the date fixed for
the original meeting.
(b) Distributions. The Board may also fix in
advance a date as the record date for determining
shareholders entitled to receive a dividend or
distribution. If no record date is fixed for the
determination of shareholders entitled to receive a
share dividend or distribution (other than a
distribution involving a purchase, redemption or other
acquisition of the corporation's shares), the close of
business on the day on which the resolution of the
Board of Directors is adopted declaring the dividend or
distribution shall be the record date.
2.06. Shareholder List. The officer or agent
having charge of the stock transfer books for shares of
the corporation shall, before each meeting of
shareholders, make a complete record of the
shareholders entitled to notice of such meeting,
arranged by class or series of shares and showing the
address of and the number of shares held by each
shareholder. The shareholder list shall be available
at the meeting and may be inspected by any shareholder
or his or her agent or attorney at any time during the
meeting or any adjournment. Any shareholder or his or
her agent or attorney may inspect the shareholder list
beginning two (2) business days after the notice of the
meeting is given and continuing to the date of the
meeting, at the corporation's principal office or at a
place identified in the meeting notice in the city
where the meeting will be held and, subject to Section
180.1602(2)(b) 3 to 5 of the Wisconsin Business
Corporation Law, may copy the list, during regular
business hours and at his or her expense, during the
period that it is available for inspection hereunder.
The original stock transfer books and nominee
certificates on file with the corporation (if any)
shall be prima facie evidence as to who are the
shareholders entitled to inspect the shareholder list
or to vote at any meeting of shareholders. Failure to
comply with the requirements of this section shall not
affect the validity of any action taken at such
meeting.
2.07. Quorum. Except as otherwise provided in
the Articles of Incorporation or in the Wisconsin
Business Corporation Law, a majority of the votes
entitled to be cast by shares entitled to vote as a
separate voting group on a matter, represented in
person or by proxy, shall constitute a quorum of that
voting group for action on that matter at a meeting of
shareholders. Once a share is represented for any
purpose at a meeting, other than for the purpose of
objecting to holding the meeting or transacting
business at the meeting, it is considered present for
purposes of determining whether a quorum exists for the
remainder of the meeting and for any adjournment of
that meeting unless a new record date is or must be set
for that meeting.
2.08. Conduct of Meetings. The Chairman of the
Board or, in his or her absence, any Officer or
Director chosen by the Board of Directors shall call
the meeting of the shareholders to order and shall act
as Chairman of the meeting, and the Secretary shall act
as secretary of all meetings of the shareholders, but,
in the absence of the Secretary, the presiding officer
may appoint any other person to act as secretary of the
meeting.
2.09. Proxies. At all meetings of shareholders,
a shareholder entitled to vote may vote in person or by
proxy appointed in writing by the shareholder or by his
or her duly authorized attorney-in-fact. All proxy
appointment forms shall be filed with the Secretary or
other officer or agent of the corporation authorized to
tabulate votes before or at the time of the meeting.
Unless the appointment form conspicuously states that
it is irrevocable and the appointment is coupled with
an interest, a proxy appointment may be revoked at any
time. The presence of a shareholder who has filed a
proxy appointment shall not of itself constitute a
revocation. No proxy appointment shall be valid after
eleven months from the date of its execution, unless
otherwise expressly provided in the appointment form.
The Board of Directors shall have the power and
authority to make rules that are not inconsistent with
the Wisconsin Business Corporation Law as to the
validity and sufficiency of proxy appointments.
2.10. Voting of Shares. Each outstanding share
shall be entitled to one (1) vote on each matter
submitted to a vote at a meeting of shareholders,
except to the extent that the voting rights of the
shares are enlarged, limited or denied by the Articles
of Incorporation or the Wisconsin Business Corporation
Law. Shares of this corporation owned directly or
indirectly by another corporation are not entitled to
vote if this corporation owns, directly or indirectly,
sufficient shares to elect a majority of the directors
of such other corporation. However, the prior sentence
shall not limit the power of the corporation to vote
any shares, including its own shares, held by it in a
fiduciary capacity.
2.11. No Nominee Procedures. The corporation has
not established, and nothing in these Bylaws shall be
deemed to establish, any procedure by which a
beneficial owner of the corporation's shares that are
registered in the name of a nominee is recognized by
the corporation as the shareholder under Section
180.0723 of the Wisconsin Business Corporation Law.
ARTICLE III.
BOARD OF DIRECTORS
3.01. General Powers. All corporate powers shall
be exercised by or under the authority of, and the
business and affairs of the corporation shall be
managed under the direction of, its Board of Directors.
The number of directors shall be fixed from time to
time by the Board of Directors; provided, however, a
decrease in the number of directors may not shorten an
incumbent director's term.
3.02. Resignations and Qualifications. A
director may resign at any time by delivering a written
resignation to the Board of Directors, to the Chairman
of the Board, or to the corporation through the
Secretary or otherwise. Directors need not be
residents of the State of Wisconsin or shareholders of
the corporation.
3.03. Regular Meetings. The Board of Directors
may provide, by resolution, the time and place, either
within or without the State of Wisconsin, for the
holding of regular meetings without other notice than
such resolution.
3.04. Special Meetings. Special meetings of the
Board of Directors may be called by or at the request
of the Chairman of the Board, the President or any two
(2) directors. Special meetings of any committee may
be called by or at the request of the foregoing persons
or the Chairman of the committee. The persons calling
any special meeting of the Board of Directors or
committee may fix any place, either within or without
the State of Wisconsin, as the place for holding any
special meeting called by them, and if no other place
is fixed the place of meeting shall be the principal
office of the corporation in the State of Wisconsin.
3.05. Meetings By Telephone or Other
Communication Technology. (a) Any or all directors may
participate in a regular or special meeting or in a
committee meeting of the Board of Directors by, or
conduct the meeting through the use of, telephone or
any other means of communication by which either: (i)
all participating directors may simultaneously hear
each other during the meeting or (ii) all communication
during the meeting is immediately transmitted to each
participating director, and each participating director
is able to immediately send messages to all other
participating directors.
(b) If a meeting will be conducted through the use
of any means described in paragraph (a), all
participating directors shall be informed that a
meeting is taking place at which official business may
be transacted. A director participating in a meeting
by any means described in paragraph (a) is deemed to be
present in person at the meeting.
3.06. Notice of Meetings. Except as otherwise
provided in the Articles of Incorporation or the
Wisconsin Business Corporation Law, notice of the date,
time and place of any special meeting of the Board of
Directors and of any special meeting of a committee of
the Board shall be given orally or in writing to each
director or committee member at least 48 hours prior to
the meeting. The notice need not describe the purpose
of the meeting. Notice may be communicated in person,
by telephone, telegraph or facsimile, or by mail or
private carrier. Oral notice is effective when
communicated to the director or to any person answering
the director's business or home telephone, or when left
on the director's answering machine or voice-mail
system at home or place of business. Written notice is
effective at the earliest of the following: (a) when
received; (b) five days after its deposit in the U.S.
Mail, if mailed postpaid and correctly addressed; (c)
on the date shown on the return receipt, if sent by
registered or certified mail, return receipt requested,
and the receipt is signed by or on behalf of the
addressee; (d) at the time a facsimile transmission is
completed, if sent by facsimile to the director's home
or place of business.
