<PAGE>
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
Definitive proxy statement
Definitive additional materials
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Old Second Bancorp, Inc.
(Name of Registrant as Specified in Its Charter)
Stathy Panopoulos, Chapman and Cutler, 312/845-2992
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
X $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
$500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
(4) Proposed maximum aggregate value of transaction:
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>
LOGO
Notice of Annual Meeting of Stockholders to be Held March 12, 1996
To the Stockholders of Old Second Bancorp, Inc.:
The Annual Meeting of Stockholders of Old Second Bancorp, Inc., will be
held on Tuesday, March 12, 1996 at 11:00 a.m. at the Corporation's premises
at 37 South River Street, Aurora, Illinois, for the following purposes:
1. The election of six directors to serve for a term of three years
each, the Board of Directors' nominees being listed in the Proxy
Statement;
2. The ratification and approval of the selection of Ernst & Young,
L.L.P. as the Corporation's independent accountants for the fiscal
year ended December 31, 1996;
3. The amendment of the Corporation's Certificate of Incorporation to
increase the number of its authorized shares of Common Stock from
3,500,000 to 6,000,000 shares, without par value; and
4. The transaction of such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
The Board of Directors of the Corporation has fixed the close of business on
February 2, 1996 as the record date for the determination of stockholders
entitled to notice of and to vote at this meeting and at any and all
adjournments thereof.
By Order of the Board of Directors
James Benson
Chairman and
Chief Executive Officer
Aurora, Illinois
February 9, 1996
Your Vote is Important
Even if you plan to attend the meeting in person, please date, sign, and
return your proxy in the enclosed envelope. Prompt response is helpful and
your cooperation will be appreciated.
<PAGE>
Old Second Bancorp, Inc.
37 South River Street / Aurora, IL 60507 /(708)892-0202
Proxy Statement
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Old Second Bancorp, Inc., a Delaware corporation (the
"Corporation"), 37 South River Street, Aurora, Illinois 60507, of proxies to
be used at the Annual Meeting of Stockholders of the Corporation to be held
at the Corporation's premises at 37 South River Street, Aurora, Illinois on
March 12, 1996 at 11:00 a.m., Central Standard Time, and at any and all
adjournments thereof.
A form of proxy is enclosed for use at the meeting. If the proxy is executed
and returned, it may nevertheless be revoked at any time insofar as it has not
been exercised. Stockholders attending the meeting may, on request, vote their
own shares even though they had previously sent in a proxy. Unless revoked or
instructions to the contrary are contained in the proxies, the shares
represented by validly executed proxies will be voted at the meeting and will
be voted: (i) for the election of the nominees for director named below; (ii)
for the ratification and approval of the selection of Ernst & Young, L.L.P. as
the Corporation's independent accountants for the fiscal year ended
December 31, 1996; (iii) for the amendment of the Corporation's Certificate of
Incorporation to increase the number of authorized shares of Common Stock,
without par value; and (iv) in the discretion of the named proxies upon such
other matters as may properly come before the meeting or at any adjournment or
adjournments thereof.
In order to be elected a director, a nominee must receive a plurality of the
votes cast at the meeting for the election of directors. Since the six nominees
receiving the largest number of affirmative votes will be elected, shares
represented by proxies which are marked "withhold authority" or "abstain" will
have no effect on the outcome of the election. Approval of each of the other
matters requires the affirmative vote of at least a majority of the votes cast
at the meeting on such matter. Shares represented by proxies which are marked
"abstain" as to any such matter will be counted as votes cast, which will have
the same effect as a negative vote on such matter. Proxies relating to
"street name" shares which are not voted by brokers on one or more, but less
than all, matters will be treated as shares present for purposes of determining
the presence of a quorum but will not be treated as votes cast as to such
matter or matters not voted upon.
<PAGE>
A copy of the Corporation's Annual Report for the fiscal year ended
December 31, 1995, which includes certified financial statements, has been
previously mailed to you. The financial statements contained therein are not
deemed material to the exercise of prudent judgment in regard to any matter to
be acted upon at the Annual Meeting and, therefore, such financial statements
are not incorporated in this Proxy Statement by reference. This Proxy Statement
was mailed to stockholders on or about February 9, 1996.
Voting Securities and Principal Holders Thereof
Only holders of Common Stock of record at the close of business on February 2,
1996 will be entitled to vote at the Annual Meeting of Stockholders. At such
date, the Corporation had outstanding 2,350,165 shares of Common Stock without
par value. Each share of Common Stock entitled the holder to one vote upon
each matter to be voted at the meeting.
