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:
Preliminary proxy statement
X 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 Darcy, Chapman and Cutler, 312/845-2992
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
X No Fee Required
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:(1)
(4)Proposed maximum aggregate value of transaction:
Fee paid previously 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:
[FN]
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE>
LOGO
Notice of Annual Meeting of Stockholders to be Held March 11, 1997
To the Stockholders of Old Second Bancorp, Inc.
The Annual Meeting of Stockholders of Old Second Bancorp, Inc., will be held
on Tuesday, March 11, 1997 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 three 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, 1997; and
3. The transaction of such other business as may properly come before the
meeting or any postponement or adjournment thereof.
The Board of Directors of the Corporation has fixed the close of business on
February 3, 1997 as the record date for the determination of stockholders
entitled to notice of and to vote at this meeting and at any and all
postponements or adjournments thereof.
By Order of the Board of Directors
James Benson
Chairman and
Chief Executive Officer
Aurora, Illinois
February 10, 1997
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 / (630) 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 11, 1997 at 11:00 a.m., Central Standard Time, and at any and all
postponements or 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 have 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, 1997; and (iii) in the discretion of the
named proxies upon such other matters as may properly come before the meeting
or at any postponement or adjournment 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 three
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, 1996, 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 10, 1997.
Voting Securities and Principal Holders Thereof
Only holders of Common Stock of record at the close of business on February 3,
1997 will be entitled to vote at the Annual Meeting of Stockholders. At such
date, the Corporation had outstanding 2,937,484 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 of the 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, 1996.
Number and Percent of
Name and Address Shares Beneficially Owned
Old Second, as trustee for 150,410 shares (5.12%) of the Corporation's
the J. Carl Schmitz marital Common Stock is held in the name of the
and residual trusts J. Carl Schmitz marital and residual trusts
37 South River Street, for the benefit of Genevieve P. Schmitz and
Aurora, Illinois 60507 and James Carl Schmitz. Genevieve P. Schmitz
has the power to direct the voting of all such
Genevieve P. Schmitz shares.
Villa San Marcos
4201 North 78th Place
Scottsdale, Arizona 85251
Old Second Bancorp, Inc. 251,892 shares (8.58%) of the Corporation's
Profit Sharing Plan and Trust Common Stock
37 South River Street
Aurora, Illinois 60507
<PAGE>
As of December 31, 1996, 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),
192,800 shares of the Corporation's Common Stock (6.56%). Old Second had full
voting responsibility with respect to 184,372 of such shares (6.28%) of the
total outstanding shares and no voting responsibility with respect to the
remaining shares. Old Second had full investment power with respect to
133,524 shares (4.55%) and shared investment power with respect to 43,894
shares (1.49%).
The following table sets forth information as of December 31, 1996, 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.
<TABLE>
Corporation Common Stock
<S> Beneficially Owned
Name Number of Shares (%)*
<C> <C>
Walter Alexander 17,392 (0.59%)
James Benson 57,874 (1.97%)
Ronald J. Carlson 8,983 (0.31%)
Marvin Fagel 1,250 (0.04%)
Joanne Hansen 1,312 (0.04%)
Kenneth Lindgren 9,374 (0.32%)
Jesse Maberry 4,705 (0.16%)
Gary McCarter 691 (0.02%)
D. Chet McKee 3,416 (0.12%)
William Meyer 8,707 (0.30%)
Alan J. Rassi 1,250 (0.04%)
Larry Schuster 13,700 (0.47%)
William B. Skoglund 7,504 (0.26%)
George Starmann III 2,888 (0.10%)
All Directors, Director
Nominees, and Executive
Officers as a group (14
persons) 139,046 (4.73%)
*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.
</TABLE>
<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 are asked to elect the member of a class for a term of three
years. The three nominees named below have been recommended for election as
Directors for a term ending at the Annual Meeting in 2000 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)
Ronald J. Carlson 61 President, COO, CFO, and Secretary of the Corporation,
Vice President and CFO of Old Second (1987)
Gary McCarter 60 Vice President, Farmers Group, Inc., an insurance
company (1988)
D. Chet McKee 57 President, Copley Memorial Hospital (1978)
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.
Continuing Directors
Name Age Principal Occupation(1,2)
Walter Alexander(3) 62 President, Alexander Lumber Co., lumber and building
material sales (1976)
James Benson(4) 66 Chairman of the Board and CEO of the Corporation
(1971)
Marvin Fagel(4) 49 President, Aurora Packing Company and Chairman of the
Board and CEO, New City Packing Company, a meat
packing company
Joanne Hansen(4) 56 President, Furnas Foundation, Inc., a charitable
foundation (1993)
Kenneth Lindgren(4) 56 President, Daco Incorporated, contract manufacturer
of machined components (1990)
Jesse Maberry(4) 53 Treasurer, Aurora Bearing Company, manufacturer of
rod end and spherical bearings (1985)
William Meyer(3) 49 President, William F. Meyer Co., a wholesale plumbing
supply company (1995)
Alan J. Rassi(4) 56 Vice President and General Manager, Caterpillar,
Inc., construction equipment manufacturer (1987)
Larry Schuster(3) 56 Chairman, Westside Mechanical, Inc., mechanical
contractor (1990)
William B. Skoglund(3)
46 Vice President and Assistant Secretary of the
Corporation, President and CEO of Old Second (1992)
George Starmann III(3)
53 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 1998.