3.07. Quorum. Except as otherwise provided by
the Wisconsin Business Corporation Law, a majority of
the number of directors specified in accordance with
the Articles of Incorporation shall constitute a quorum
of the Board of Directors. Except as otherwise
provided by the Wisconsin Business Corporation Law, a
majority of the number of directors appointed to serve
on a committee shall constitute a quorum of the
committee.
3.08. Manner of Acting. Except as otherwise
provided by the Wisconsin Business Corporation Law or
the Articles of Incorporation, the affirmative vote of
a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board
of Directors or any committee thereof.
3.09. Conduct of Meetings. The Chairman of the
Board, or in his or her absence, any director chosen by
the directors present, shall call meetings of the Board
of Directors to order and shall chair the meeting. The
Secretary of the corporation shall act as secretary of
all meetings of the Board of Directors, but in the
absence of the Secretary, the presiding officer may
appoint any assistant secretary or any director or
other person present to act as secretary of the
meeting.
3.10. Vacancies. Any vacancy occurring in the
Board of Directors shall be filled in the manner
provided in the Articles of Incorporation.
3.11. Compensation. The Board of Directors,
irrespective of any personal interest of any of its
members, may fix the compensation of directors.
3.12. Presumption of Assent. A director who is
present and is announced as present at a meeting of the
Board of Directors or a committee thereof at which
action on any corporate matter is taken shall be
presumed to have assented to the action taken unless
(i) the director objects at the beginning of the
meeting or promptly upon his or her arrival to holding
the meeting or transacting business at the meeting; or
(ii) the director's dissent or abstention from the
action taken is entered in the minutes of the meeting;
or (iii) the director delivers his or her written
dissent or abstention to the presiding officer of the
meeting before the adjournment thereof or to the
corporation immediately after the adjournment of the
meeting. Such right to dissent or abstain shall not
apply to a director who voted in favor of such action.
3.13. Committees. Unless the Articles of
Incorporation otherwise provide, the Board of
Directors, by resolution adopted by the affirmative
vote of a majority of all the directors then in office,
may create one (1) or more committees, each committee
to consist of two (2) or more directors as members,
which to the extent provided in the resolution as
initially adopted, and as thereafter supplemented or
amended by further resolution adopted by a like vote,
may exercise the authority of the Board of Directors,
except that no committee may: (a) authorize
distributions; (b) approve or propose to shareholders
action that the Wisconsin Business Corporation Law
requires be approved by shareholders; (c) fill
vacancies on the Board of Directors or any of its
committees, except that the Board of Directors may
provide by resolution that any vacancies on a committee
shall be filled by the affirmative vote of a majority
of the remaining committee members; (d) amend the
Articles of Incorporation; (e) adopt, amend or repeal
Bylaws; (f) approve a plan of merger not requiring
shareholder approval; (g) authorize or approve
reacquisition of shares, except according to a formula
or method prescribed by the Board of Directors; or (h)
authorize or approve the issuance or sale or contract
for sale of shares, or determine the designation and
relative rights, preferences and limitations of a class
or series of shares, except within limits prescribed by
the Board of Directors. The Board of Directors may
elect one or more of its members as alternate members
of any such committee who may take the place of any
absent member or members at any meeting of such
committee, upon request by the Chairman of the Board or
the Chairman of such meeting. Each such committee
shall fix its own rules (consistent with the Wisconsin
Business Corporation Law, the Articles of Incorporation
and these Bylaws) governing the conduct of its
activities and shall make such reports to the Board of
Directors of its activities as the Board of Directors
may request. Unless otherwise provided by the Board of
Directors in creating a committee, a committee may
employ counsel, accountants and other consultants to
assist it in the exercise of authority.
ARTICLE IV.
OFFICERS
4.01. Appointment. The principal officers may
include a Chairman of the Board, a President, a
Secretary, a Treasurer and such other officers if any,
as may be deemed necessary by the Board of Directors,
each of whom shall be appointed by the Board of
Directors. The officers may also include one or more
Vice Presidents who may be appointed and have such
designations as are determined by or at the direction
of the Board of Directors or the Chairman of the Board
or President. Any two or more offices may be held by
the same person.
4.02. Resignation and Removal. An officer shall
hold office until he or she resigns, dies, is removed
hereunder, or a different person is appointed to the
office. An officer may resign at any time by
delivering an appropriate written notice to the
corporation. The resignation is effective when the
notice is delivered, unless the notice specifies a
later effective date and the corporation accepts the
later effective date. Any officer may be removed by
the Board of Directors with or without cause and
notwithstanding the contract rights, if any, of the
person removed. The Chairman of the Board or
President may also remove any of the other officers
with or without cause and notwithstanding the contract
rights, if any, of the person removed. Except as
provided in the preceding sentence, the resignation or
removal is subject to any remedies provided by any
contract between the officer and the corporation or
otherwise provided by law. Appointment shall not of
itself create contract rights.
4.03. Chairman of the Board. The Chairman of the
Board shall preside at all meetings of the
shareholders, Board of Directors and Executive
Committee of the Board of Directors, if any. He shall
have the authority, subject to such rules, directions
or orders as may be prescribed by the Board of
Directors, to appoint and terminate the appointment of
such agents and employees of the corporation as he
shall deem necessary, to prescribe their power, duties
and compensation and to delegate authority to them. He
shall perform such other duties as may be prescribed
from time to time by the Board of Directors.
4.04. President. The President shall be the
chief executive officer of the corporation. He shall
have general and active management of the business of
the corporation and shall see that all orders and
resolutions of the Board of Directors are carried into
effect. He shall, in the absence of the Chairman of
the Board, preside at all meetings of shareholders,
Board of Directors and the Executive Committee of the
Board of Directors, if any. He shall have the
authority, subject to such rules, directions or orders
as may be prescribed by the Board of Directors, to
appoint and terminate the appointment of such agents
and employees of the corporation as he shall deem
necessary, to prescribe their power, duties and
compensation and to delegate authority to them. He
shall perform such other duties as may be prescribed
from time to time by the Board of Directors.
4.05. Shared Duties of Chairman of the Board and
President. The Chairman of the Board and President are
each severally authorized to sign, execute and
acknowledge, on behalf of the corporation, all deeds,
mortgages, bonds, stock certificates, contracts,
leases, reports and all other documents or instruments
necessary or proper to be executed in the course of the
corporation's regular business, or which shall be
authorized by resolution of the Board of Directors;
and, except as otherwise provided by law or directed by
the Board of Directors, the Chairman of the Board and
President may authorize any Vice President or other
officer or agent of the corporation to sign, execute
and acknowledge such documents or instruments in his or
her place and stead.
4.06. Vice Presidents. Any Vice President
(including any Executive Vice President, Senior Vice
President or other Vice President, however designated)
may sign, with the Secretary, certificates for shares
of the corporation; and shall have charge of such
divisions or departments of the corporation and perform
such other duties and have such authority as from time
to time may be delegated or assigned to him or her by
the Chairman of the Board or President, or the Board of
Directors. The execution of any instrument of the
corporation by any Vice President shall be conclusive
evidence, as to third parties, of the Vice President's
authority to act in the stead of the Chairman of the
Board or President.