To the best knowledge of the Corporation, no person, other than the
persons shown below and the Trust Department of The Old Second National Bank
of Aurora ("Old Second") owned beneficially more than 5% of the outstanding
voting securities of the Corporation as of December 31, 1995.
Number and Percent of
Name and Address Shares Beneficially Owned
Old Second, as trustee for the 120,328 shares (5.12%) of the
J. Carl Schmitz marital and Corporation's Common Stock is
residual trusts 37 South River held in the name of the J. Carl
Street, Aurora, Illinois 60507 Schmitz marital and residual
trusts for the benefit
of Genevieve P. Schmitz, and
James Carl Schmitz. Genevieve P.
Genevieve P. Schmitz Schmitz has the power to direct
Villa San Marcos the voting of all such shares.
4201 North 78th Place
Scottsdale, Arizona 85251
Old Second Bancorp, Inc. 194,906 shares (8.29%) of the
Profit Sharing Plan and Trust Corporation's Common Stock
37 South River Street
Aurora, Illinois 60507
<PAGE>
As of December 31, 1995, Old Second held in its Trust Department, in various
fiduciary capacities (other than as trustee of the Corporation's Profit
Sharing Plan and Trust and the J. Carl Schmitz marital and residual trusts),
151,904 shares of the Corporation's Common Stock (6.46%). Old Second had full
voting responsibility with respect to 139,553 of such shares (5.94%) of the
total outstanding shares and no voting responsibility with respect to the
remaining shares. Old Second had full investment power with respect to
105,145 shares (4.47%) and shared investment power with respect to 26,937
shares (1.15%).
The following table sets forth information as of December 31, 1995, with
respect to the ownership of shares of the Corporation's Common Stock held by
each director, director nominee and each executive officer and all directors,
director nominees and executive officers of the Corporation as a group based
upon information received from such persons. Beneficial ownership of
securities generally means the power to vote or dispose of securities,
regardless of any economic interest.
[CAPTION]
Corporation Common Stock
[S] Beneficially Owned
Name Number of Shares (%)*
[C] [C]
Walter Alexander 13,914 (0.59%)
James Benson 47,272 (2.01%)
Ronald J. Carlson 6,889 (0.29%)
Marvin Fagel 500 (0.02%)
Joanne Hansen 1,050 (0.04%)
Kenneth Lindgren 6,853 (0.29%)
Jesse Maberry 4,420 (0.19%)
Gary McCarter 553 (0.02%)
D. Chet McKee 2,333 (0.10%)
William Meyer 4,566 (0.19%)
Alan J. Rassi 1,000 (0.04%)
Larry Schuster 10,960 (0.47%)
William B. Skoglund 5,526 (0.24%)
George Starmann III 2,200 (0.09%)
All Directors, Director Nominees,
and Executive Officers as a group
Officers as a group (14 persons) 108,036 (4.60%)
*Includes ownership of securities by spouse (even though any beneficial
interest is disclaimed), and in the Corporation's Profit Sharing Plan and
Trust and the Corporation's Salary Savings Plan.
<PAGE>
Election of Directors
Under the Corporation's Certificate of Incorporation, the Board of Directors
is divided into three classes, approximately equal in number. Each year the
stockholders will be asked to elect the member of a class for a term of three
years. The six nominees named below have been recommended for election as
Directors for a term ending at the Annual Meeting in 1999 or until their
successors are elected.
The Board of Directors has no reason to believe that any of the nominees
will not be available for election. However, if any such nominees are not
available for election, proxies may be voted for the election of other
persons selected by the Board of Directors.
Director Nominees
Name Age Principal Occupation 1,2
James Benson 65 Chairman of the Board and CEO
of the Corporation (1971)
Marvin Fagel 48 President, Aurora Packing
Company, and Chairman of
the Board and CEO, New City
Packing Company, a meat
packing company
Joanne Hansen 55 President, Furnas Foundation,
Inc., a charitable
foundation (1993)
Kenneth Lindgren 55 President, Daco Incorporated,
contract manufacturer
of machined components (1990)
Jesse Maberry 52 Treasurer, Aurora Bearing
Company, manufacturer of
rod end and spherical
bearings (1985)
Alan J. Rassi 55 Vice President and General
Manager, Caterpillar,
Inc., construction equipment
manufacturer (1987)
1) Each director nominee has been employed in his principal occupation with
the same organization or other responsible position with the same
organization for at least the last five years, or is retired after having
served in responsible positions with the organization indicated.