4)Serves as director until 1999.
<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, and McKee, and since October 8, 1996, Mr. Marvin Fagel.
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 1996.
<PAGE>
The members of the Corporation's Nominating Committee during 1996 were Messrs.
Alexander, Benson, Carlson, Maberry, McKee, Rassi, Schuster, Skoglund, and
Starmann. 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 did not meet in 1996.
The Board of Directors of the Corporation held 12 meetings during 1996. Actions
taken by any Committee of the Board are reported to the Board of Directors,
usually at its next meeting. During 1996 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 1996, 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 paid
for the fiscal years ended December 31, 1996, 1995, and 1994, to those persons
who were at December 31, 1996; (i) the chief executive officer and (ii) the
other executive officers of the Corporation whose annual salary exceeded
$100,000.
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Long-Term
Compensation Compensation
Awards
Securities
Name and Underlying All Other
Principal Position Year Salary($)(1) Options(#)(2) Compensation ($)(3)
<S> <C> <C> <C> <C>
James Benson 1996 $102,034 - $ 0
Chairman and Chief 1995 268,695 3,250 16,904
Executive Officer 1994 254,540 - 15,830
of the Corporation
Ronald J. Carlson 1996 $222,555 2,300 $14,284
President, Chief 1995 208,135 3,000 13,584
Operating Officer 1994 194,885 - 12,761
and Chief Financial
Officer and Secretary
of the Corporation
Vice President and
Chief Financial Officer
of Old Second
William B. Skoglund 1996 $172,550 2,200 $12,490
Vice President and 1995 156,565 2,750 11,611
Assistant Secretary 1994 146,565 - 10,626
of the Corporation
President and Chief
Executive Officer
of Old Second
<PAGE>
Summary Compensation Table (continued)
Annual Long-Term
Compensation Compensation
Awards
Securities
Name and Underlying All Other
Principal Position Year Salary($)(1) Options(#)(2) Compensation($)(3)
George Starmann III 1996 $160,615 2,100 $11,834
Vice President of 1995 149,465 2,500 9,446
the Corporation 1994 140,775 - 3,815
Executive Vice
President and
Senior Trust Officer
of Old Second
<FN>
1)Salary amounts for Mr. Benson include director's fees received from the
Corporation's subsidiary banks in the amounts of $28,150, $15,900, and
$13,125 for years 1996, 1995, and 1994, respectively. Salary amounts for Mr.
Carlson include director's fees received from the Corporation's subsidiary
banks other than Old Second in the amounts of $17,400, $15,700, and $12,925
for years 1996, 1995, and 1994, respectively.
2)Share amounts for prior years have been restated for the five-for-four
stock split effective June 1996.
3)The amounts shown for 1996 represent the contribution to: (i) the
Corporation's qualified Profit Sharing Plan and Trust in the amount of $8,250
each for Messrs. Carlson, Skoglund, and Starmann; (ii) the Corporation's
Salary Savings Plan in the amount of $3,000 each for Messrs. Carlson, Skoglund,
and Starmann, as vested and accrued during 1996; and (iii) the Corporation's
nonqualified Supplemental Executive Retirement Plan ("SERP") in the amounts of
$3,034, $1,240, and $584 for Messrs. Carlson, Skoglund, and Starmann,
respectively. No amounts were paid or distributed pursuant to the plans to the
named individuals during 1996, 1995, or 1994.
</TABLE>
<PAGE>
Option Grants
The following table provides information about stock options granted during
1996 to the Named Executive Officers other than Mr. Benson, to whom no stock
options were granted during the year.
<TABLE>
Option Grants in Last Fiscal Year*
<CAPTION>
Individual Grant Potential
Realizable Value
Percent of at Assumed Annual
Total Options Rates of Stock
Granted to Exercise Price Appreciation
Options Employees Price Expiration For Option Term
Name Granted(#) in Fiscal Year ($/Share) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Ronald J.
Carlson 2,300 22.80% $40.875 12/09/06 $59,124 $149,832
William B.
Skoglund 2,200 21.80% $40.875 12/09/06 $56,553 $143,317
George
Starmann III 2,100 20.80% $40.875 12/09/06 $53,983 $136,803
<FN>
*Messrs. Carlson, Skoglund, and Starmann received the 1996 options on December
10, 1996. One-third of the options granted vest and become exercisable on each
of the first three anniversaries of their grant date.
</TABLE>
<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 1996 were Walter
Alexander, Gary McCarter, Alan Rassi, and William Meyer. 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.
Competitive market data is provided by an independent compensation consultant.
The data provided compares Old Second's compensation practices to banking
institutions with similar asset size and employment levels.