4.07. Secretary. The Secretary shall: (a) keep
(or cause to be kept) regular minutes of all meetings
of the shareholders, the Board of Directors and any
committees of the Board of Directors in one or more
books provided for that purpose; (b) see that all
notices are duly given in accordance with the
provisions of these Bylaws or as required by law; (c)
be custodian of the corporate records and of the seal
of the corporation, if any, and see that the seal of
the corporation, if any, is affixed to all documents
which are authorized to be executed on behalf of the
corporation under its seal; (d) keep or arrange for the
keeping of a register of the post office address of
each shareholder which shall be furnished to the
Secretary by such shareholder; (e) sign certificates
for shares of the corporation, the issuance of which
shall have been authorized by resolution of the Board
of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general
perform all duties incident to the office of Secretary
and have such other duties and exercise such authority
as from time to time may be delegated or assigned to
him or her by the Chairman of the Board, President or
the Board of Directors.
4.08. Treasurer. The Treasurer shall: (a) have
charge and custody of and be responsible for all funds
and securities of the corporation; (b) receive and give
receipts for moneys due and payable to the corporation
from any source whatsoever, and deposit all such moneys
in the name of the corporation in such banks, trust
companies or other depositories as shall be selected by
the corporation; and (c) in general perform all of the
duties incident to the office of Treasurer and have
such other duties and exercise such other authority as
from time to time may be delegated or assigned to him
or her by the Chairman of the Board, President or Board
of Directors.
4.09. Assistants and Acting Officers. The Board
of Directors and the Chairman of the Board and
President shall each have the power to appoint any
person to act as assistant to any officer, or as agent
for the corporation in the officer's stead, or to
perform the duties of such officer whenever for any
reason it is impracticable for such officer to act
personally, and such assistant or acting officer or
other agent so appointed shall have the power to
perform all the duties of the office to which that
person is so appointed to be assistant, or as to which
he or she is so appointed to act, except as such power
may be otherwise defined or restricted by the Board of
Directors, Chairman of the Board or President.
4.10. Salaries. The salaries or other
compensation of the Chairman of the Board and President
shall be fixed from time to time by the Board of
Directors or by a duly authorized committee thereof,
and no officer shall be prevented from receiving such
salary by reason of the fact that such officer is also
a director of the corporation.
ARTICLE V.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
5.01. Certificates for Shares. All shares of
this corporation shall be represented by certificates.
Certificates representing shares of the corporation
shall be in such form, consistent with law, as shall be
determined by the Board of Directors. Such
certificates shall be signed, either manually or in
facsimile, by any one or more of the Chairman of the
Board, the President, the Chief Operating Officer, the
Vice Chairman or a Vice President. All certificates
for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom
the shares represented thereby are issued, with the
number of shares and date of issue, shall be entered on
the stock transfer books of the corporation. All
certificates surrendered to the corporation for
transfer shall be canceled and no new certificate shall
be issued until the former certificate for a like
number of shares shall have been surrendered and
canceled, except as provided in Section 5.05.
5.02. Signature by Former Officer, Transfer Agent
or Registrar. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature
has been placed upon any certificate for shares has
ceased to be such officer, transfer agent or registrar
before such certificate is issued, the certificate may
be issued by the corporation with the same effect as if
that person were still an officer, transfer agent or
registrar at the date of its issue.
5.03. Transfer of Shares. Prior to due
presentment of a certificate for shares for
registration of transfer, and unless the corporation
has established a procedure by which a beneficial owner
of shares held by a nominee is to be recognized by the
corporation as the shareholder, the corporation may
treat the registered owner of such shares as the person
exclusively entitled to vote, to receive notifications
and otherwise to have and exercise all the rights and
power of an owner. The corporation may require
reasonable assurance that all transfer endorsements are
genuine and effective and in compliance with all
regulations prescribed by or under the authority of the
Board of Directors.
5.04. Restrictions on Transfer. The face or
reverse side of each certificate representing shares
shall bear a conspicuous notation of any restriction
upon the transfer of such shares imposed by the
corporation.
5.05. Lost, Destroyed or Stolen Certificates.
Where the owner claims that his or her certificate for
shares has been lost, destroyed or wrongfully taken, a
new certificate shall be issued in place thereof if the
owner (a) so requests before the corporation has notice
that such shares have been acquired by a bona fide
purchaser; and (b) if required by the corporation,
files with the corporation a sufficient indemnity bond;
and (c) satisfies such other reasonable requirements as
may be prescribed by or under the authority of the
Board of Directors.
5.06. Consideration for Shares. The shares of
the corporation may be issued for such consideration as
shall be fixed from time to time and determined to be
adequate by the Board of Directors, provided that any
shares having a par value shall not be issued for a
consideration less than the par value thereof. The
consideration may consist of any tangible or intangible
property or benefit to the corporation, including cash,
promissory notes, services performed, contracts for
services to be performed, or other securities of the
corporation. When the corporation receives the
consideration for which the Board of Directors
authorized the issuance of shares, such shares shall be
deemed to be fully paid and nonassessable.
5.07. Stock Regulations. The Board of Directors
shall have the power and authority to make all such
rules and regulations not inconsistent with the
statutes of the State of Wisconsin as it may deem
expedient concerning the issue, transfer and
registration of certificates representing shares of the
corporation, including the appointment or designation
of one or more stock transfer agents and one or more
registrars.
ARTICLE VI.
WAIVER OF NOTICE
6.01. Shareholder Written Waiver. A shareholder
may waive any notice required by the Wisconsin Business
Corporation Law, the Articles of Incorporation or these
Bylaws before or after the date and time stated in the
notice. The waiver shall be in writing and signed by
the shareholder entitled to the notice, shall contain
the same information that would have been required in
the notice under the Wisconsin Business Corporation Law
except that the time and place of meeting need not be
stated, and shall be delivered to the corporation for
inclusion in the corporate records.
6.02. Shareholder Waiver by Attendance. A
shareholder's attendance at a meeting, in person or by
proxy, waives objection to both of the following:
(a) Lack of notice or defective notice of the
meeting, unless the shareholder at the
beginning of the meeting or promptly upon
arrival objects to holding the meeting or
transacting business at the meeting.
(b) Consideration of a particular matter at
the meeting that is not within the purpose
described in the meeting notice, unless the
shareholder objects to considering the matter
when it is presented.
6.03. Director Written Waiver. A director may
waive any notice required by the Wisconsin Business
Corporation Law, the Articles of Incorporation or these
Bylaws before or after the date and time stated in the
notice. The waiver shall be in writing, signed by the
director entitled to the notice and retained by the
corporation.
6.04. Director Waiver by Attendance. A
director's attendance at or participation in a meeting
of the Board of Directors or any committee thereof
waives any required notice to him or her of the meeting
unless the director at the beginning of the meeting or
promptly upon his or her arrival objects to holding the
meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at
the meeting.
ARTICLE VII.
ACTION WITHOUT MEETINGS
7.01. Director Action Without Meeting. Unless
the Articles of Incorporation provide otherwise, action
required or permitted by the Wisconsin Business
Corporation Law to be taken at a Board of Directors
meeting or committee meeting may be taken without a
meeting if the action is taken by all members of the
Board or committee. The action shall be evidenced by
one or more written consents describing the action
taken, signed by each director and retained by the
corporation. Action taken hereunder is effective when
the last director signs the consent, unless the consent
specifies a different effective date. A consent signed
hereunder has the effect of a unanimous vote taken at a
meeting at which all directors or committee members
were present, and may be described as such in any
document.