2) The date shown in parentheses refers to the year originally elected or
appointed to the Board of Old Second or the Corporation. Pursuant to a
reorganization in 1982, Old Second became a wholly-owned subsidiary of the
Corporation. Each director has served continuously since the date indicated.
<PAGE>
Continuing Directors
Name Age Principal Occupation 1, 2
Walter Alexander (4) 61 President, Alexander Lumber
Co., lumber and building material
sales (1976)
Ronald J. Carlson (3) 60 President, COO, CFO, and
Secretary of the Corporation,
Vice President and CFO of Old
Second (1987)
Gary McCarter (3) 59 Vice President, Farmers
Group, Inc., an insurance
company (1988)
D. Chet McKee (3) 56 President, Copley Memorial
Hospital (1978)
William Meyer (4) 48 President, William F. Meyer
Co., a wholesale plumbing
supply company (1995)
Larry Schuster (4) 55 Chairman, Westside
Mechanical, Inc., mechanical
contractor (1990)
William B. Skoglund (4) 45 Vice President and Assistant
Secretary of the
Corporation, President and
CEO of Old Second (1992)
George Starmann III (4) 52 Vice President of the
Corporation, Executive Vice
President and Senior Trust
Officer of Old Second
(1995)
1) Each director has been employed in his principal occupation with
the same organization or other responsible position with the same
organization for at least the last five years, or is retired after having
served in responsible positions with the organization indicated, except
for George Starmann III who prior to 1993 was Executive Vice President and
Senior Trust Officer at Banc One, La Grange, Illinois.
2) The date shown in parentheses refers to the year originally elected or
appointed to the Board of Old Second or the Corporation. Pursuant to a
reorganization in 1982, Old Second became a wholly-owned subsidiary of the
Corporation. Each director has served continuously since the date indicated.
3) Serves as director until 1997.
4) Serves as director until 1998.
<PAGE>
Walter Alexander, a director of the Corporation, is also a director of
Mosinee Paper Corporation, a corporation with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934
or subject to the reporting requirements of Section 15(d) of that Act or
registered as an investment company under the Investment Company Act
of 1940.
Upon attaining age 70, an elected director would assume the status of a
Senior Director for a period of three years. Every Senior Director has a
right to attend all Board of Director meetings and Board of Director
Committee meetings to which they are appointed and to participate in all
discussions during such meetings. However, a Senior Director does not have
the right to vote on any matter.
The Board of Directors of the Corporation has established Audit and Nominating
Committees, as well as other Committees, to assist it in the discharge of its
responsibilities. The principal responsibilities of the Audit and Nominating
Committees are described below. The members of each Committee serve on the
respective Committees during the period between annual stockholders' meetings.
The Corporation does not have a Compensation Committee, since compensation
levels are determined by the Board of Directors of each subsidiary of the
Corporation. The Corporation's executive officers also are executive officers
of Old Second, and are compensated by Old Second rather than the Corporation;
accordingly, their compensation is determined and approved by the Compensation
Committee and Board of Directors of Old Second.
The members of the Corporation's Audit Committee during 1996 were Messrs.
Alexander, McCarter, McKee, and Schuster. Each year, such Committee recommends
to the Board the appointment of a firm of independent accountants to examine
the books of the Corporation. It reviews with representatives of the
independent accountants the auditing arrangement and scope of the independent
accountants' examination of the books, results of those audits, their fees,
and any problems identified by the independent accountants regarding internal
controls, together with their recommendations. The Committee also reviews with
the Corporation's internal auditors any problems identified by them regarding
internal controls and their recommendations. The Committee is also prepared
to meet privately at any time at the request of the independent accountants,
the internal auditors, or members of the Corporation's management to review
any special situation arising on any of the above subjects. The Committee
met six times during 1995.
<PAGE>
The members of the Corporation's Nominating Committee during 1995 were Messrs.
Alexander, Benson, Carlson, Maberry, McKee, Schuster, Skoglund, Starmann, and,
prior to attaining mandatory retirement age in August 1995, Mr. Edward Schmitt.
The Committee reviews the qualifications of, and recommends to the Board,
candidates to fill Board vacancies as they may occur during the year. The
Nominating Committee will consider suggestions from all sources, including
stockholders, regarding possible candidates for director. Such suggestions,
together with appropriate biographical information, should be submitted to the
Corporation. The Committee met twice during 1995.
The Board of Directors of the Corporation held 12 meetings during 1995. Actions
taken by any Committee of the Board are reported to the Board of Directors,
usually at its next meeting. During 1995 all of the directors attended at least
75% of the aggregate of the Corporation's Board of Directors meetings and
meetings of the committees on which they served.
