<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MIDWEST BANC HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
MIDWEST BANC HOLDINGS, INC.
501 WEST NORTH AVENUE
MELROSE PARK, ILLINOIS 60160
Fellow Stockholders:
You are cordially invited to attend the annual meeting of stockholders
(the "Annual Meeting") of Midwest Banc Holdings, Inc. (the "Company"), Melrose
Park, Illinois, which will be held on May 20, 1998, at 2:00 p.m., Chicago time,
at Elmcrest Banquets by Biancalana, 7370 West Grand Avenue, Elmwood Park,
Illinois 60707.
The attached Notice of the Annual Meeting and the Proxy Statement describe
the formal business to be transacted at the Annual Meeting. Directors and
officers of the Company will be present at the Annual Meeting to respond to any
questions that our stockholders may have regarding the business to be
transacted.
The Board of Directors of the Company has determined that the matters to be
considered at the Annual Meeting are in the best interests of the Company and
its stockholders. For the reasons set forth in the Proxy Statement, the Board
unanimously recommends that you vote FOR the matters to be considered.
Please sign and return the enclosed proxy card promptly. Your cooperation
is appreciated since a majority of the common stock must be represented, either
in person or by proxy, to constitute a quorum for the conduct of business.
On behalf of the Board of Directors and all of the employees of the
Company, I thank you for your continued interest and support.
Sincerely yours,
ROBERT L. WOODS
President and Chief Executive Officer
April , 1998
<PAGE> 3
MIDWEST BANC HOLDINGS, INC.
501 WEST NORTH AVENUE
MELROSE PARK, ILLINOIS 60160
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1998
---------------------
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the "Annual
Meeting") of Midwest Banc Holdings, Inc. (the "Company") will be held on May 20,
1998, at 2:00 p.m., Chicago time, at Elmcrest Banquets by Biancalana, 7370 West
Grand Avenue, Elmwood Park, Illinois 60707.
The purpose of the Annual Meeting is to consider and vote upon the
following matters:
1. The election of eight (8) members of the Company's Board of
Directors;
2. The amendment of the Company's By-laws to provide for staggered
terms for the Company's Board of Directors;
3. The amendment of the Company's By-laws to increase the required
percentage of voting stock needed to amend certain provisions of the
By-laws to 66 2/3%;
4. The ratification of the appointment of Crowe, Chizek and Company
LLP as independent auditors of the Company for the fiscal year ending
December 31, 1998; and
5. Such other matters as may properly come before the Annual Meeting
and at any adjournments thereof, including whether or not to adjourn the
meeting.
The Board of Directors has established April 8, 1998 as the record date for
the determination of stockholders entitled to receive notice of and to vote at
the Annual Meeting and at any adjournments thereof. Only record holders of the
common stock of the Company as of the close of business on such record date will
be entitled to vote at the Annual Meeting or any adjournments thereof. In the
event there are not sufficient votes for a quorum, the Annual Meeting may be
adjourned in order to permit further solicitation of proxies by the Company. A
list of stockholders entitled to vote at the Annual Meeting will be available at
Midwest Banc Holdings, Inc., 501 West North Avenue, Melrose Park, Illinois
60160, for a period of ten days prior to the Annual Meeting and will also be
available at the Annual Meeting itself.
By Order of the Board of Directors
DANIEL NAGLE
Secretary
Chicago, Illinois
April , 1998
<PAGE> 4
MIDWEST BANC HOLDINGS, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1998
SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is being furnished to stockholders of Midwest Banc
Holdings, Inc. (the "Company") in connection with the solicitation by the Board
of Directors ("Board of Directors" or "Board") of proxies to be used at the
annual meeting (the "Annual Meeting") of stockholders to be held on May 20, 1998
at 2:00 p.m., Chicago time, at Elmcrest Banquets by Biancalana, 7370 West Grand
Avenue, Elmwood Park, Illinois 60707, and at any adjournments thereof. The 1997
Annual Report to Stockholders, including consolidated financial statements for
the fiscal year ended December 31, 1997, and a proxy card, accompanies this
Proxy Statement, which is first being mailed to record holders of Common Stock
of the Company ("Common Stock") on or about April , 1998.
Stockholders are requested to vote by completing the enclosed proxy card
and returning it signed and dated in the enclosed postage-paid envelope.
Stockholders are urged to indicate their vote in the spaces provided on the
proxy card. Proxies solicited by the Board of Directors will be voted in
accordance with the directions given therein. Where no instructions are
indicated, signed proxy cards will be voted FOR the election of the eight
nominees for director named in this Proxy Statement; FOR the amendment to the
Company's By-laws to allow for staggered terms for the Board of Directors; FOR
the Amendment to the Company's By-laws increasing the required percentage of
voting stock needed to amend certain portions of the By-laws to 66 2/3% and FOR
the ratification of Crowe, Chizek and Company LLP as independent auditors for
the fiscal year ending December 31, 1998.
Other than the matters listed on the attached Notice of Annual Meeting of
Stockholders, the Board of Directors knows of no additional matter that will be
presented for consideration at the Annual Meeting. Execution of a proxy,
however, confers on the designated proxy holders discretionary authority to vote
the shares in accordance with their best judgment on such other business, if
any, that may properly come before the Annual Meeting and at any adjournments
thereof, including whether or not to adjourn the Annual Meeting.
A proxy may be revoked at any time prior to its exercise by filing a
written notice of revocation with the Secretary of the Company, by delivering to
the Company a duly executed proxy bearing a later date, or by attending the
Annual Meeting and voting in person. However, if you are a stockholder whose
shares are not registered in your own name, you will need appropriate
documentation from your record holder to vote personally at the Annual Meeting.
The cost of solicitation of proxies on behalf of management will be borne
by the Company. In addition to the solicitation of proxies by mail, proxies may
be solicited personally or by telephone by directors, officers and other
employees of the Company and its subsidiaries, without additional compensation
therefor. The Company will also request persons, firms and corporations holding
shares in their names, or in the name of their nominees, which are beneficially
owned by others, to send proxy materials to and obtain proxies from such
beneficial owners, and will reimburse such holders for their reasonable expenses
in doing so.
VOTING SECURITIES
The securities which may be voted at the Annual Meeting consist of shares
of Common Stock, with each share entitling its owner to one vote on all matters
to be voted on at the Annual Meeting.
The close of business on April 8, 1998, has been fixed by the Board of
Directors as the record date (the "Record Date") for the determination of
stockholders of record entitled to notice of and to vote at the Annual Meeting
and at any adjournments thereof. The total number of shares of Common Stock
outstanding on the Record Date was 11,279,392 shares.
<PAGE> 5
The presence, in person or by proxy, of the holders of at least a majority
of the total number of the outstanding shares of Common Stock entitled to vote
is necessary to constitute a quorum at the Annual Meeting. In the event that
there are not sufficient votes for a quorum at the time of the Annual Meeting,
the Annual Meeting may be adjourned in order to permit the further solicitation
of proxies.
As to the election of directors, the proxy card being provided by the Board
of Directors enables a stockholder to vote "FOR ALL" to vote in favor of the
nominees proposed by the Board of Directors, "WITHHELD FOR ALL" to vote against
all of the nominees being proposed, or "FOR ALL EXCEPT" to withhold authority to
vote for any individual nominee by writing the nominee's name in the space
provided. Under Delaware law and the Company's By-laws, an affirmative vote of
the holders of a plurality of shares, present at the Annual Meeting, represented
in person or by proxy, and entitled to vote is required for a nominee to be
elected as a Director.