ARTICLE VIII.
INDEMNIFICATION
8.01. Indemnification for Successful Defense.
Within twenty (20) days after receipt of a written
request pursuant to Section 8.03, the corporation shall
indemnify a director or officer, to the extent he or
she has been successful on the merits or otherwise in
the defense of a proceeding, for all reasonable
expenses incurred in the proceeding if the director or
officer was a party because he or she is a director or
officer of the corporation.
8.02. Other Indemnification. (a) In cases not
included under Section 8.01, the corporation shall
indemnify a director or officer against all liabilities
and expenses incurred by the director or officer in a
proceeding to which the director or officer was a party
because he or she is a director or officer of the
corporation, unless liability was incurred because the
director or officer breached or failed to perform a
duty he or she owes to the corporation and the breach
or failure to perform constitutes any of the following:
(1) A willful failure to deal fairly with the
corporation or its shareholders in connection with a
matter in which the director or officer has a
material conflict of interest.
(2) A violation of criminal law, unless the
director or officer had reasonable cause to believe
that his or her conduct was lawful or no reasonable
cause to believe that his or her conduct was
unlawful.
(3) A transaction from which the director or
officer derived an improper personal profit.
(4) Willful misconduct.
(b) Determination of whether indemnification is
required under this Section shall be made pursuant to
Section 8.05.
(c) The termination of a proceeding by judgment,
order, settlement or conviction, or upon a plea of no
contest or an equivalent plea, does not, by itself,
create a presumption that indemnification of the
director or officer is not required under this Section.
8.03. Written Request. A director or officer who
seeks indemnification under Sections 8.01 or 8.02 shall
make a written request to the corporation.
8.04. Nonduplication. The corporation shall not
indemnify a director or officer under Sections 8.01 or
8.02 if the director or officer has previously received
indemnification or allowance of expenses from any
person, including the corporation, in connection with
the same proceeding. However, the director or officer
has no duty to look to any other person for
indemnification.
8.05. Determination of Right to Indemnification.
(a) Unless otherwise provided by the Articles of
Incorporation or by written agreement between the
director or officer and the corporation, the director
or officer seeking indemnification under Section 8.02
shall select one of the following means for determining
his or her right to indemnification:
(1) By a majority vote of a quorum of the
Board of Directors consisting of directors not at
the time parties to the same or related
proceedings. If a quorum of disinterested
directors cannot be obtained, by majority vote of
a committee duly appointed by the Board of
Directors and consisting solely of two (2) or more
directors who are not at the time parties to the
same or related proceedings. Directors who are
parties to the same or related proceedings may
participate in the designation of members of the
committee.
(2) By independent legal counsel selected by
a quorum of the Board of Directors or its
committee in the manner prescribed in sub. (1) or,
if unable to obtain such a quorum or committee, by
a majority vote of the full Board of Directors,
including directors who are parties to the same or
related proceedings.
(3) By a panel of three (3) arbitrators
consisting of one arbitrator selected by those
directors entitled under sub. (2) to select
independent legal counsel, one arbitrator selected
by the director or officer seeking indemnification
and one arbitrator selected by the two (2)
arbitrators previously selected.
(4) By an affirmative vote of shares
represented at a meeting of shareholders at which
a quorum of the voting group entitled to vote
thereon is present. Shares owned by, or voted
under the control of, persons who are at the time
parties to the same or related proceedings,
whether as plaintiffs or defendants or in any
other capacity, may not be voted in making the
determination.
(5) By a court under Section 8.08.
(6) By any other method provided for in any
additional right to indemnification permitted
under Section 8.07.
(b) In any determination under (a), the burden of
proof is on the corporation to prove by clear and
convincing evidence that indemnification under Section
8.02 should not be allowed.
(c) A written determination as to a director's or
officer's indemnification under Section 8.02 shall be
submitted to both the corporation and the director or
officer within 60 days of the selection made under (a).
(d) If it is determined that indemnification is
required under Section 8.02, the corporation shall pay
all liabilities and expenses not prohibited by Section
8.04 within ten (10) days after receipt of the written
determination under (c). The corporation shall also
pay all expenses incurred by the director or officer in
the determination process under (a).
8.06. Advance of Expenses. Within ten (10) days
after receipt of a written request by a director or
officer who is a party to a proceeding, the corporation
shall pay or reimburse his or her reasonable expenses
as incurred if the director or officer provides the
corporation with all of the following:
(1) A written affirmation of his or her good
faith belief that he or she has not breached or
failed to perform his or her duties to the
corporation.
(2) A written undertaking, executed
personally or on his or her behalf, to repay the
allowance to the extent that it is ultimately
determined under Section 8.05 that indemnification
under Section 8.02 is not required and that
indemnification is not ordered by a court. The
undertaking under this subsection shall be an
unlimited general obligation of the director or
officer and may be accepted without reference to
his or her ability to repay the allowance. The
undertaking may be unsecured.
8.07. Nonexclusivity. (a) Except as provided in
(b), Sections 8.01, 8.02 and 8.06 do not preclude any
additional right to indemnification or allowance of
expenses that a director or officer may have under any
of the following:
(1) The Articles of Incorporation.
(2) A written agreement between the director
or officer and the corporation.
(3) A resolution of the Board of Directors.
(4) A resolution, after notice, adopted by a
majority vote of all of the corporation's voting
shares then issued and outstanding.
(b) Regardless of the existence of an additional
right under (a), the corporation shall not indemnify a
director or officer, or permit a director or officer to
retain any allowance of expenses unless it is
determined by or on behalf of the corporation that the
director or officer did not breach or fail to perform a
duty he or she owes to the corporation which
constitutes conduct under Section 8.02(a)(1), (2), (3)
or (4). A director or officer who is a party to the
same or related proceedings for which indemnification
or an allowance of expenses is sought may not
participate in a determination under this subsection.
(c) Sections 8.01 to 8.14 do not affect the
corporation's power to pay or reimburse expenses
incurred by a director or officer in any of the
following circumstances.
(1) As a witness in a proceeding to which he
or she is not a party.
(2) As a plaintiff or petitioner in a
proceeding because he or she is or was an
employee, agent, director or officer of the
corporation.
8.08. Court-Ordered Indemnification. (a) Except
as provided otherwise by written agreement between the
director or officer and the corporation, a director or
officer who is a party to a proceeding may apply for
indemnification to the court conducting the proceeding
or to another court of competent jurisdiction.
Application shall be made for an initial determination
by the court under Section 8.05(a)(5) or for review by
the court of an adverse determination under Section
8.05(a)(l), (2), (3), (4) or (6).
(b) If the court determines that the director or
officer is entitled to indemnification, the corporation
shall pay the director's or officer's expenses incurred
to obtain the court-ordered indemnification.
8.09. Indemnification and Allowance of Expenses
of Employees and Agents. The corporation shall
indemnify an employee of the corporation who is not a
director or officer of the corporation, to the extent
that he or she has been successful on the merits or
otherwise in defense of a proceeding, for all
reasonable expenses incurred in the proceeding if the
employee was a party because he or she was an employee
of the corporation. In addition, the corporation may
indemnify and allow reasonable expenses of an employee
or agent who is not a director or officer of the
corporation to the extent provided by the Articles of
Incorporation or these Bylaws, by general or specific
action of the Board of Directors or by contract.