All persons who serve as directors of the Corporation also serve as
directors of Old Second. No fees are paid by the Corporation to the
directors in their capacity as directors of the Corporation, and no fees
are paid by Old Second to inside directors in their capacity as directors
of Old Second. During 1995, Old Second paid directors' fees to outside
directors consisting of a $3,500 annual retainer fee, $250 for each
Board of Director meeting attended, and $200 for each Committee meeting
attended.
<PAGE>
Executive Compensation
The following table sets forth information with respect to compensation
for services in all capacities paid by the Corporation for the fiscal years
ended December 31, 1995, 1994, and 1993, to those persons who were at
December 31, 1995; (i) the chief executive officer and (ii) the other executive
officers of the Corporation whose annual salary exceeded $100,000.
Summary Compensation Table
Annual Long-Term
Compensation Compensation
Awards
Securities
Name and Underlying All Other
Principal Position Year Salary ($)1 Options (#) Compensation ($)2
James Benson 1995 $268,695 2,600 $16,904
Chairman and Chief 1994 254,540 -- 15,830
Executive Officer 1993 240,325 -- 15,623
of the Corporation
Ronald J. Carlson 1995 $208,135 2,400 $13,584
President, Chief 1994 194,885 -- 12,671
Operating Officer 1993 183,623 -- 11,742
and Chief Financial
Officer and Secretary
of the Corporation
Vice President and
Chief Financial Officer
of Old Second
William B. Skoglund 1995 $156,565 2,200 $11,611
Vice President and 1994 146,565 -- 10,626
Assistant Secretary 1993 135,338 -- 9,538
of the Corporation
President and Chief
Executive Officer
of Old Second
<PAGE>
Summary Compensation Table (continued)
Annual Long-Term
Compensation Compensation
Awards
Securities
Name and Underlying All Other
Principal Position Year Salary ($)1 Options (#) Compensation ($)2
George Starmann III 1995 $149,465 2,000 $9,446
Vice President of 1994 140,775 -- 3,815
the Corporation 1993 131,555 -- 0
Executive Vice
President and
Senior Trust Officer
of Old Second
1) Salary amounts for Messrs. Benson and Carlson include director's
fees received from the Corporation's subsidiary banks other than Old Second
in the amount of $15,900, $13,125, and $12,850 for Mr. Benson and $15,700,
$12,925, and $12,650 for Mr. Carlson for the years 1995, 1994, and 1993,
respectively.
2) The amounts shown represent the contribution to the Corporation's qualified
Profit Sharing Plan and Trust in the amounts of $8,250, $8,250, $8,250, and
$8,221 for Messrs. Benson, Carlson, Skoglund, and Starmann, respectively;
to the Corporation's Salary Savings Plan in the amounts of $3,000, $3,000,
$3,000, and $1,225 for Messrs. Benson, Carlson, Skoglund, and Starmann,
respectively, as vested and accrued during 1995; and, to the Corporation's
nonqualified Supplemental Executive Retirement Plan ('SERP') in the amounts of
$5,654, $2,334, and $361 for Messrs. Benson, Carlson, and Skoglund,
respectively. No amounts were paid or distributed pursuant to the plans to the
named individuals during 1995, 1994, or 1993.
<PAGE>
Option Grants
The following table provides information about stock options granted during
1995.
[CAPTION]
Option Grants in Last Fiscal Year*
Individual Grant Potential
Realizable Value
Percent of at Assumed Annual
Total Options Rates of Stock
Granted to Exercise Price Appreciation
[S] Options Employees Price Expiration For Option Term
Name Granted (#) in Fiscal Year ($/Share) Date 5% 10%
[C] [C] [C] [C] [C]
James 1,300 18.31% $39.00 07/10/05 $31,885 $80,803
Benson 1,300 46.00 12/11/05 37,608 95,306
Ronald J. 1,200 16.90% 39.00 07/10/05 29,432 74,587
Carlson 1,200 46.00 12/11/05 34,715 87,975
William B. 1,100 15.49% 39.00 07/10/05 26,980 68,372
Skoglund 1,100 46.00 12/11/05 31,822 80,643
George 1,000 14.08% 39.00 07/10/05 24,527 62,156
Starmann III 1,000 46.00 12/11/05 28,929 73,312
*Messrs. Benson, Carlson, Skoglund, and Starmann received one-half of their
total options awarded for the 1995 fiscal year on 7/11/95 and one-half on
12/10/95. One-third of the options granted vest and become exercisable on each
of the first three anniversaries of their grant date.