As to the amendment of the Company's By-laws to allow for staggered terms
for the Company's Board of Directors, by checking the appropriate box, a
stockholder may: (i) vote "FOR" the item; (ii) vote "AGAINST" the item; or (iii)
"ABSTAIN" from voting on such item. Under Delaware law and the Company's
By-laws, an affirmative vote of the holders of a majority of the outstanding
shares of Common Stock present at the Annual Meeting, represented in person or
by proxy, and entitled to vote, is required to constitute stockholder approval
of Proposal 2.
As to the amendment of the Company's By-laws to increase the required
percentage of voting shares needed to amend certain provision of the By-laws to
66 2/3, by checking the appropriate box, a stockholder may: (i) vote "FOR" the
item; (ii) vote "AGAINST" the item; or (iii) "ABSTAIN" from voting on such item.
Under Delaware law and the Company's By-laws, an affirmative vote of the holders
of a majority of the outstanding shares of Common Stock present at the Annual
Meeting, represented in person or by proxy, and entitled to vote, is required to
constitute stockholder approval of Proposal 3.
As to the approval of Crowe, Chizek and Company LLP as independent auditors
of the Company by checking the appropriate box, a stockholder may: (i) vote
"FOR" the item; (ii) vote "AGAINST" the item; or (iii) "ABSTAIN" from voting on
such item. Under Delaware law, an affirmative vote of the holders of a majority
of the shares of Common Stock present at the Annual Meeting, represented in
person or by proxy, and entitled to vote, is required to constitute stockholder
approval of Proposal 4.
Proxies solicited hereby will be returned to the Company's transfer agent,
Harris Trust and Savings Bank. The Board of Directors has also designated Harris
Trust and Savings Bank to act as inspectors of election and to tabulate the
votes at the Annual Meeting. After the final adjournment of the Annual Meeting,
the proxies will be returned to the Company.
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
All persons standing for election as director were unanimously nominated by
the Board of Directors. No person being nominated as a director is being
proposed for election pursuant to any agreement or understanding between any
such person and the Company.
2
<PAGE> 6
INFORMATION WITH RESPECT TO BENEFICIAL OWNERS, NOMINEES FOR DIRECTOR AND CERTAIN
EXECUTIVE OFFICERS
The following table sets forth as of the Record Date information for: (i)
those people believed by management to be the beneficial owners of more than
5.0% of the Company's Common Stock; (ii) the nominees for election to the Board
of Directors of the Company; and (iii) certain executive officers of the
Company. The table includes, with respect to directors, the year in which each
became a director of the Company and the year in which their terms as director
of the Company will expire (if Proposal 2 is adopted by the stockholders at the
Annual Meeting). The table also sets forth the amount of Common Stock and the
percent thereof beneficially owned by each person and all directors and
executive officers as a group as of the Record Date. Ownership information is
based upon information furnished by the respective individuals.
<TABLE>
<CAPTION>
EXPIRATION SHARES OF
OF COMMON STOCK
DIRECTOR OF TERM AS BENEFICIALLY PERCENT
NAME AGE COMPANY SINCE DIRECTOR* OWNED(2) OF CLASS
- ---- --- ------------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C>
NOMINEES
E.V. Silveri........................... 67 1983 2001 1,666,946(3) 15.0%
Robert L. Woods........................ 68 1983 1999 383,416(4) 3.4
Angelo DiPaolo......................... 59 1983 2000 495,422(5) 4.5
Daniel Nagle........................... 64 1983 2001 322,000 2.9
Joseph Rizza........................... 55 1997 2000 275,280(6) 2.4
LeRoy Rosasco.......................... 65 1983 2001 1,000,450(7) 9.0
Robert D. Small........................ 67 1983 1999 158,544(8) 1.4
Leon Wolin............................. 71 1991 2000 306,082(9) 2.8
NON-DIRECTOR, EXECUTIVE OFFICERS
Edward H. Sibbald...................... 49 -- -- 12,600(10) **
Brad A. Luecke......................... 47 -- -- 108,152(11) 1.0
James I. McMahon....................... 44 -- -- 11,426(11)(12) **
Stephen M. Karaba...................... 40 -- -- 10,540(11)(13) **
All directors and executive officers as
a group (12 persons)................. 4,851,556(14) 43.0%
</TABLE>
- ---------------
* Assumes Proposal 2 is approved by the stockholders of the Company at the
Annual Meeting. See "Proposal 2 -- Amendment of By-laws for Staggered
Board."
** Less than one percent.
(1) The address of each principal stockholder is 501 West North Avenue, Melrose
Park, Illinois 0160.
(2) Unless otherwise stated below, each person has sole voting and investment
power with respect to all such shares.
(3) Includes 115,680 shares held by trusts for which Mr. Silveri acts as
trustee; 34,832 shares held directly by Mr. Silveri's spouse; 2,100 shares
held by trusts for which Mr. Silveri's spouse acts as trustee; and 956,494
shares held by Go-Tane Service Stations, Inc., a company controlled by Mr.
Silveri, and the Go-Tane Pension Plan.
(4) Represents shares held by trusts for which Mr. Woods or his spouse acts as
trustee.
(5) Includes 600 shares held by Mr. DiPaolo's minor grandchild.
(6) Includes 84,480 shares held by a trust for which Mr. Rizza acts as trustee.
(7) Includes 220,880 shares held by trusts for which Mr. Rosasco acts as
trustee and 168,000 shares held directly by Mr. Rosasco's spouse.
(8) Includes the indirect ownership of 122,400 shares held in a retirement
trust account for the benefit of Mr. Small.
(9) Includes 305,282 shares held by a trust for which Mr. Wolin acts as
trustee.
(10) Includes 1,500 shares subject to currently exercisable options and the
indirect ownership of 3,300 shares held in a retirement trust account for
the benefit of Mr. Sibbald.
(11) Includes 2,500 shares subject to currently exercisable options.
3
<PAGE> 7
(12) Includes 4,126 shares held directly by Mr. McMahon's spouse and 4,000
shares held in a IRA account for the benefit of Mr. McMahon's spouse.
(13) Includes 3,000 shares held directly by Mr. Karaba's spouse.
(14) Includes an aggregate of 9,000 shares subject to currently exercisable
options. Includes 101,698 shares held in the Company's 401(k) Plan, for
which Midwest Trust Services, Inc., a subsidiary of the Company, acts as
trustee. The trustee under the 401(k) Plan has sole voting and investment
power with respect to such shares.
E.V. Silveri has served as Chairman of the Board of the Company since 1983.
Mr. Silveri was elected a director of Midwest Bank and Trust Company in 1972 and
has been Chairman of the Board of Midwest Bank and Trust Company since 1975. He
is also a member of the board of directors of Midwest Bank, First Midwest Data
Corp., Midwest Trust Services, Inc. and Midwest One Mortgage Services, Inc.
Since 1984, Mr. Silveri has been the President and also a director of Go-Tane
Service Stations, Inc., a firm he co-founded in 1966.
Robert L. Woods has served as President and Chief Executive Officer and as
a Director of the Company since 1983. Previously, he was the President of
Midwest Bank and Trust Company from 1967 to 1992. Mr. Woods also serves as
Chairman of the Board of Directors of Midwest Bank. In addition, he is a
director of The National Bank of Monmouth, Midwest One Mortgage Services, Inc.
and First Midwest Data Corp.
Angelo DiPaolo has served as a Director of the Company since 1983. He has
also served as a director of Midwest Bank and Trust Company since 1982. He has
served as President of DiPaolo Company, a heavy construction company, and
DiPaolo Center, a commercial complex in Glenview, Illinois, since 1963.
Daniel Nagle has served as a Director of the Company and as a director of
Midwest Bank and Trust Company since 1983 and 1975, respectively. He also has
served as a director of Midwest Bank since 1991 and Midwest Trust Services, Inc.
since 1994. Mr. Nagle is an attorney with the law firm of Nagle & Nagle.