8.10. Insurance. The corporation may purchase
and maintain insurance on behalf of an individual who
is an employee, agent, director or officer of the
corporation against liability asserted against or
incurred by the individual in his or her capacity as an
employee, agent, director or officer, regardless of
whether the corporation is required or authorized to
indemnify or allow expenses to the individual against
the same liability under Sections 8.01, 8.02, 8.06,
8.07 and 8.09.
8.11. Securities Law Claims.
(a) Pursuant to the public policy of the State of
Wisconsin, the corporation shall provide
indemnification and allowance of expenses and may
insure for any liability incurred in connection with a
proceeding involving securities regulation described
under (b) to the extent required or permitted under
Sections 8.01 to 8.10.
(b) Sections 8.01 to 8.10 apply, to the extent
applicable to any other proceeding, to any proceeding
involving a federal or state statute, rule or
regulation regulating the offer, sale or purchase of
securities, securities brokers or dealers, or
investment companies or investment advisers.
8.12. Liberal Construction. In order for the
corporation to obtain and retain qualified directors,
officers and employees, the foregoing provisions shall
be liberally administered in order to afford maximum
indemnification of directors, officers and, where
Section 8.09 of these Bylaws applies, employees. The
indemnification above provided for shall be granted in
all applicable cases unless to do so would clearly
contravene law, controlling precedent or public policy.
8.13. Definitions Applicable to this Article.
For purposes of this Article:
(a) "Affiliate" shall include, without limitation,
any corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise that directly
or indirectly through one or more intermediaries,
controls or is controlled by, or is under common
control with, the corporation.
(b) "Corporation" means this corporation and any
domestic or foreign predecessor of this corporation
where the predecessor corporation's existence ceased
upon the consummation of a merger or other transaction.
(c) "Director or officer" means any of the
following:
(1) An individual who is or was a director or
officer of this corporation.
(2) An individual who, while a director or
officer of this corporation, is or was serving at
the corporation's request as a director, officer,
partner, trustee, member of any governing or
decision-making committee, employee or agent of
another corporation or foreign corporation,
partnership, joint venture, trust or other
enterprise.
(3) An individual who, while a director or
officer of this corporation, is or was serving an
employee benefit plan because his or her duties to
the corporation also impose duties on, or
otherwise involve services by, the person to the
plan or to participants in or beneficiaries of the
plan.
(4) Unless the context requires otherwise,
the estate or personal representative of a
director or officer.
For purposes of this Article, it shall be
conclusively presumed that any director or officer
serving as a director, officer, partner, trustee,
member of any governing or decision-making committee,
employee or agent of an affiliate shall be so serving
at the request of the corporation.
(d) "Expenses" include fees, costs, charges,
disbursements, attorney fees and other expenses
incurred in connection with a proceeding.
(e) "Liability" includes the obligation to pay a
judgment, settlement, penalty, assessment, forfeiture
or fine, including an excise tax assessed with respect
to an employee benefit plan, and reasonable expenses.
(f) "Party" includes an individual who was or is,
or who is threatened to be made, a named defendant or
respondent in a proceeding.
(g) "Proceeding" means any threatened, pending or
completed civil, criminal, administrative or
investigative action, suit, arbitration or other
proceeding, whether formal or informal, which involves
foreign, federal, state or local law and which is
brought by or in the right of the corporation or by any
other person.
ARTICLE IX.
SEAL
9.01. Seal. The Board of Directors may provide a
corporate seal which may be circular in form and have
inscribed thereon the name of the corporation and the
state of incorporation and the words "Corporate Seal."
ARTICLE X.
AMENDMENTS
10.01. By Shareholders. These Bylaws may be
amended or repealed and new Bylaws may be adopted by
the shareholders.
10.02. By Directors. Except as the Articles of
Incorporation may otherwise provide, these Bylaws may
also be amended or repealed and new Bylaws may be
adopted by the Board of Directors by the vote provided
in Section 3.08, but (a) no Bylaw adopted by the
shareholders shall be amended, repealed or readopted by
the Board of Directors if the Bylaw so adopted so
provides and (b) a Bylaw adopted or amended by the
shareholders that fixes a greater or lower quorum
requirement or a greater voting requirement for the
Board of Directors than otherwise is provided in the
Wisconsin Business Corporation Law may not be amended
or repealed by the Board of Directors unless the Bylaw
expressly provides that it may be amended or repealed
by a specified vote of the Board of Directors. Action
by the Board of Directors to adopt or amend a Bylaw
that changes the quorum or voting requirement for the
Board of Directors must meet the same quorum
requirement and be adopted by the same vote required to
take action under the quorum and voting requirement
then in effect, unless a different voting requirement
is specified as provided by the preceding sentence. A
Bylaw that fixes a greater or lower quorum requirement
or a greater voting requirement for shareholders or
voting groups of shareholders than otherwise is
provided in the Wisconsin Business Corporation Law may
not be adopted, amended or repealed by the Board of
Directors.
10.03. Implied Amendments. Any action taken or
authorized by the shareholders or by the Board of
Directors, which would be inconsistent with the Bylaws
then in effect but is taken or authorized by a vote
that would be sufficient to amend the Bylaws so that
the Bylaws would be consistent with such action, shall
be given the same effect as though the Bylaws had been
temporarily amended or suspended so far, but only so
far, as is necessary to permit the specific action so
taken or authorized.
DIRECTOR DEFERRED COMPENSATION PLAN
FOR
BANK OF LUXEMBURG
1. Purpose. The purpose of the within plan (the
"Plan") is to permit certain directors of BANK OF
LUXEMBURG (the "Corporation") to defer receipt of a
portion of their compensation until a later date, and
to provide for the payment of said deferred
compensation upon the occurrence of certain specified
future events.
2. Definitions. For the purpose of the Plan,
the following definitions shall be applicable:
(a) "Plan Year" shall mean the period commencing
on January 1 of each year and ending on
December 31 the following year. The first
Plan Year of the Plan shall be the year
commencing February 1, 1993 and ending on
December 31, 1993.
(b) "Compensation" shall mean the total gross
compensation paid by the Corporation to a
Participant for services rendered to the
Corporation, excluding compensation payable
in forms other than cash, expense allowances,
contributions by the Corporation to any plan
qualified under Section 401 of the Internal
Revenue Code of 1986, and amounts expended by
the Corporation for health, medical, life or
other insurance on behalf of the Participant.
(c) "Participant" shall mean a person who is
eligible to participate in the Plan pursuant
to paragraph 3 and who in fact does
participate in the Plan.
(d) "Administration" shall mean the persons
appointed as the Administrative Committee
pursuant to paragraph 16.
(e) "Account" shall mean a Participant's deferred
compensation account as provided in
paragraphs 4 and 6.
(f) "Amount of the benefit payable hereunder"
with respect to a Participant shall mean the
amount determined pursuant to the provisions
of paragraphs 9 and 10(b).
(g) "Vesting" shall be 100% unless otherwise
stated in Exhibit A.