<PAGE>
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors of Old Second has
furnished the following report on executive compensation.
The Corporation's executive officers are also executive officers of Old Second
and are compensated by Old Second (not the Corporation); accordingly, their
compensation is determined and approved by the Compensation Committee and Board
of Directors of Old Second. The members of the Compensation Committee and Board
of Directors of Old Second are Directors of both the Corporation and Old
Second. The members of the Compensation Committee during 1995 were Walter
Alexander, Gary McCarter, and Alan Rassi. Although the executive officers are
compensated by Old Second and their compensation is determined by the
Compensation Committee of Old Second, their scope of authority for management
of the Corporation, as well as Old Second, is an important consideration by
the Committee when establishing compensation.
Compensation Philosophy and Overall Objectives
The Corporation's mission is to maximize stockholder value over the long term.
To accomplish this mission, the Corporation has developed a comprehensive
business strategy that emphasizes superior financial products and customer
services. The Corporation believes its executive compensation program should
motivate its executives to both individually and collectively take actions
that support the attainment of this mission.
The program of executive compensation is intended to reflect the following
stated executive compensation policies:
The program of executive compensation should strengthen the
relationship between pay and performance by providing compensation
that is dependent upon the level of success in meeting specified
Corporate goals.
Compensation opportunities should enhance the Corporation's ability
to attract, retain, and encourage the development of exceptionally
knowledgeable and experienced executives upon whom, in large part,
the successful operation and management of the Corporation depends.
Each program element should target compensation levels at rates that
are reflective of current market practices. Offering market-comparable
pay opportunities should allow the Corporation to maintain a stable,
successful management team.
<PAGE>
Elements of Executive Compensation
(a) Base Salaries
Annually, the Compensation Committee reviews each executive's base salary. It is
the Corporation's philosophy that base salaries offer security to executives
and allow the Corporation to attract competent executive talent and maintain
a stable management team. The Compensation Committee of Old Second targets
base salaries at market levels, though compensation may be adjusted above or
below the median based on company performance. Initially, base salaries are
determined by evaluating an executive's level of responsibility, prior
experience, education, breadth of knowledge, internal performance objectives,
and competitive compensation programs for senior executives at comparable banks.
Adjustments to base salaries are driven primarily by corporate performance
measured primarily in terms of earnings per share, return on equity and
assets, and enhancement of book value per share. When measuring individual
performance, the Compensation Committee considers the executive's efforts in
achieving established financial and business objectives, managing and developing
employees, and enhancing long-term relationships with customers.
As reflected in the Summary Compensation Table, the Chief Executive Officer's
(Mr. Benson's) base salary was increased in 1995. In determining Mr. Benson's
base salary in 1995, the Compensation Committee considered the Corporation's
financial performance for the year, Mr. Benson's individual performance, and
his long-term contributions to the success of the Corporation. The Compensation
Committee also compared Mr. Benson's base salary to the base salaries of bank
CEOs from various data sources. Overall, salary increases for the three
additional senior executives were at a rate comparable to the increases provided
to similar executives at other banks, as shown by the survey data.
(b) Stock Options
To establish a link between compensation and management's performance in
creating value for shareholders, top level management employees were granted
stock options during 1995 pursuant to the Company's Long-Term Incentive Plan
as approved by shareholders in 1994. To reinforce the Company's long-term
perspective and to help retain valued executives, these options vest ratably
over the three-year period following grant. Options are issued at the market
value of Company shares on the date of grant, thus providing reward only for
future stock price appreciation. Future grants of option awards are expected to
be reviewed on an annual basis.
<PAGE>
The 1995 grant of stock options to Mr. Benson was determined primarily by
comparing the long-term incentive opportunities awarded to CEOs at various banks
of similar size. Mr. Benson, as well as other top level management employees,
received a stock option grant comparable to the long-term incentive opportunity
granted to individuals with the same or similar position at these banks.
(c) Benefits, Qualified Savings Plans, and Perquisites
Benefits offered to key executives serve a different purpose than does base
salary and other elements of compensation. In general, they provide a safety
net of protection against financial catastrophes that can result from illness,
disability, or death. Benefits offered to key executives, including those
provided to the Corporation's CEO are generally those offered to the general
employee population with some variation to promote tax efficiency and
replacement of benefit opportunities lost to regulatory limits.
All full-time employees, including Mr. Benson, are eligible to participate
in the Corporation's 401-K Savings Plan, Profit Sharing Plan, and a
tax-qualified Pension Plan, subject to regulatory limits. The pension plan
targets a 50% pay replacement, integrated with the participant's social
security benefits, at normal retirement age following a full career of service.