Joseph Rizza has served as a Director of the Company since April 1997. He
was elected a director of Midwest Bank in 1994. Mr. Rizza is the owner of Joe
Rizza Enterprises which owns several automobile dealerships and financial
service companies in the Chicago metropolitan area.
LeRoy Rosasco has served as a Director of the Company since 1983. He has
also served as a director of Midwest Bank and Trust Company since 1969. Mr.
Rosasco has been the owner and President of ProTacTic Golf, Inc. since 1996.
Prior thereto, Mr. Rosasco was a private investor with LPR Enterprises, Inc., a
real estate investment firm, for 10 years.
Robert D. Small has served as a Director of the Company since 1983. He was
originally elected to serve as a director of Midwest Bank and Trust Company in
1974. He has previously served as President and director of Midwest Bank of
McHenry County from 1989 to 1993. Mr. Small has been President of Small's
Furniture City since 1980.
Leon Wolin has served as a Director of the Company since 1991. He was
elected a director of Midwest Bank and Trust Company in 1989. Mr. Wolin has
served as a director of Midwest Bank since 1996. Mr. Wolin has been President of
both Wolin-Levin, Inc., a real property management and consulting firm, and
Price Associates, Inc., a real estate appraisal and consulting firm, since 1950.
Edward H. Sibbald was named Executive Vice President and Chief Financial
Officer of the Company in October 1997. Previously, Mr. Sibbald served as Senior
Vice President -- Administration since 1991. Mr. Sibbald also serves as Chairman
of the Executive Committee and director of The National Bank of Monmouth and as
a director of Midwest Bank of McHenry County. In addition, he is a Vice
President and a director of Midwest One Mortgage Services, Inc., and serves as a
director of First Midwest Data Corp.
Brad A. Luecke has served as President and Chief Executive Officer and a
director of Midwest Bank and Trust Company since 1991. Mr. Luecke also serves as
Trust Officer and director of Midwest Trust Services, Inc. and as a director of
Midwest One Mortgage Services, Inc.
James I. McMahon has served as President and Chief Executive Officer and a
director of Midwest Bank since 1991. Mr. McMahon has been a Vice President of
the Company since 1987. He was elected President of
4
<PAGE> 8
Midwest One Mortgage Services, Inc. in 1997. He has served as director of
Midwest One Mortgage Services, Inc. and Midwest Trust Services, Inc. since 1994.
Stephen M. Karaba has served as President of Midwest Bank of McHenry County
since 1994. Previously, Mr. Karaba was an Executive Vice President of Midwest
Bank of McHenry County and served as Vice President -- Commercial Lending of
Illinois State Bank, and subsequently, Midwest Bank and Trust Company beginning
in 1989. Mr. Karaba has been a director of Midwest Bank of McHenry County,
Midwest Trust Services, Inc. and Midwest One Mortgage Services, Inc. since 1994.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of eight (8)
directors each serving one-year terms that expire at the next annual meeting of
stockholders.
If Proposal 2 concerning the classification of the Board of Directors is
adopted at the Annual Meeting (see "Proposal 2 -- Amendment of By-laws for
Staggered Board"), proxies solicited by the Board of Directors will be voted for
the election of Messrs. Woods and Small to Class I of the Company's Board of
Directors for initial terms expiring at the 1999 Annual Meeting of Stockholders;
the election of Messrs. DiPaolo, Rizza and Wolin to Class II of the Company's
Board of Directors for initial terms expiring at the 2000 Annual Meeting of
Stockholders; and the election of Messrs. Silveri, Nagle and Rosasco to Class
III of the Company's Board of Directors for initial terms expiring at the 2001
Annual Meeting of Stockholders. If Proposal 2 is not adopted, the proxies
solicited by the Board of Directors will be voted for the election of the
nominees herein named, each to serve until the 1999 Annual Meeting of
Stockholders and until their respective successors have been duly elected and
qualified.
In the event that any of the nominees is unable to serve or declines to
serve for any reason, it is intended that the proxies will be voted for the
election of such other person as may be designated by the present Board of
Directors. The Board of Directors has no reason to believe the nominees will be
unable or unwilling to serve. UNLESS AUTHORITY TO VOTE FOR THE NOMINEES IS
WITHHELD, IT IS INTENDED THAT THE SHARES REPRESENTED BY THE ENCLOSED PROXY CARD,
IF EXECUTED AND RETURNED, WILL BE VOTED FOR THE ELECTION OF THE NOMINEES
PROPOSED BY THE BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEES NAMED IN THIS PROXY STATEMENT.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors conducts its business through meetings of the Board
of Directors and through activities of its committees. The Board of Directors
meets regularly and may schedule special meetings as needed. During fiscal year
1997, the Board of Directors of the Company held nine meetings primarily related
to general company matters. Each of the directors of the Company attended at
least 75% of the total number of the Company's Board meetings held and committee
meetings on which such directors served during fiscal year 1997.
The Board of Directors of the Company maintains an Audit Committee. The
Audit Committee recommends the annual appointment of the Company's auditors and
reviews the scope and results of the audit and other services provided by the
Company's independent auditors. The Audit Committee consists of Messrs. Nagle,
Rosasco, Small and Wolin. The Audit Committee met once in fiscal year 1997. The
Board of Directors also functions as a Compensation Committee for the purpose of
administering the Company's 1996 Stock Option Plan, and otherwise is responsible
for determining the compensation of the Company's executive officers.
DIRECTORS' COMPENSATION
All Directors of the Company receive fees of $12,000 per year for serving
on the Board. Except for Joseph Rizza and Robert Small, all Directors of the
Company are also members of the board of directors of Midwest
5
<PAGE> 9
Bank and Trust Company. Five Directors of the Company also serve on the board of
directors of Midwest Bank, and Robert L. Woods also serves on the board of
directors of The National Bank of Monmouth. Each director of the Company's
subsidiaries received between $4,200 and $10,400 per year in base directors'
fees. Each subsidiary maintains its own fee structure for director compensation.
Certain subsidiaries also provide fees for director participation in specific
board of directors committees (such as loan committees, audit committees and
executive committees) which range between $420 and $4,200 annually. One Director
of the Company, Daniel Nagle, also serves as Secretary and receives an annual
fee not exceeding $12,000 for legal services rendered to the board of directors
of Midwest Bank and Trust Company and Midwest Bank.
EXECUTIVE COMPENSATION
The following table shows, for the years ended December 31, 1997, 1996 and
1995, the cash compensation paid by the Company, as well as certain other
compensation paid or accrued for those years, to the President and Chief
Executive Officer and other executive officers of the Company who earned and/or
received salary and bonus in excess of $100,000 in fiscal years 1997, 1996 and
1995 ("Named Executive Officers"). No other executive officer of the Company
earned and/or received salary and bonus in excess of $100,000 in fiscal year
1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- --------------------------- ---- ------- ------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Woods................. 1997 325,000 150,000 39,550(1) 0 12,072(2)
President and Chief 1996 300,000 150,000 30,950(1) 0 11,462(2)
Executive Officer 1995 250,000 100,000 27,175(1) 0 10,994(2)
Edward H. Sibbald............... 1997 133,500 29,931 13,650(3) 7,000 6,160(4)
Executive Vice President 1996 126,000 25,313 13,300(3) 6,000 5,815(4)
and Chief Financial Officer 1995 119,000 24,487 6,125(3) 0 4,262(4)
Brad A. Luecke.................. 1997 165,000 23,967 19,530(5) 7,000 6,029(4)
President, Midwest Bank 1996 155,000 31,140 15,325(5) 10,000 5,938(4)
and Trust Company 1995 145,000 35,000 16,137(5) 0 5,775(4)
James I. McMahon................ 1997 150,000 29,462 15,920(6) 7,000 4,327(4)
President, Midwest Bank 1996 140,000 28,584 10,566(6) 10,000 4,318(4)
1995 130,000 30,500 5,869(6) 0 4,200(4)
Stephen M. Karaba............... 1997 100,000 29,082 9,000(7) 7,000 4,231(8)
President, Midwest Bank 1996 90,000 18,325 7,300(7) 10,000 4,214(4)
of McHenry County 1995 80,000 16,000 3,425(7) 0 3,080(4)
</TABLE>
- ---------------
(1) Consists of directors' fees of $34,150, $26,150 and $22,375 in 1997, 1996
and 1995 respectively, and an automobile allowance of $5,400 in 1997 and
$4,800 in each of 1996 and 1995.