3. Eligibility. Each director of the
Corporation who has completed at least one (1) year of
service with the Corporation is eligible to participate
in the Plan as of the beginning of the Plan Year
immediately following such director's completion of one
(1) year of service with the Corporation. For purposes
of the foregoing, a director of the Corporation shall
be deemed to have completed one (1) year of service
with the Corporation on the first anniversary date of
such director's employment by the Corporation as an
director. Each eligible director who elects to
participate in the Plan shall enter into an Agreement
with the Corporation in the form attached hereto as
Exhibit A prior to the beginning of the first Plan Year
with respect to which such director is eligible to
participate in the Plan.
4. Deferral of Compensation. In order to defer
receipt of Compensation for future Plan Years, a
Participant shall file a written election with the
Administrative Committee on the Agreement to be
executed by the Participant in the form of Exhibit A
not later than the December 31 immediately preceding
the first such Plan Year, setting forth (i) an initial
amount of Compensation which such Participant elects to
defer from the Compensation otherwise payable to such
Participant during the first Plan Year in which the
Participant will participate in the Plan, and (ii) in
addition to the foregoing, the amount or percentage of
Compensation to be deferred during all Plan Years in
which the Participant participates in the Plan;
provided, however, that the initial amount of
Compensation to be deferred pursuant to clause (i)
hereinabove shall be subject to the approval of the
Corporation; and further provided, that the amount or
percentage of Compensation that may be deferred
pursuant to clause (ii) above may not exceed one
hundred percent (100%) during any Plan Year without the
Corporation's consent; and further provided, that
subject to the foregoing one hundred percent (100%)
limitation, the Participant may elect to modify the
percentage of his Compensation to be deferred pursuant
to clause (ii) above for any future Plan Year(s) by
executing and filing with the Administrative Committee
written notification thereof on forms to be furnished
by the Administrative Committee prior to the first day
of the Plan Year(s) with respect to which such
modification is applicable. The Participant's
Compensation shall be reduced by the amounts stated,
and said amounts shall be credited promptly to the
Participant's deferred compensation account
("Account").
5. Irrevocable Election. An election to defer
Compensation with respect to any Plan Year shall become
binding and irrevocable in all respects upon the
commencement of the Plan Year to which such election
applies.
6. Interest on Accounts. Except as provided
hereinafter within this Paragraph 6, all amounts
credited to a Participant's Account shall be deemed to
have earned interest during each Plan Year from (i) the
first day of such Plan Year with respect to amounts
that were credited to the Participant's Account on or
prior to such date, or (ii) the dates on which such
amounts shall have been credited to such Participant's
Account with respect to any amounts that are credited
to such Participant's Account during a Plan Year. The
indexed interest crediting rate shall be declared by
the board on or before each January 31st for the then
current deferral year. Notwithstanding the foregoing,
(i) if a Participant's employment with the Corporation
is terminated for any reason (whether or not for cause,
and whether or not voluntarily) other than such
Participant's death, or retirement following his
attainment of the age of seventy-two (72) years, then
such Participant's Account shall thereafter be deemed
to have been credited with interest at such rate as is
two (2) percentage points less than the rate set forth
in the first sentence of this paragraph 6; (ii) if the
Corporation terminates the Plan, then each
Participant's Account shall thereafter be deemed to
have been credited with interest at such rate as is
equal to two (2) percentage points less than the rate
set forth in the first sentence of this paragraph 6;
and (iii) if prior to the termination of the Plan a
Participant dies while employed by the Corporation, or
retires from his employment with the Corporation after
having attained the age of seventy-two (72) years, then
all amounts credited to such Participant's Account
shall thereafter be deemed to have been credited with
interest at such rate as is equal to (x) the rate of
the Corporation in effect as of the December 31
immediately preceding the commencement of the Plan Year
during which such Participant died or retired, as the
case may be, or (y) any rate that is substituted for
such rate as provided in the first sentence of this
paragraph 6.
Through the later of (i) the last day of the Plan
Year immediately preceding the date on which a benefit
becomes payable hereunder to a Participant pursuant to
paragraph 8, or (ii) the last day of the Plan Year
immediately preceding the date on which payment of a
benefit payable hereunder commences, if such payment is
deferred by the Administrative Committee pursuant to
paragraph 10(b), all interest deemed earned pursuant to
this paragraph 6 shall be deemed to have been earned
ratably over each such Plan Year and shall be credited
to such Participant's Account on the last day of each
such Plan Year. All interest deemed earned pursuant to
this paragraph 6 between (x) the last day of the Plan
Year immediately preceding the date on which a benefit
becomes payable hereunder pursuant to paragraph 8, and
(y) the date on which a benefit becomes payable
hereunder pursuant to paragraph 8, shall be deemed to
have been earned ratably over such period and shall be
credited to such Participant's Account on the date on
which a benefit becomes payable hereunder pursuant to
paragraph 8; provided, however, that if the
Administrative Committee defers payment of a benefit
payable hereunder pursuant to paragraph 10(b), then in
lieu of the foregoing, all interest deemed earned
pursuant to this paragraph 6 between (x) the last day
of the Plan Year immediately preceding the date on
which payable of the benefit payable hereunder
commences, and (y) the date on which payment of the
benefit hereunder commences, shall be deemed to have
been earned ratably over such period and shall be
credited to the Participant's Account on the date on
which payment of the benefit payable hereunder
commences. Thereafter, a Participant shall be deemed
to earn simple interest on the unpaid amount of the
benefit payable hereunder at the rate provided in this
paragraph 6.
7. Account Information. Within sixty (60) days
after the close of each Plan Year, the Administrative
Committee shall provide each Participant with a report
of the amount deemed credited to his Account as of the
last day of such Plan Year.
8. Distribution of Benefits. A benefit under
this Plan shall be payable to a Participant or his
beneficiary upon the first to occur of the following
events:
(a) the Participant's death, if such
Participant's employment with the Corporation
has not terminated prior to his death; or
(b) the termination of the Participant's
employment with the Corporation; or
(c) the retirement of the Participant from his
employment with the Corporation on or after
attainment of the age of seventy-two (72)
years; or
(d) the election by the Corporation to terminate
the Plan as provided in paragraph 11.
9. Amount of Benefit. Subject to paragraph
10(b), the amount of the benefit payable hereunder to a
Participant or his beneficiary shall be the vested
amount deemed credited to the Participant's Account as
of the date of the occurrence of an event described in
paragraph 8 which causes the benefit to be payable
hereunder; provided, however, that in the event of a
Participant's death prior to the termination of his
employment with the Corporation, and prior to the
termination of the Plan, then, if the Participant's
Projected Benefit (as defined hereinafter within this
paragraph 9) exceeds the aforesaid amount, then the
amount of the benefit payable hereunder to such
Participant's beneficiary shall be the Participant's
Projected Benefit and not the amount deemed credited to
the Participant's Account as of the date of his death.
For purposes of this Paragraph 9, a Participant's
Projected Benefit shall be defined to mean the amount
that would have been deemed credited to such
Participant's Account as of the first day of the month
during which the Participant would have attained the
age of seventy-two (72) years. The Projected Benefit
with respect to each Participant shall be based solely
upon the Corporation's determination thereof and the
initial amount thereof with respect to each Participant
shall be set forth on the Agreement entered into by and
between such Participant and the Corporation in the
form of Exhibit A attached hereto. The Corporation at
its sole discretion, may from time to time modify the
amount of each Participant's Projected Benefit.