The 401(k) savings program authorizes a maximum voluntary salary deferral of up
to 10% (with a partial company match), subject to statutory limitations. The
profit sharing arrangement provides an annual discretionary contribution to the
retirement account of each employee based in part on the bank's profitability
in a given year, and on each participant's rate of base salary.Participation
in these qualified savings plans is likewise offered to the eligible general
employee population. Benefits under these plans, taken as a whole, are
competitive with comparable banks and bank holding companies.
Policy With Respect to the $1 Million Deduction Limit
Recently enacted Section 162(m) of the Internal Revenue Code generally limits
the corporate deduction for compensation paid to executive officers named in
the proxy to $1 million, unless certain requirements are met. The Compensation
Committee has carefully considered the impact of this new tax code provision
and has determined that it is unlikely to affect the deductibility of
compensation paid to executive officers.
<PAGE>
Conclusion
The Compensation Committee believes these executive compensation policies and
programs effectively serve the interests of stockholders and the Corporation.
The Compensation Committee believes these policies motivate executives to
contribute to the Corporation's overall future successes, thereby enhancing
the value of the Corporation for the stockholders' benefit.
Compensation Committee of the Board of Directors of Old Second
Mr. Walter Alexander
Mr. Gary McCarter
Mr. Alan Rassi
Employment Agreement
Effective January 2, 1996, Mr. Benson retired as CEO of Old Second and was
replaced by Mr. Skoglund. However, for an initial period of one year,
Mr. Benson will continue in his position as Chairman of the Board of the
Corporation and will retain the title of CEO of the Corporation. During this
initial one-year period, Mr. Benson will continue to serve on the Board
Committees of banks in the holding company, will participate in exit interviews
with regulatory examiners, and will be available to bank management as a
consultant. In exchange for these and other services, Mr. Benson will receive
a fee of $48,000.
<PAGE>
Comparison of Five-Year Cumulative Total Return*
Old Second Bancorp, Inc.; S&P 500; and Custom Peer Group
Reference is made to graph filed under cover of Form SE.
*Total return assumes reinvestment of dividends on a quarterly basis.
The above graph represents the five-year cumulative total stockholder return
for the Corporation, the S&P 500 Composite Index, and the Custom Peer Group. The
companies in the Custom Peer Group are: First Oak Brook Bancshares Inc.;
Heritage Financial Services Inc.; Merchants Bancorp Inc.; Northern States
Financial Corporation; Pinnacle Banc Group Inc.; Premier Financial Services
Inc.; Princeton National Bancorp Inc.; and Todays Bancorp Inc.
<PAGE>
Pension Plan
All full-time employees of the Corporation's subsidiary banks who have
completed one year of service are eligible for participation in the
Corporation's Pension Plan and the remuneration credited each participant
includes all direct salaries and wages paid. Generally speaking, retirement
benefits are based on final average monthly earnings during the highest five
consecutive years of employment during the last ten years before retirement and
integrates with a portion of the Primary Social Security Benefit payable to the
participant. A participant receives monthly the amount calculated under the
following formula: the monthly average of the 60 highest paid consecutive months
out of the final ten years of employment times the sum of (i) 1-2/3% times the
number of years of credited service up to a maximum of 30, and (ii) 1/2% times
each year of credited service over 30 years; less one-half the Primary Social
Security Benefit payable to the participant. The following table
illustrates the annual amount of retirement income available under both the
Corporation's Pension Plan and SERP (after deducting 1/2 of the social
security benefit, but without limiting the retirement benefits for the single
plan defined benefit limit of Section 415(c), for the combined plan Section 415
limits, and for the includible compensation limitation of Section 401(a)(17) of
the Internal Revenue Code (the Code) from such plan for a person 65 years of
age in specified average earnings and years of service classification. The SERP
restores benefits lost under the Pension Plan due to the limits imposed under
Sections 401(a)(17) and 415 of the Code. The objective of the SERP is to permit
those employees who are affected by the limitations of Code Sections 401(a)(17)
and 415 to receive the same benefit they would have received under the Pension
Plan but for the limitations imposed by the Code.