(2) Consists of a matching contribution made by the Company pursuant to the
Company's 401(k) Plan of $8,414, $7,917 and $7,700 in 1997, 1996 and 1995,
respectively, and life insurance premiums paid by the Company on behalf of
Mr. Woods in the amount of $3,658 in 1997, $3,545 in 1996 and $3,294 in
1995.
(3) Consists of directors' fees of $8,850, $8,500 and $6,125 in 1997, 1996 and
1995, respectively, and an automobile allowance of $4,800 in each of 1997
and 1996.
(4) Consists of a matching contribution made by the Company pursuant to the
Company's 401(k) Plan.
(5) Consists of directors' fees of $13,900, $11,900 and $11,000 in 1997, 1996
and 1995 and membership fees of $5,630, $3,425 and $5,137 in 1997, 1996 and
1995, respectively.
(6) Consists of directors' fees of $4,200 in 1997 and $3,600 in each of 1996 and
1995, membership fees of $2,885, $2,220 and $275 in 1997, 1996 and 1995,
respectively, and tuition reimbursement of $8,835, $4,746 and $1,994 in
1997, 1996 and 1995, respectively.
6
<PAGE> 10
(7) Consists of directors' fees of $4,200, $3,800 and $3,425 in 1997, 1996 and
1995 respectively, and an automobile allowance of $4,800 and $3,500 in 1997
and 1996, respectively.
(8) Consists of a matching contribution of $3,611 made by Company pursuant to
the Company's 401(k) Plan and $620 in life insurance premiums paid by
Company.
The information presented below summarizes certain information about the
Common Stock underlying options which were granted in 1997 by the Company to the
Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF PERCENT OF VALUE AT ASSUMED ANNUAL
SECURITIES TOTAL RATES OF STOCK PRICE
UNDERLYING OPTIONS APPRECIATION
OPTION GRANTED TO EXERCISE OF FOR OPTION TERM
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ------------ ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Edward H. Sibbald.............. 7,000 14.3% $12.75 12/31/07 $56,129 $142,242
Brad A. Luecke................. 7,000 14.3 12.75 12/31/07 56,129 142,242
James I. McMahon............... 7,000 14.3 12.75 12/31/07 56,129 142,242
Stephen M. Karaba.............. 7,000 14.3 12.75 12/31/07 56,129 142,242
</TABLE>
The following table summarizes the number and value of stock options
relating to Common Stock that were unexercised at December 31, 1997. No stock
options were exercised by the Named Executive Officers during 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON VALUE OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
EXERCISE REALIZED YEAR-END(#) FISCAL YEAR-END($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Edward H. Sibbald................ 0 0 1,500/11,500 7,313/23,688
Brad A. Luecke................... 0 0 2,500/14,500 12,188/38,313
James I. McMahon................. 0 0 2,500/14,500 12,188/38,313
Stephen M. Karaba................ 0 0 2,500/14,500 12,188/38,313
</TABLE>
REPORT ON EXECUTIVE COMPENSATION FOR 1997 PERIOD
The Board of Directors is responsible for making decisions regarding
executive officers' compensation, including bonuses and other benefits. The full
Board also acts as the Compensation Committee for purposes of administering the
Company's 1996 Stock Option Plan and determines the awards granted thereunder.
The Board of Directors has developed a compensation program which is
comprised of salary, annual cash incentive bonuses, long-term incentives in the
form of stock options and other benefits typically offered to executives by
corporations similar to the Company. The Board of Directors recognizes that
attracting and retaining key executives is critical to the Company's long term
success. The Board has set certain guidelines regarding executive officers'
compensation. Each executive officer is reviewed annually, and that officer's
compensation is based on that individual's contribution to the Company.
The Board of Directors has reviewed compensation structures and other
information from various sources, including, among others, The Illinois Bankers
Association and Sheshunoff Information Services. Although no company is an exact
match, consideration was given to salaries and bonuses that are paid to
executives at similar community bank holding companies. Additional
considerations were the greatly increased responsibilities of running a public
company, the individual's contributions to the Company and individual's
experience and tenure with the Company.
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<PAGE> 11
The salary of Mr. Robert L. Woods, the Company's Chief Executive Officer,
was set at $325,000 for fiscal 1997, an increase of $25,000 over the amount paid
in 1996. His salary was determined based on corporate results over the past five
years, plus a review of his individual performance. Mr. Woods also received a
bonus of $150,000 in 1997. In making decisions regarding CEO compensation, the
Board of Directors took into account results of operations of the Company,
conditions in the banking industry as a whole and Mr. Wood's long-term
contributions to the Company. Mr. Woods has been with the Company for over 36
years.
The Internal Revenue Code limits the deductions a publicly held company may
take for compensation paid to its most highly paid executive officers.
Typically, salaries and bonuses in excess of $1 million (excluding
performance-based compensation) which are paid in one tax year cannot be
deducted. The Board of Directors did not consider this section of the Internal
Revenue Code when establishing compensation because current executive salaries
and bonuses are well below the $1 million threshold.
BOARD OF DIRECTORS
E.V. Silveri
Robert L. Woods
Angelo DiPaolo
Daniel Nagle
Joseph Rizza
LeRoy Rosasco
Robert D. Small
Leon Wolin
EMPLOYMENT AGREEMENTS
The Company and certain subsidiaries of the Company have entered into
separate Transitional Employment Agreements with each of the Named Executive
Officers and certain other officers of the Company's subsidiaries. The
Transitional Employment Agreements are designed to minimize the impact of change
in control transactions on the performance of key officers and executives. In
the event of a "change in control" (generally, the acquisition of 50% or more of
the voting power or the sale of more than 40% of the assets of the Company or
the relevant subsidiary), the agreements require the Company, the relevant
subsidiary or any successor, as the case may be, to continue the employment of
the affected officers for either 12 or 24 months in their respective positions
and at their respective salaries (including directors' fees, if any) with the
right to participate in new or continuing bonus, incentive, benefit and other
plans. In the event the employment of an officer is terminated by (i) the
officer for any reason during the first year following the change in control
(subject to the requirement that certain officers must wait 90 days following
the change of control to exercise such right of termination), (ii) by an
acquiror for any reason other than death, disability or cause, or (iii) due to
constructive discharge (e.g., a reduction in salary or benefits, a material
diminution in title, duties or responsibilities, or a significant change in
hours worked or location), the acquiror is obligated to continue the affected
officer's salary (including directors' fees, if any) for 12 or 24 months after
the termination of employment.