10. Form of Benefits. (A) Subject to paragraphs
10(b) and 11, the amount of the benefit to which a
Participant is entitled under the Plan shall be
distributed promptly to such Participant (or to his
beneficiary in the event of such Participant's death)
following an event described in paragraph 8 in either
of the following methods, as selected solely by the
Administrative Committee:
(1) as a lump sum; or
(2) in substantially equal monthly installments
over a ten (10) year period. In addition,
interest as provided in paragraph 6 on the
amount of the benefit payable hereunder which
remains unpaid from time to time shall be
paid monthly at the time of paying each
monthly installment.
(B) Notwithstanding paragraph 10(a), if a
Participant leaves the employ of the Corporation for
any reason (whether or not for cause, and whether or
not voluntarily) other than the Participant's death,
the Administrative Committee may elect to defer the
payment of the amount of the benefit otherwise payable
hereunder until the earlier of (i) the first day of the
month during which such Participant attains the age of
seventy-two (72) years, or (ii) such date as is not
later than thirty (30) days next following the date on
which the Corporation has been notified of the
Participant's death. In such event, however, the
amount of the benefit payable hereunder shall be deemed
to include interest as provided in paragraph 6 through
the date on which payment of the benefit commences and
the unpaid amount of the benefit shall bear interest
thereafter as provided in paragraph 10(a)(2).
11. Termination of Plan. Subject to the
provisions of paragraph 10(c), the Corporation may at
any time and for any reason terminate the Plan, in
which event it shall pay to each Participant (or to his
beneficiary in the event of a Participant's death) the
amount of the benefit payable hereunder in either of
the following methods, as selected solely by the
Administrative Committee:
(a) as a lump sum; or
(b) in substantially equal monthly installments
over such period of time as is selected by
the Administrative Committee. In addition,
interest as provided in paragraph 6 on the
amount of the benefit payable hereunder which
remains unpaid from time to time shall be
paid monthly at the time of paying each
monthly installment.
12. Appointment of Beneficiary. Any benefit
payable to a Participant's beneficiary under this
Agreement shall be paid to the beneficiary named by the
Participant on a written document in the form attached
hereto as Exhibit B executed by the Participant and
delivered to the Corporation. The Participant shall
have the right to change the beneficiary designation by
completing a subsequent document in the form of Exhibit
B attached hereto, executing said document, and
delivering it to the Corporation. If the Participant
does not designate any beneficiary in the manner set
forth hereinabove, or if the designated beneficiary has
predeceased the Participant, then the benefit payable
hereunder shall be payable first to the spouse of the
Participant during his or her lifetime, and then to the
issue of the Participant by right of representation;
provided, however, that if the Participant has no
spouse or issue who are alive at the time any benefits
are payable hereunder, such benefits shall be payable
to the estate of the Participant.
13. Condition Precedent. The Participant hereby
agrees that he has answered, or will answer, truthfully
and completely, without mental reservation or
concealment, any question or request for information in
connection with the issuance of any life insurance
policy on the life of the Participant to the
Corporation for the purpose of assisting the
Corporation in meeting its obligations under this
Agreement. If the issuing life insurance company
refuses to pay a claim as a result of a material
misrepresentation or other act by the Participant, no
benefits shall be payable under this Agreement.
14. Withholding. All benefits payable hereunder
shall be subject to withholding for income taxes,
social security and similar items to the extent
required by law.
15. Assignability. The right to receive payments
under this Agreement shall not be assigned or
encumbered, or subject to anticipation, garnishment,
attachment, or any other legal process of creditors of
a Participant or any person designated as beneficiaries
hereunder. In the event that a Participant or a
beneficiary hereunder attempts to assign such right,
the Corporation, at its own discretion, may suspend,
reduce, or terminate any or all rights created by this
Agreement as to the Participant or to the person
attempting said assignment.
16. Administration and Interpretation of the
Plan. The Corporation is hereby designated as the
named fiduciary under this Agreement. The Board of
Directors of the Corporation shall appoint an
administrative committee (the "Administrative
Committee") consisting of two or more persons to
administer and interpret the Plan. Interpretation by
the Administrative Committee shall be final and binding
upon the Participants and their beneficiaries. The
Administrative Committee may adopt rules and
regulations relating to the Plan as it may deem
necessary or advisable for the administration of the
Plan. A member of the Administrative Committee shall
not participate in any Committee decisions affecting
his rights as a Participant in the Plan.
17. Claims Procedure. If a Participant or the
Participant's beneficiary (the "Claimant") is denied
all or a portion of an expected benefit under the Plan
for any reason, he may file a claim with the
Administrative Committee. The Administrative Committee
shall notify the claimant within sixty (60) days of
allowance or denial of the claim, unless the Claimant
receives a written notice from the Administrative
Committee prior to the end of the 60-day period stating
that special circumstances require an extension of time
for decision. The notice of the Administrative
Committee's decision shall be in writing, sent by mail
to the Claimant's last known address, and, if a denial
of the claim, must contain the following information:
(a) the specific reasons for the denial;
(b) specific reference to pertinent provisions of
the Plan on which the denial is based; and
(c) if applicable, a description of any
additional information or material necessary
to perfect the claim, an explanation of why
such information or material is necessary,
and an explanation of the claims review
procedure.
18. Review Procedure. (a) A Claimant is
entitled to request a review of any denial of his claim
by the Administrative Committee. The request for
review must be submitted in writing within sixty (60)
days of mailing of notice of the denial. Absent a
request for review within the 60-day period, the claim
will be deemed to be conclusively denied. The Claimant
or his representative shall be entitled to review all
pertinent documents, and to submit issues and comments
orally and in writing.
(b) If the request for review by a Claimant
concerns the interpretation and application of the
provisions of the Plan and the Corporation's
obligations, then the review shall be conducted by an
arbitrator agreed upon by and between the claimant and
the Administrative Committee. If the Claimant and the
Administrative Committee cannot agree upon an
arbitrator within thirty (30) days from the date on
which the Claimant requests in writing a review of any
denial of his claim by the Administrative Committee,
then the request for review by the Claimant shall be
decided by three arbitrators selected as follows:
(a) The Claimant, within five (5) days after the
expiration of the aforesaid thirty (30) day
period shall select one arbitrator and serve
notice thereof upon the administrative
committee. Within five (5) days after
receipt of notice of the Claimant's selection
of an arbitrator, the Administrative
Committee shall select one arbitrator and
serve notice thereof upon the Claimant. The
two arbitrators so selected shall thereupon
select the third arbitrator;
(b) If a party fails to appoint such arbitrator
and serve notice thereof within the specified
time, the other party shall be entitled to
appoint both arbitrators;
(c) If the two arbitrators appointed fail to
agree upon a third arbitrator within ten (10)
days after the appointment of the latter of
them, then an application may be made by
either party hereto, upon notice to the other
party, to any court of competent
jurisdiction, for the appointment of a third
arbitrator, and any such appointment so made
shall be binding upon the parties hereto.
The decision of a majority of the three
arbitrators shall be deemed to be the
arbitrator's decision.
The term "party" or "parties" as used herein shall
mean the Claimant on the one hand, and the
Administrative Committee on the other hand. It is
further agreed that each party shall select as an
arbitrator only persons experienced in the types of
issues that the Claimant requests be reviewed.