In certain cases, a participant's actual benefit may be less than that provided
below:
Covered Years of Service
Compensation 15 20 25 30 35 40
$15,000 $ 2,250 $ 3,000 $ 3,750 $ 4,500 $ 5,250 $ 6,000
25,000 3,750 5,000 6,250 7,500 8,750 10,000
35,000 5,471 7,295 9,118 10,942 12,250 14,000
50,000 8,924 11,899 14,873 17,848 19,098 20,348
75,000 15,006 20,008 25,010 30,012 31,887 33,762
100,000 21,256 28,341 35,427 42,512 45,012 47,512
125,000 27,506 36,675 45,843 55,012 58,137 61,262
150,000 33,756 45,008 56,260 67,512 71,262 75,012
175,000 40,006 53,341 66,677 80,012 84,387 88,762
200,000 46,256 61,675 77,093 92,512 97,512 102,512
225,000 52,506 70,008 87,510 105,012 110,637 116,262
250,000 58,756 78,341 97,927 117,512 123,762 130,012
275,000 65,006 86,675 108,343 130,012 136,887 143,762
300,000 71,256 95,008 118,760 142,512 150,012 157,512
<PAGE>
Covered compensation under the pension formula and the respective years of
credited service as of December 31, 1995 for the executive officers named in
the cash compensation table are as follows: James Benson, $252,795 (37 years);
Ronald J. Carlson, $192,435 (16 years); William B. Skoglund, $156,565
(23 years); and George Starmann III, $149,465 (2 years).
Compensation Committee Interlocks and Insider Participation
Directors, director nominees, and executive officers of the Corporation and
their associates were customers of, and had transactions with, the Corporation
and its subsidiaries in the ordinary course of business during 1995. Additional
transactions may be expected to take place in the future. All outstanding
loans, commitments to loan, transactions in repurchase agreements and
certificates of deposit, and depository relationships, in the opinion of
management, were made on substantially the same terms, including interest
rates, collateral, and repayment terms on extensions of credit, as those
prevailing at the time for comparable transactions with other persons and in
the ordinary course of business and did not involve more than the normal risk
of collectibility or present other unfavorable features.
<PAGE>
Proposal to Increase the Number of Authorized Shares
The Corporation proposes to amend Article 4 of its Certificate of
Incorporation to increase the number of its authorized shares of Common Stock.
The Corporation proposes to increase the number of authorized shares of Common
Stock from 3,500,000 to 6,000,000 shares.
The Corporation does not have any current plans to issue any shares of Common
Stock other than in connection with the Old Second Bancorp Long-Term Incentive
Plan.
The Board of Directors of the Corporation has determined that it is in the
best interests of the Corporation to have additional shares of Common Stock
authorized and available for issuance as the need arises for possible future
financing transactions, acquisitions, asset purchases, stock dividends or
splits, issuances under employee benefit plans, and for other general
corporate purposes. Such shares will be issuable by the Corporation generally
without further authorization by the stockholders on such terms as the Board
of Directors may lawfully determine. The effect of the authorization and
issuance of additional shares of Common Stock (other than on a pro rata basis
among holders of Common Stock) would be to dilute the present voting power of
the holders of Common Stock. Stockholders presently do not have preemptive
rights. Although it is not intended to be an anti-takeover measure, the increase
in authorized shares of Common Stock with a subsequent issuance of such shares
could impede a potential takeover by, among other things, (1) diluting the
stock ownership of persons attempting to gain control of the Corporation
and (2) issuing securities to individuals or entities favorable to management.
The par value, designations, preferences, relative rights, limitations, or
restrictions of the authorized Common Stock of the Corporation will remain
unchanged.
Upon effectiveness of the amendment to increase the number of authorized
shares of Common Stock, the Corporation will have 6,000,000 shares of
Common Stock, without par value per share, and authorized and available for
issuance.
The Board of Directors currently believes that the authorized, unissued
shares of Common Stock of the Corporation which will remain after amendment
of the Corporation's Certificate of Incorporation as proposed in these proxy
materials will be sufficient for the Corporation's capital and other needs
for the foreseeable future.
The Board of Directors recommends that the stockholders vote FOR the
amendment of the Corporation's Certificate of Incorporation to increase the
number of authorized shares of Common Stock.
<PAGE>
Independent Accountants
Ernst & Young, L.L.P. ("Ernst & Young") has been selected by the Corporation
to be the Corporation's independent accountants for the fiscal year
ended December 31, 1996. The Board of Directors will propose the adoption
of a resolution at the Annual Meeting ratifying and approving the selection
of Ernst & Young. Representatives of Ernst & Young are expected to be present
at the Annual Meeting with the opportunity to make a statement, if they desire
to do so, and to be available to respond to the appropriate questions.