1996 STOCK OPTION PLAN
Under the Company's 1996 Stock Option Plan (the "Plan"), incentive stock
options and nonqualified stock options may be granted to executives, key
personnel, consultants and nonemployee directors of the Company. The incentive
stock options granted under the Plan will be qualified as such under the
Internal Revenue Code of 1986, as amended (the "Code"). The purpose of the Plan
is to offer executives, key personnel, consultants and nonemployee directors
stock-based incentives in the Company, thereby giving them a stake in the
Company's growth and prosperity and encouraging them to continue their services
with the Company and its subsidiaries. The Plan permits the grant of options to
purchase up to 500,000 shares of Common Stock. In the event of corporate changes
affecting the Common Stock such as stock splits, stock dividends,
reorganizations, mergers or consolidations, appropriate adjustments will be made
in the number of
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<PAGE> 12
shares for which options may thereafter be granted under the Plan and the option
price and the number of shares subject to outstanding options granted pursuant
to the Plan. Incentive stock options may be granted only to employees of the
Company. Nonqualified stock options may be granted to all employees of, and
consultants who provide services to, the Company or its subsidiaries. Options
may be granted to employees or consultants at any time and from time to time in
the sole discretion of the Board of Directors acting as the Compensation
Committee. The full Board of Directors currently serves as the Compensation
Committee. No employee or consultant may receive options covering more than
100,000 shares in any single fiscal year.
401(K) PLAN
The Company maintains a 401(k) Plan, which is designed to be qualified
under Section 401(k) of the Internal Revenue Code of 1986, as amended (the
"Code"). An employee is eligible to participate in the 401(k) Plan following
attainment of the age of 21 and the completion of one year of service with the
Company (1,000 hours within a twelve-month period). Under the 401(k) Plan,
subject to the limitations imposed under Section 401(k) and Section 415 of the
Code, a participant is able to elect to defer not more than [15%] of his or her
compensation by directing the Company to contribute such amount to the 401(k)
Plan on such employee's behalf. The Company may elect to make matching
contributions equal to the participating employee's contribution plus 1%,
subject to a maximum matching contribution of no more than 5% of the
participant's salary.
Under the 401(k) Plan, a separate account is established for each employee.
Participants are 100% vested at all times in their contributions and vest in
employer matching contributions in one-third increments, becoming fully vested
in employer contributions after 3 years of service. Distributions from the
401(k) Plan are made upon termination of service, retirement, disability or
death in a lump sum or in annual installments. Midwest Trust Services, Inc., a
subsidiary of the Company, acts as trustee for the 401(k) Plan. Participants in
the 401(k) Plan can choose from a number of investment vehicles, including
investment in the Company's Common Stock. The trustee has sole voting and
investment power with respect to all shares of the Company's Common Stock held
in each participant's account under the 401(k) Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors functions as the Compensation Committee for purposes
of administering the Company's 1996 Stock Option Plan, and otherwise is
responsible for determining the compensation of the Company's executive
officers. Robert L. Woods, President and Chief Executive Officer of the Company,
serves on the Board of Directors.
Angelo DiPaolo, a Director of the Company, and four companies controlled by
Mr. DiPaolo received loans and lines of credit from the Company which had an
aggregate outstanding loan balance of $8.9 million as of December 31, 1997. Each
loan was made in the ordinary course of business on terms substantially the same
as those prevailing at the time for comparable transactions with unaffiliated
persons and did not involve more than the normal risk of collectibility or
present other unfavorable features. Midwest Bank and Trust Company has
contracted with a general construction contractor for renovations at its Elmwood
Park location. A company controlled by Angelo DiPaolo is a subcontractor for the
renovation project. The work to be performed by Mr. DiPaolo's company has an
estimated value of $90,000.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
The Company's current policy provides that all loans made by the Company to
its directors and executive officers are made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and do not involve more than the
normal risk of collectibility or present other unfavorable features. At December
31, 1997, the Company's directors and executive officers had loans outstanding,
whose individual aggregate indebtedness to the Company exceeded $60,000,
totaling approximately $10.3 million in the aggregate, which represented 19.4%
of total stockholders equity as of that date. Such loans were made by the
Company in the ordinary course of business, were not
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<PAGE> 13
made with favorable terms, and did not involve more than the normal risk of
collectibility or present other unfavorable features.
PROPOSAL 2 -- AMENDMENT OF BY-LAWS FOR STAGGERED BOARD
GENERAL
The Board of Directors has approved an amendment to Article III, Section
3.2 of the Company's By-laws to classify the Company's Board of Directors into
three classes of directors serving staggered three-year terms ("By-law Amendment
No. 1"). The complete text of By-law Amendment No. 1 is provided in Appendix A
and the following description of By-law Amendment No. 1 is qualified in its
entirety by reference to Appendix A.
DESCRIPTION OF BY-LAW AMENDMENT NO. 1
The By-laws currently provide for a single class of directors. By-law
Amendment No. 1 would classify the Board of Directors into three classes of
directors serving staggered terms and provide that the number of directors may
be increased or decreased from time to time. Each director will hold office
until his successor is elected and qualified or until his earlier resignation or
removal. Under the Delaware General Corporate Law, members of a staggered board
may only be removed for cause unless the Certificate of Incorporation provides
otherwise. The Company's Certificate of Incorporation does not provide for
removal of directors without cause.
The By-laws currently provide that the term of office for each director is
one year. If By-law Amendment No. 1 is approved, the slate of eight directors
proposed for election at the 1998 Annual Meeting would be elected to three
separate classes with assigned terms of from one to three years, as follows:
directors in Class I, consisting of two directors, would be elected for a one
year term expiring at the 1999 Annual Meeting; directors in Class II, consisting
of three directors, would be elected for two year terms expiring at the 2000
Annual Meeting; and directors in Class III, consisting of three directors, would
be elected for three year terms expiring at the 2001 Annual Meeting. Beginning
with the 1999 Annual Meeting, only one class of directors would be elected at
each Annual Meeting, the directors so elected would succeed the directors of the
class whose term was then expiring and each newly elected director would serve
for a three-year term. If By-law Amendment No. 1 is not approved, the eight
nominees named herein will be nominated to serve for a one-year term ending at
the 1999 Annual Meeting of Stockholders and until their respective successors
have been duly elected and qualified. See "Proposal 1 -- Election of Directors"
for information regarding the individual nominees for director.
REASONS FOR BY-LAW AMENDMENT NO. 1
The Board of Directors believes that a classified board would serve the
best interests of the Company and its stockholders by promoting the continuity
and stability of the Company and its business. The Board also believes that a
classified board would better enable the Board to protect the interests of
stockholders in the event that another entity seeks to accumulate a substantial
amount of the Company's Common Stock in order to gain control of the Company or
replace its management. A corporate raider may accumulate a substantial equity
position in a public company as a prelude to proposing a takeover, a
restructuring or a sale of all or part of the company or other similar
extraordinary corporate action. Such actions are often undertaken without
advance notice to or consultation with the target company's board of directors
or management. The purchaser may have its own agenda and little or no concern
for the interests of other stockholders. In many cases, the purchaser seeks
representation on the target company's board in order to increase the likelihood
that any such transaction will be consummated. If the target company resists
these efforts to obtain board representation, the purchaser may initiate a proxy
contest to have itself or its nominees elected to the board in place of certain
directors or the entire board.
The Board believes that if such a purchaser acquired a significant or
controlling interest in the Company's Common Stock, the purchaser's ability to
promptly remove and replace the Board without the Board's consent
10
<PAGE> 14
would severely curtail the directors' ability to negotiate effectively with the
purchaser. The threat of imminent removal also would deprive the Board of the
time and opportunity necessary to evaluate appropriately any takeover proposal,
to obtain and study alternative proposals and to help ensure that the best price
would be obtained in any transaction involving the Company. The Board believes
that such a sudden change in its membership could also be harmful to the
continuity of the Company's operations, deprive stockholders of maximum value
for their shares and jeopardize the rights of the minority stockholders.