The arbitrator or arbitrators, as the case may be,
shall afford the Claimant a hearing and the opportunity
to review all pertinent documents and submit issues and
comments orally and in writing, and shall render a
review decision in writing, all within sixty (60) days
after the appointment of the last arbitrator; provided,
that, in special circumstances the arbitrator or
arbitrators may extend the time for decision by not
more than sixty (60) days upon written notice to the
claimant. The Claimant shall receive written notice of
the arbitrator's or arbitrator's review decision,
together with specific reasons for the decision and
reference to the pertinent provisions of the Plan.
19. Liability. No officer of the Corporation
shall be personally liable by virtue of any contract,
agreement or other instrument made or executed by him
or on his behalf as an officer, nor for any mistake or
judgment made by himself or any other officer, nor for
any negligence, omission or wrongdoing of any other
officer or of anyone employed by the Corporation, nor
for any loss, unless resulting from his own gross
negligence or willful misconduct. In addition, the
Corporation does not assure or guarantee the tax
consequences of benefits provided hereunder or matters
beyond its control.
20. Title to Assets. No Participant or former
Participant, or his beneficiaries, shall have any legal
or equitable right or interest in any of the funds set
aside by the Corporation or in any assets in which the
Corporation may invest, from time to time, to fund the
Plan.
21. Amendments. The Corporation reserves the
right to amend or modify, in whole or in part, any or
all of the provisions of the Plan at any time by a
written instrument; provided, however, that no
amendment or modification shall be made which will
deprive any Participant or any Participant's
beneficiary of any vested benefits to which he is
entitled under the Plan.
22. Insurance Contracts. No insurance company
which issues a policy under the Plan shall be required
to take or permit any action contrary to the provisions
of such policy, or be bound to allow any benefit or
privilege to any person interested in a policy it has
issued which is not provided in such policy, or be
deemed to be a party to the Plan for any purpose. The
terms of such policy or policies shall be a part of the
Plan and incorporated herein by reference.
23. Participant's Rights. The establishment of
the Plan shall not create any legal or equitable right
against the Corporation unless such right is
specifically provided for in the Plan. Furthermore,
nothing in the Plan shall be construed as giving a
Participant the right to be retained in the employment
of the Corporation, and a Participant shall remain
subject to discharge at any time to the same extent as
if the Plan had not been adopted.
24. Incompetency. Every person receiving or
claiming benefits under the Plan shall be conclusively
presumed to be mentally competent until the date on
which the Corporation receives a written notice in a
form and manner acceptable to the Corporation that such
person is incompetent, and that a guardian, conservator
or other person legally vested with the care of his
estate has been appointed. In such event, the
Corporation may direct payments of benefits to such
guardian, conservator or other person legally vested
with the care of his estate, and any such payments so
made shall be a complete discharge of the Corporation
to the extent so made.
25. Notices. Notices required by the Plan to be
given to the Corporation or a Participant shall be in
writing, and shall be considered to have been duly
given or served if personally delivered, or sent by
first class, certified or registered mail.
26. Severability. The invalidity or partial
invalidity of any portion of the Plan shall not
invalidate the remainder thereof, and said remainder
shall remain in full force and effect.
27. Release. Any payment to or for the benefit
of any Participant or his beneficiaries in accordance
with the provisions hereof shall, to the extent
thereof, be in full satisfaction of all claims
hereunder against the Corporation.
28. Governing Law. Construction and
administration of the Plan shall be governed by the
laws of the State of Wisconsin.
29. Effective Date. The Plan is effective as of
February 1, 1993.
EXHIBIT A
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT, made and entered into on this ____
day of __________, 19__, by and between Bank of
Luxemburg (the "Corporation") and _______________ (the
"Participant").
WITNESSETH;
WHEREAS, the Corporation has adopted the Deferred
Compensation Plan for Bank of Luxemburg (the "Plan");
and
WHEREAS, the Participant has been determined to be
eligible to participate in the Plan; and
WHEREAS, the Plan requires that an agreement be
entered into between the Corporation and the
Participant setting forth certain terms of the Plan as
they apply to the Participant;
NOW, THEREFORE, the Corporation and the
Participant agree as follows:
1. Participant. The Participant is hereby
designated as a participant in the Plan.
2. Incorporation of Plan. The Plan, a copy of
which is attached, is hereby incorporated into and made
a part of this Agreement as though set forth in full
herein. The parties shall be bound by, and have the
benefit of, each and every provision of the Plan
including but not limited to the non-assignability
provisions of paragraph 15 of the Plan. The
Participant hereby acknowledges receipt of a copy of
the Plan, and that he/she has read the same.
3. Information Regarding the Participant. The
Participant was born on ________, and his/her present
employment by the Corporation as a director began on
_____________________.
4. Election to Defer. The Participant hereby
irrevocably elects to defer:
(a) An amount of ___________ payable to the
Participant as Compensation during the first
Plan Year during which the Participant is
eligible to participate in the Plan; and
(b) __________ percent (___%) of the
Participant's Compensation, during subsequent
Plan Years for which the Participant is
eligible to participate in the Plan, and
continuing until modified by the Participant
as provided in the Plan.
5. Projected Benefit. For purposes of paragraph
9 of the Plan, the amount of the projected Benefit with
respect to the Participant is _______.
6. Deferral Crediting Rate. The interest
credited on all balances in the Participant's deferral
account shall be ___________.
7. Vesting. The Participant will be 100% vested
in the Plan.
8. Certification by Participant. The
Participant certifies that his/her decision to defer
Compensation is not due to any reliance upon financial
or tax advice given by the Corporation, and that the
Corporation has not represented or warranted the tax
effect of any Compensation deferred pursuant to the
Plan. The Participant further certifies that he/she is
aware that no ruling or determination has been obtained
from the Internal Revenue Service that the Plan will
effect the deferral of income for income tax purposes.
The Participant further certifies that he/she
understands that all Compensation deferred by the
undersigned pursuant to the Plan will remain the
property of the Corporation until paid out in
accordance with the terms of the Plan, and that all
such amounts are subject to the claims of the
Corporation's creditors.
9. Definitions. All capitalized terms utilized
but not defined herein shall be defined as set forth in
the Plan.
10. Entire Agreement. This Agreement constitutes
the entire Agreement between the parties as to the
subject matter hereof. No rights are granted to the
Participant by virtue of this Agreement other than
those specifically set forth in the Plan.
11. Binding Effect. This Agreement shall be
binding upon the parties, the successors and assigns of
the Corporation, and subject to the limitations of the
Plan, the heirs and beneficiaries of the Participant.
12. Governing Law. This Agreement shall be
construed and interpreted in accordance with the laws
of the State of Wisconsin.
IN WITNESS WHEREOF, the parties hereto have
entered into the Agreement as of the date first above
written.
By:
Its
Participant
EXHIBIT B
For purposes of the Deferred Compensation
Agreement dated ______________, 19___, made and entered
into by and between the undersigned and Bank of
Luxemburg, the undersigned does hereby name the
following beneficiary or beneficiaries for all purposes
contemplated by the Agreement:
Dated:
Participant
Receipt of the foregoing beneficiary designation
is hereby acknowledged.
Dated:_________________ By:
Its
Bank of Luxemburg
Exhibit 21
Subsidiaries
Name Jurisdiction of Organization
Bank of Luxemburg Wisconsin
Area Development Corporation Wisconsin
Luxemburg Investment Nevada
Corporation *
* A wholly-owned subsidiary of Bank of Luxemburg.
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