On February 3, 1995, the Corporation notified its previous independent
accountants, Coopers & Lybrand, L.L.P. (Coopers & Lybrand) that
Coopers & Lybrand would not be retained as the Company's independent
accountants for the 1995 fiscal year. The decision to change independent
accountants was recommended by the Corporation's Audit Committee and approved
by the Board of Directors. Representatives of Coopers & Lybrand are not
expected to be present at the Annual Meeting of Stockholders.
Coopers & Lybrand's reports on the Corporation's financial statements during
the two most recent fiscal years in which Coopers & Lybrand was retained
contained no adverse opinion or a disclaimer of opinions, and was not qualified
or modified as to uncertainty, audit scope, or accounting principles. During
those two fiscal years, there were no disagreements between the Corporation and
Coopers & Lybrand on any matters of accounting principles, financial statement
disclosure, or auditing scope or procedure.
None of the reportable events described under Item 304(a)(1)(v) of
Regulation S-K promulgated under the Securities Exchange Act of 1934
(Regulation S-K) occurred during those two fiscal years. In addition, during
those two fiscal years, the Corporation did not consult Ernst & Young regarding
any of the matters or events set forth in Item 304(a)(2)(i) and (ii) of
Regulation S-K.
The Board of Directors recommends that the stockholders vote FOR the above
proposal.
Stockholder Proposals
Proposals of stockholders to be included in the Corporation's Proxy Statement
for the March 1997 Annual Meeting of Stockholders must be received by the
Corporation at its executive office no later than November 1, 1996.
<PAGE>
General
The cost of this proxy solicitation will be borne by the Corporation.
Solicitation will be made primarily through the use of the mail, but officers,
directors, or regular employees of the Corporation may solicit proxies
personally or by telephone or telegraph without additional remuneration for
such activity. In addition, the Corporation will reimburse brokerage houses and
other custodians, nominees, or fiduciaries for their reasonable expenses in
forwarding proxies and proxy material to the beneficial owner of such shares.
As of the date of this Proxy Statement, management knows of no other matters
to be brought before the Annual Meeting. However, if any other matters should
properly come before the meeting, it is the intention of the persons named
in the enclosed proxy to vote thereon in accordance with their best judgment.
By Order of the Board of Directors
James Benson
Chairman and
Chief Executive Officer
Aurora, Illinois
February 9, 1996
<PAGE>
Proxy for Annual Meeting of Stockholders
on March 12, 1996
Old Second Bancorp, Inc.
Aurora, Illinois
The undersigned hereby appoints Alan J. Rassi, Townsend Way,Jr.,
and Clarence Ruddy, or any one of them, the undersigned's attorneys
and proxies, with full power of substitution, to vote all shares of
Common Stock of Old Second Bancorp, Inc., which the undersigned is
entitled to vote, as fully as the undersigned could do if personally
present, at the Annual Meeting of Stockholders of said Corporation
to be held at the Corporation's premises at 37 South River Street,
Aurora, Illinois on the 12th day of March 1996, at 11:00 a.m.,
Central Standard Time, and at any and all adjournments thereof:
(1) Election of Directors
__For all nominees listed __WITHHOLD AUTHORITY __ABSTAIN
below (except as marked
to the contrary)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S
NAME IN THE LIST BELOW).
James Benson, Marvin Fagel, Joanne Hansen, Kenneth Lindgren,
Jesse Maberry, Alan J. Rassi
(2) Ratification and approval of the selectin of Ernst & Young, L.L.P.
as the Corporation's independent accountants.
__FOR __AGAINST __ABSTAIN
(3) Amendment of the Corporation's Certificate of Incorporation
to Increase the Number of Authorized Shares of Common Stock
from 3,500,000 to 6,000,000 shares, without par value.
__FOR __AGAINST __ABSTAIN
(4) In their discretion on such other matters as may properly
come before the meeting or at any adjournment or
adjournments thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
ALL NOMINEES LISTED FOR DIRECTORS, FOR THE RATIFICATION AND
APPROVAL OF THE SELECTION OF ERNST & YOUNG, L.L.P. AS
INDEPENDENT ACCOUNTS, AND FOR THE AMENDMENT OF THE CORPORATION'S
CERTIFICATE OF INCORPORATION.
DATED______________________ ________________________
________________________
Stockholder's Signature-
please sign name exactly
as imprinted below. (Do not
print.)
PLEASE INDICATE ANY CHANGE OF
ADDRESS
NOTE: Executors, administrators, trustees, and others signing
in a representative capacity should indicate the
capacity in which they sign. If shares are held jointly,
EACH holder should sign.
PLEASE DATE, SIGN, AND RETURN THIS PROXY