Under a three-class structure, at least two annual stockholder meetings,
instead of one, would generally be required for such an acquiror to obtain
control of the Board of Directors by electing a majority of its representatives
to the Board. By-law Amendment No. 1 is designed to make it more time-consuming
to obtain majority control of the Board without its consent, and thus reduce the
vulnerability of the Company to an unsolicited takeover proposal or to an
unsolicited proposal for the restructuring or sale of all or part of the Company
or to enter into any other extraordinary transaction. The Board believes that
By-law Amendment No. 1 will serve to encourage any person intending to attempt
such a takeover or other transaction to negotiate with the Board, and that the
Board therefore will be better able to protect the interests of all of the
Company's stockholders.
Takeovers and changes in management of the Company which are proposed and
effected without prior consultation and negotiation with the Board and
management may not necessarily be detrimental to the Company and its
stockholders. The adoption of By-law Amendment No. 1 could discourage or
frustrate future attempts to acquire control of the Company that are not
approved by the incumbent Board, but which a majority of the stockholders deem
to be in their best interests. One of the effects of By-law Amendment No. 1 may
be to discourage prospective acquirors from making tender offers for, or open
market purchases of, shares of the Company's Common Stock. As tender offers are
often made at a premium above market price, and as large purchases made in the
open market often result in temporary fluctuations in the market price of such
shares, stockholders may be denied the opportunity to sell their shares at
prices in excess of historic market prices if the proposed amendment discourages
such tender offers or open market purchases.
By-law Amendment No. 1 is intended to encourage persons seeking to acquire
control of the Company to initiate such transaction through arms-length
negotiations with the Company's Board of Directors. The Board is charged with
protecting the interests of the Company and its stockholders. By-law Amendment
No. 1 can help prevent the bidder's use of coercive tactics, which can deprive
the Board of the opportunity to review and evaluate a takeover proposal, seek
alternative transactions, help protect the interests of the Company as an on-
going enterprise and, if the Company is to be acquired, obtain the most
beneficial terms for all stockholders. These provisions will better ensure that
neither the Board nor stockholders are coerced into a transaction that is of
primary benefit only to the acquiror. They are also intended to help ensure that
the Board will be given ample time to review and evaluate any acquisition
proposal and if appropriate, to seek alternative proposals, and to arrive at a
result which is in the best interests of the Company, its stockholders and
employees. Stockholders are urged to carefully review all discussions under
Proposal 2 and the full text of the proposed By-law Amendment No. 1 included in
Appendix A.
Approval of By-law Amendment No. 1 will require the affirmative vote of a
majority of the outstanding shares of Common Stock, present or represented by
proxy and entitled to vote at the Annual Meeting.
CERTAIN ANTI-TAKEOVER EFFECTS OF THE CERTIFICATE OF INCORPORATION, BY-LAWS AND
DELAWARE LAW
General. Certain provisions of the Certificate of Incorporation, By-laws
and the DGCL may have the effect of impeding the acquisition of control of the
Company by means of a tender offer, a proxy fight, open-market purchase or
otherwise in a transaction not approved by the Board of Directors. These
provisions may have the effect of discouraging a future takeover attempt which
is not approved by the Board of Directors but which individual stockholders may
deem to be in their best interests or in which stockholders may receive a
substantial premium for their shares over then current market prices. As a
result, stockholders who might desire to participate in such a transaction may
not have an opportunity to do so. Such provisions will also render the removal
of the current Board of Directors or management of the Company more difficult.
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<PAGE> 15
The provisions of the Certificate of Incorporation and By-laws described
below are designed to reduce, or have the effect of reducing, the vulnerability
of the Company to an unsolicited proposal for the restructuring or sale of all
or substantially all of the assets of the Company or an unsolicited takeover
attempt which is unfair to stockholders. The following description of certain of
the provisions of the Certificate of Incorporation and By-laws of the Company is
necessarily general and is qualified in its entirety by reference to the
Certificate of Incorporation and By-laws of the Company.
Authorized Shares. The Certificate of Incorporation authorizes the
issuance of 17,000,000 shares of Common Stock and 1,000,000 shares of Preferred
Stock. The shares of Common Stock and Preferred Stock have been authorized in an
amount which provides the Board of Directors with flexibility to effect, among
other things, transactions, financings, acquisitions, stock dividends, stock
splits and employee stock options. However, these authorized shares may also be
used by the Board of Directors consistent with its fiduciary duty to deter
future attempts to gain control of the Company. The Board of Directors also has
sole authority to determine the terms of any one or more series of Preferred
Stock, including voting rights, conversion rates, and liquidation preferences.
As a result of the ability to fix voting rights for a series of Preferred Stock,
the Board of Directors has the power to the extent consistent with its fiduciary
duty to issue a series of Preferred Stock to persons friendly to management in
order to attempt to block a merger or other transaction by which a third party
seeks control, and thereby assist the incumbent Board of Directors and
management to retain their respective positions.
Classified Board of Directors; Filling of Board Vacancies and Qualifying
Shares. The Board of Directors has approved, subject to stockholder approval at
the Annual Meeting, amendments to the By-laws to implement a classified Board of
Directors with staggered terms. Upon adoption of these amendments, the Board of
Directors will be divided into three classes, each of which will contain
approximately one-third of the whole number of the members of the Board of
Directors. Each class will serve a staggered three-year term, with approximately
one-third of the total number of Directors being elected each year. Under the
DGCL, members of a staggered board may only be removed for cause unless the
Certificate of Incorporation provides otherwise. The Certificate of
Incorporation does not provide for removal of directors without cause. The
staggered board is intended to provide for continuity of the Board of Directors
and to make it more difficult and time consuming for a stockholder group to
fully use its voting power to gain control of the Board of Directors without the
consent of the incumbent Board of Directors.
The By-laws provide that the number of the Directors shall be eight. The
By-laws also provide that any vacancy occurring on the Board of Directors,
including a vacancy created by an increase in the number of Directors, will be
filled for the remainder of the unexpired term by a majority vote of the
Directors then in office.
The By-laws also provide that each person, in order to be eligible to serve
as a Director, must own, of record or beneficially, at least 120,000 shares of
Common Stock.
Cumulative Voting; Action by Written Consent and Stockholder Meetings. The
Certificate of Incorporation does not provide for cumulative voting for any
purpose. The Certificate of Incorporation and By-laws also provide that any
action required or permitted to be taken by the stockholders must be effected at
an annual or special meeting and may not be effected by written consent in lieu
of a meeting. The By-laws provide that special meetings of the stockholders may
only be called by the Chairman or the President of the Company or a majority of
the Board of Directors.
Delaware Business Combination Statute. Section 203 of the DGCL provides
that, subject to certain exceptions specified therein, an "interested
stockholder" of a Delaware corporation shall not engage in any business
combination, including mergers or consolidations or acquisitions of additional
shares of the corporation, with the corporation for a three-year period
following the time that such stockholder becomes an interested stockholder
unless (i) prior to such time, the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder, (ii) upon consummation of
the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced (excluding
certain shares), or (iii) at or subsequent to
12
<PAGE> 16
such time the business combination is approved by the board of directors of the
corporation and authorized at an annual or special meeting of stockholders, by
the affirmative vote of at least 66 2/3% of the outstanding voting stock which
is not owned by the interested stockholder. Except as otherwise specified in
Section 203, an interested stockholder is defined to include any person that is
(x) the owner of 15% or more of the outstanding voting stock of the corporation,
or (y) is an affiliate or associate of the corporation and was the owner of 15%
or more of the outstanding voting stock of the corporation at any time within
the three-year period immediately prior to the date of determination; and the
affiliates and associates of any such person.
Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period. The Company has not
elected to be exempt from the restrictions imposed under Section 203. The
provisions of Section 203 may encourage persons interested in acquiring the
Company to negotiate in advance with the Board of Directors of the Company since
the stockholder approval requirement would be avoided if a majority of the
directors then in office approves either the business combination or the
transaction which results in any such person becoming an interested stockholder.