<PAGE>
The competitive market data used for compensation purposes differs from the
companies which comprise the Custom Peer Group in the Performance Graph
included in this proxy statement. The Compensation Committee believes that
the Company's most direct competitors for executive talent reflects a broader
group of companies than those included in the Custom Peer Group established
for comparing shareholder returns.
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) salary was reduced in 1996. In determining Mr. Benson's salary
in 1996, the Compensation Committee considered Mr. Benson's advisory role, his
individual performance, and his long-term contributions to the success of the
Corporation. 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 1996 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>
In 1996, Mr. Benson received no stock options. As detailed in the table on page
11, the other Named Executive Officers received stock option grants comparable
to the long-term incentive opportunity granted to individuals with the same or
similar position at various banks of similar size. The grants are similar in
size to the option shares that were granted in the previous fiscal year. The
Compensation Committee has determined that the compensation opportunities
should reflect overall Corporate and individual achievement, as well as
competitive compensation practices.
(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 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 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
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 tax code provision and has determined
that it is unlikely to affect the deductibility of compensation paid to
executive officers.
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.
<PAGE>
Compensation Committee of the Board of Directors of Old Second
Mr. Walter Alexander
Mr. Gary McCarter
Mr. Alan Rassi
Mr. William Meyer
Employment Agreement
Effective January 2, 1996, Mr. Benson retired as CEO of Old Second. However,
during 1996 Mr. Benson continued in his position as Chairman of the Board of
the Corporation and retained the title of CEO of the Corporation. As determined
at the Board of Directors meeting on January 14, 1997, Mr. Benson will continue
in his position as Chairman of the Board and CEO of the Corporation for 1997.
As in 1996, 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 to be performed during fiscal 1997,
Mr. Benson will receive a fee of $60,000.
<PAGE>
Comparison of Five-Year Cumulative Total Return*
Old Second Bancorp, Inc.; S&P 500; and Custom Peer Group
(Graph presented here.)
<TABLE>
<CAPTION>
Date Old Second S&P 500 Custom Peer Group
<S> <C> <C> <C>
December 1991 $100.00 $100.00 $100.00
December 1992 $117.28 $107.61 $141.12
December 1993 $156.14 $118.41 $176.36
December 1994 $163.73 $120.01 $180.00
December 1995 $188.51 $164.95 $216.61
December 1996 $218.07 $202.73 $232.56
</TABLE>
*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.; and Princeton National Bancorp
Inc. The Custom Peer Group has changed from last year's Custom Peer Group by
the removal of Premier Financial Services Inc. and Todays Bancorp Inc. These
companies were removed from the peer group as they were acquired in 1996 by
Grand Premier Financial and Mercantile Bancorp, respectively.
<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 includable 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:
<TABLE>
<CAPTION>
Covered Years of Service
Compensation 15 20 25 30 35 40
<S> <C> <C> <C> <C> <C> <C>
$ 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 5,372 7,163 8,953 10,744 12,250 14,000
50,000 8,759 11,679 14,598 17,518 18,768 20,018
75,000 14,772 19,696 24,620 29,544 31,419 33,294
100,000 21,022 28,029 35,037 42,044 44,544 47,044
125,000 27,272 36,363 45,453 54,544 57,669 60,794
150,000 33,522 44,696 55,870 67,044 70,794 74,544
175,000 39,772 53,029 66,287 79,544 83,919 88,294
200,000 46,022 61,363 76,703 92,044 97,044 102,044
225,000 52,272 69,696 87,120 104,544 110,169 115,794
250,000 58,522 78,029 97,537 117,044 123,294 129,544
275,000 64,772 86,363 107,953 129,544 136,419 143,294
300,000 71,022 94,696 118,370 142,044 149,544 157,044
</TABLE>
<PAGE>
Covered compensation under the qualified and nonqualified pension formulas and
the respective years of credited service as of December 31, 1996 for the
executive officers named in the cash compensation table are as follows: Ronald
J. Carlson, $205,155 (17 years); William B. Skoglund, $172,550 (24 years); and
George Starmann III, $160,615 (3 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 1996. 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>
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, 1997. 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 1998 Annual Meeting of Stockholders must be received by the
Corporation at its executive office no later than October 10, 1997.
<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 10, 1997
<PAGE>
Proxy for Annual Meeting of Stockholders
On March 11, 1997
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 11th day of March 1997,
at 11:00 a.m., Central Standard Time, and at any and all postponements or
adjournments thereof:
(1) Election of Directors.
__For all nomimees listed __WITHHOLD AUTHORITY __ABSTAIN
below (except as marked to vote for all nominees
to the contrary) listed below
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Ronald J. Carlson, Gary McCarter, D. Chet McKee
(2) Ratification and approval of the selection of Ernst & Young, L.L.P.
as the Corporation's independent accountants.
__FOR __AGAINST __ABSTAIN
(3) In their discretion on such other matters as may properly come before
the meeting or at any postponement or adjournment 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 AND FOR THE RATIFICATION AND APPROVAL OF THE SELECTION
OF ERNST & YOUNG, L.L.P. AS INDEPENDENT ACCOUNTANTS.
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