Such provisions also may have the effect of preventing changes in the management
of the Company. It is possible that such provisions could make it more difficult
to accomplish transactions which the Company's stockholders may otherwise deem
to be in their best interests.
Amendment of the Certificate of Incorporation and By-laws. The Certificate
of Incorporation provides that the affirmative vote of the holders of at least
66 2/3% of the voting stock, voting together as a single class, is required to
amend provisions of the Certificate of Incorporation prohibiting stockholder
action without a meeting or specifying the vote required to amend such
provisions. The By-laws currently may be amended by a majority vote of the
stockholders or the Board of Directors. See "Proposal 3 -- Amendment of By-laws
to Require Two-Thirds Stockholder Vote to Amend Certain By-law Provisions."
Certain By-law Provisions. The By-laws of the Company also require a
stockholder who intends to nominate a candidate for election to the Board of
Directors, or to raise new business at an annual stockholder meeting, to provide
advance notice of at least 120 days to the Company. The notice provision
requires a stockholder who desires to raise new business at an annual
stockholder meeting to provide certain information to the Company concerning the
nature of the new business, the stockholder and such stockholder's interest in
the business matter. Similarly, a stockholder wishing to nominate any person for
election as a director must provide the Company with certain information
concerning the nominee and such proposing stockholder.
The provisions described above are intended to reduce the Company's
vulnerability to takeover attempts and certain other transactions which have not
been negotiated with and approved by members of its Board of Directors.
Attempts to take over corporations have become increasingly common. An
unsolicited, nonnegotiated proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Accordingly, the Board
of Directors believes it is in the best interests of the Company and its
stockholders to encourage potential acquirors to negotiate directly with
management and that these provisions will encourage such negotiations and
discourage nonnegotiated takeover attempts. It is also the view of the Board of
Directors that these provisions should not discourage persons from proposing a
merger or other transaction at a price that reflects the true value of the
Company and that otherwise is in the best interests of all stockholders.
THE BOARD RECOMMENDS THAT YOU VOTE FOR BY-LAW AMENDMENT NO. 1.
PROPOSAL 3 -- AMENDMENT OF BY-LAWS TO REQUIRE
TWO-THIRDS STOCKHOLDER VOTE TO AMEND CERTAIN BY-LAW PROVISIONS
GENERAL
The Board of Directors has approved an amendment to Article XIII of the
By-laws to add Section 13.2 to increase the required percentage of outstanding
voting stock of the Company necessary to amend certain provisions of the
Company's By-laws to at least 66 2/3% ("By-law Amendment No. 2"). The complete
text of
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<PAGE> 17
By-law Amendment No. 2 is provided in Appendix A and the following description
of By-law Amendment No. 2 is qualified in its entirety by reference to Appendix
A.
DESCRIPTION OF BY-LAW AMENDMENT NO. 2
By-law Amendment No. 2 would require a two-thirds vote for stockholders to
amend certain provisions of the Company's By-laws. The provisions of the By-laws
that would be subject to the 66 2/3% vote of stockholders include calling of
special meetings of stockholders (Section 2.2); action taken by stockholders at
a meeting (Section 2.11); notice stockholders must give to bring business before
a meeting (Section 2.12); the number, tenure and qualifications of directors
(Section 3.2); vacancies and newly-created directorship (Section 3.10); and, if
approved by the stockholders at the Annual Meeting, amendment of By-laws by
stockholders (Section 13.2). For a discussion of the By-law provisions effected
by By-law Amendment No. 2, including possible anti-takeover effects, see
"Proposal 2 -- Amendment to Bylaws to Implement Classified Board -- Certain
Anti-Takeover Effects of the Certificate of Incorporation, By-laws and Delaware
Law."
Delaware law confers sole authority to adopt, amend or repeal By-laws in
the stockholders unless the certificate of incorporation also confers such a
power upon the board of directors. The Company's Certificate of Incorporation
confers such power upon the Board. Consequently, the By-laws of the Company may
be adopted, amended or repealed by the Board as well as by vote of stockholders.
However, any By-laws adopted by the Board may be amended or repealed by the
stockholders entitled to vote thereon.
REASONS FOR BY-LAW AMENDMENT NO. 2
The requirement of an increased stockholder vote for amendment of the
By-law provisions noted above is designed to prevent a stockholder with a
majority of the Company's stock from avoiding such provisions by simply amending
the By-laws to change or delete any or all of these provisions. The Board of
Directors believes that By-law Amendment No. 2 will have the effect of making it
more difficult for stockholders to change the By-law provisions that have an
anti-takeover effect or would delay, prevent or impede a change in control of
the Company. The effect of By-law Amendment No. 2 will be to further discourage
potentially unfriendly bids for shares of the Company since a greater percentage
of the Company's outstanding voting stock will be needed before the By-law
provisions at issue could be amended, removed or changed to favor an unfriendly
bidder of shares of the Company. Further, the Board will have relatively greater
control over the By-laws of the Company than the stockholders, because the Board
could adopt, alter, amend or repeal the By-laws upon a majority vote by the
Board.
Approval of By-law Amendment No. 2 will require the affirmative vote of a
majority of the outstanding shares of Common Stock, present or represented by
proxy and entitled to vote at the Annual Meeting.
THE BOARD RECOMMENDS THAT YOU VOTE FOR BY-LAW AMENDMENT NO. 2.
PROPOSAL 4 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Crowe, Chizek and Company LLP as
independent auditors for the Company for the year ending December 31, 1998,
subject to ratification of such appointment by the stockholders.
Representatives of Crowe, Chizek and Company LLP will be present at the
Annual Meeting. They will be given an opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions from
stockholders present at the Annual Meeting.
Unless marked to the contrary, the shares represented by the enclosed proxy
card will be voted FOR ratification of the appointment of Crowe, Chizek and
Company LLP as the independent auditors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
APPOINTMENT OF CROWE, CHIZEK AND COMPANY LLP AS THE INDEPENDENT AUDITORS OF THE
COMPANY.
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ADDITIONAL INFORMATION
STOCKHOLDER PROPOSALS
To be considered for inclusion in the Company's proxy and form of proxy
relating to the 1999 Annual Meeting of Stockholders, a stockholder proposal must
be received prior to December 16, 1998, by the Secretary of the Company at the
address set forth on the first page of this Proxy Statement. Any such proposal
will be subject to 17 C.F.R. Section 240.14a-8 of the Rules and Regulations
under the Exchange Act.
NOTICE OF BUSINESS TO BE CONDUCTED AT AN ANNUAL MEETING
The By-laws of the Company set forth the procedures by which a stockholder
may properly bring business before a meeting of stockholders. Pursuant to the
By-laws, only business brought by or at the direction of the Board of Directors
may be conducted at a annual meeting. The By-laws of the Company provide an
advance notice procedure for a stockholder to properly bring business before an
annual meeting. The stockholder must give written advance notice to the
Secretary of the Company not less than one hundred twenty (120) days before the
date originally fixed for such meeting; provided, however, that in the event
that less than one hundred thirty (130) days notice or prior public disclosure
of the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be received not later than the close of business
on the tenth (10th) day following the date on which the Company's notice to
stockholders of the annual meeting date was mailed or such public disclosure was
made. The advance notice by a stockholder must include the stockholder's name
and address, as they appear on the Company's record of stockholders, a brief
description of the proposed business, the reason for conducting such business at
the annual meeting, the class and number of shares of the Company's capital
stock that are beneficially owned by such stockholder and any material interest
of such stockholder in the proposed business. In the case of nominations to the
Board of Directors, certain information regarding the nominee must be provided.
Nothing in this paragraph shall be deemed to require the Company to include in
its proxy statement or the proxy relating to any annual meeting any stockholder
proposal which does not meet all of the requirements for inclusion established
by the United States Securities and Exchange Commission in effect at the time
such proposal is received.
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors knows of no business which will be presented for
consideration at the Annual Meeting other than as stated in the Notice of Annual
Meeting of Stockholders. If, however, other matters are properly brought before
the Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote the shares represented thereby on such matters in accordance with
their best judgment.
Whether or not you intend to be present at the Annual Meeting, you are
urged to return your proxy card promptly. If you are then present at the Annual
Meeting and wish to vote your shares in person, your original proxy may be
revoked by voting at the Annual Meeting.
By Order of the Board of Directors
DANIEL NAGLE
Secretary
Chicago, Illinois
April , 1998
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
15
<PAGE> 19
APPENDIX A
BY-LAW AMENDMENT NO. 1
Section 3.2 Number, Tenure and Qualifications. The number of directors
shall be eight (8). The number may be increased or decreased from time to time
by amendment of this Section except as may otherwise be provided in the
Certificate of Incorporation. Commencing with the annual meeting of stockholders
held in 1998, the directors shall be divided into three (3) classes, as nearly
equal in number as possible, with the term of office of the first class to
expire at the 1999 annual meeting of stockholders, the term of office of the
second class to expire at the 2000 annual meeting of stockholders and the third
class expiring at the 2001 annual meeting of stockholders. At each annual
meeting of stockholders following such initial classification, directors elected
by the stockholders to succeed those directors whose term expires shall be
elected for a term of office to expire at the third succeeding annual meeting of
stockholders after their election. Each director shall hold office until his
successor is elected and qualified or until his earlier resignation or removal.
In addition, each director of the Corporation shall own, of record or
beneficially, at least 120,000 shares of the Corporation.
BY-LAW AMENDMENT NO. 2
Section 13.2 Amendment by Stockholders. Notwithstanding any other
provision of the Restated Certificate of Incorporation or these By-laws of the
Corporation to the contrary and notwithstanding that a lesser percentage may be
specified by law, in the event these By-laws shall be amended by vote of
stockholders, the affirmative vote of the holders of at least two-thirds ( 2/3)
of the voting power of the outstanding shares of all classes of stock of the
Corporation, voting together as a single class, shall be required to amend or
repeal or adopt any provision inconsistent with Sections 2.2, 2.11, 2.12, 3.2,
3.10 or 13.2 of these By-laws.
* * *
SELECTED BY-LAW PROVISIONS
Section 2.2 Special Meetings. Special meetings of the stockholders may be
called at any time by the Chairman or the President, and shall be called by the
President or Secretary at the request, in writing, of a majority of the Board of
Directors. Such request shall state the purpose or purposes of the proposed
meeting.
Section 2.11 Action by Stockholders. Any action required to be taken or
which may be taken at a meeting of stockholders must be effected at a duly
called annual or special meeting of the stockholders of the Corporation, and the
power of stockholders to consent in writing, without a meeting, to the taking of
any action is specifically denied.
Section 2.12 Notice of Stockholder Business. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before the annual meeting of
stockholders, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board, (b) otherwise
properly brought before the meeting by or at the direction of the Board, or (c)
otherwise properly brought before the meeting by a stockholder. For business to
be properly brought before an annual meeting of the stockholders, the
stockholder must have the legal right and authority to make the proposal for
consideration at the meeting and the stockholder must have given timely notice
thereof in writing to the President of the Corporation. To be timely, a
stockholder's written notice of intent to make a proposal or proposals must be
personally delivered to or mailed by United States mail, postage prepaid and
received by the President of the Corporation at the principal executive offices
of the Corporation not less than 120 days prior to the meeting; provided
however, that in the event that less than 130 days notice or prior public
disclosure of the date of the meeting is given or made to stockholders (which
notice or public disclosure shall include the date of the annual meeting
specified in these By-laws, if such By-laws have been filed with the Securities
and Exchange Commission and if the Annual Meeting is held on such date), notice
by the stockholder to be timely must be so received not later
A-1
<PAGE> 20
than the close of business on the 10th day following the day on which notice of
the day of the annual meeting was mailed or such public disclosure was made. A
stockholder's notice to the President shall set forth as to each item of
business the stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the meeting, and in the
case of a nomination for election of director, such nominee's name and
qualifications, and the reasons for conducting business at the meeting, (b) the
name and the record address of the stockholder or stockholders proposing such
business, (c) the number of shares of stock of the Corporation which are
beneficially owned by such stockholder or stockholders, and (d) any material
interest of the stockholder in such business. The chairman of the meeting may
refuse to acknowledge the proposal of any stockholder not made in compliance
with this Section 2.12. Notwithstanding anything in these By-laws to the
contrary, no business shall be brought before or conducted at an annual meeting
except in accordance with the procedures set forth in this Section 2.12.
Section 3.10 Vacancies and Newly-Created Directorships. Vacancies and
newly-created directorships resulting from any increase in the authorized number
of directors may be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director, and the directors
so chosen shall hold office until their successors are elected and qualified or
until their earlier resignation or removal.
A-2
<PAGE> 21
PROXY
MIDWEST BANC HOLDINGS, INC.
501 West North Avenue
Melrose Park, Illinois 60160
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder(s) of Midwest Banc Holdings, Inc., a
Delaware corporation (the "Company"), does (do) hereby constitute and appoint
___________, and each of them, the true and lawful attorney of the undersigned
with full power of substitution, to appear and act as the proxy or proxies of
the undersigned at the Annual Meeting of Stockholders of said corporation to be
held at Elmcrest Banquets by Biancalana, 7370 West Grand Avenue, Elmwood Park,
Illinois 60707, on May 20, 1998, at 2:00 p.m. and at any adjournment thereof,
and to vote all the shares of Midwest Bank Holdings, Inc. standing in the name
of the undersigned, or which the undersigned may be entitled to vote, as fully
as the undersigned might or could do if personally present, as set forth below.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder(s). If no direction is made, this proxy
will be voted "FOR ALL" of the eight nominees for director, "FOR" the amendment
of the Company's By-laws to provide for staggered terms for the Company's Board
of Directors, "FOR" the amendment of the Company's By-laws to increase the
required percentage of voting stock needed to amend certain provisions of the
By-laws, and "FOR" the ratification of the appointment of Crowe, Chizek and
Company LLP as independent auditors of the Company for the fiscal year ending
December 31, 1997.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE
(Continued and to be signed on reverse)
- --------------------------------------------------------------------------------
MIDWEST BANK HOLDINGS, INC.
PLEASE MARK VOTE IN [OVAL] IN THE FOLLOWING MANNER USING DARK INK ONLY
[ ]
For Withheld For All
All For All Except
1. The election of eight (8) members of the [ ] [ ] [ ]
Company's Board of Directors.
Nominees: E.V. Silveri, Robert L. Woods, Angelo
DiPaolo, Daniel Nagle, Joseph Rizza, LeRoy Rosasco,
Robert D. Small, and Leon Wolin.
Instructions: To withhold authority to vote for any
individual nominee, write that nominee in the space
provided below.
- ----------------------------------------------------
For Against Abstain
2. The amendment of the Company's By-laws to [ ] [ ] [ ]
increase the required percentage of voting
stock needed to amend certain provisions of
the By-laws to 66 2/3%.
For Against Abstain
3. The amendment of the Company's By-laws to provide [ ] [ ] [ ]
for staggered terms for the Company's Board of
Directors.
For Against Abstain
4. The ratification of the appointment of Crowe, [ ] [ ] [ ]
Chizek and Company LLP as independent
auditors of the Company for the fiscal year
ending December 31, 1998.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN
SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN.
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
IF A CORPORATION, PLEASE SIGN THE FULL CORPORATE NAME
BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
----------------------------------------------------
Signature
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Signature if held jointly
DATED
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