<PAGE>
[LETTERHEAD OF LIBERTYBANCORP, INC. APPEARS HERE]
October 17, 1996
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders of
Liberty Bancorp, Inc. scheduled to be held on Tuesday, November 26, 1996, at
the Chicago Marriott O'Hare, 8535 West Higgins Road, Chicago, Illinois, at
2:00 p.m., Chicago time (the "Special Meeting"). Notice of the Special
Meeting, a Joint Proxy Statement/Prospectus and a form of proxy are enclosed.
The Special Meeting has been called to approve a "merger of equals" of
Liberty Bancorp and its principal subsidiary, Liberty Federal Savings Bank,
with Hinsdale Financial Corporation and its principal subsidiary, Hinsdale
Federal Bank for Savings (the "Merger"). The Merger will create a well-
capitalized combined entity, to be named "Alliance Bancorp," with
approximately $1.3 billion in assets and $1.0 billion in deposits operating
through 14 offices in Cook and DuPage counties, Illinois. Under the Merger
Agreement, stockholders of Liberty Bancorp will receive 1.054 shares of common
stock of Alliance Bancorp for each share of stock they currently own in
Liberty Bancorp. As a "merger of equals," members of Liberty Bancorp's Board
of Directors will represent 50% of the combined company's Board of Directors.
Your Board of Directors believes that the Merger presents an exceptional
opportunity to enhance the operational and strategic value of your company.
Liberty Bancorp's financial advisors, Chicago Capital, Inc. and Morgan Keegan
& Company, Inc., have advised your Board of Directors that in their opinion
the exchange ratio is fair to Liberty Bancorp's stockholders from a financial
point of view.
Consummation of the Merger is conditioned upon, among other things, receipt
of all required stockholder and regulatory approvals. The Board of Directors
has approved the Merger and believes that the Merger is in the best interest
of Liberty Bancorp and its stockholders. ACCORDINGLY, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER.
If any other matters are properly brought before the Special Meeting, the
persons named in the accompanying White Proxy Card will vote the shares
represented by such proxy upon such matters as determined by a majority of the
Board of Directors. You are urged to read the accompanying Joint Proxy
Statement/ Prospectus, which provides information regarding the merger and
related matters.
Your vote is important, regardless of the number of shares you own. ON
BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO SIGN, DATE AND RETURN THE
ENCLOSED WHITE PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID
ENVELOPE EVEN IF YOU CURRENTLY PLAN TO ATTEND THE SPECIAL MEETING. This will
not prevent you from voting in person but will assure that your vote is
counted if you do not attend the Special Meeting.
Sincerely,
/s/ Edward J. Burns
Chairman of the Board
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME. YOU WILL RECEIVE
INSTRUCTIONS FOLLOWING THE MERGER FOR THE EXCHANGE OF STOCK CERTIFICATES.
<PAGE>
LIBERTY BANCORP, INC.
5700 N. LINCOLN AVENUE
CHICAGO, ILLINOIS 60659
(312) 334-1200
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 26, 1996
Notice is Hereby Given that a Special Meeting of Stockholders (the "Special
Meeting") of Liberty Bancorp, Inc. ("Liberty Bancorp") is scheduled to be held
Tuesday, November 26, 1996, at the Chicago Marriott O'Hare, 8535 West Higgins
Road, Chicago, Illinois, at 2:00 p.m., Chicago time.
A White Proxy Card and a Joint Proxy Statement/Prospectus for the Special
Meeting are enclosed. The Special Meeting is for the purpose of considering
and voting upon the following matters:
1. The approval of the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of August 2, 1996, by and between Hinsdale Financial
Corporation ("Hinsdale Financial") and Liberty Bancorp, a copy of which is
attached to the accompanying Joint Proxy Statement/Prospectus as Appendix
I, and the transactions contemplated thereby, including the merger of
Liberty Bancorp into Hinsdale Financial, pursuant to which each outstanding
share of Liberty Bancorp common stock would be converted into 1.054 shares
of Hinsdale Financial (to be called "Alliance Bancorp" following the
Merger) common stock (with cash paid in lieu of fractional share
interests), and the merger of Liberty Federal Savings Bank into Hinsdale
Federal Bank for Savings, to operate under the name "Liberty Federal Bank."
2. Such other matters as may properly come before the Special Meeting or
any adjournments thereof, including proposals to adjourn the Special
Meeting to permit the further solicitation of proxies by the Board of
Directors in the event that there are not sufficient votes to approve any
proposal at the time of the Special Meeting; provided, however, that no
proxy which is voted against the foregoing proposal will be voted in favor
of an adjournment to solicit further proxies.
The Board of Directors has established October 14, 1996 as the record date
for the determination of stockholders entitled to notice of and to vote at the
Special Meeting and at any adjournments thereof. Only holders of the Common
Stock of Liberty Bancorp as of the close of business on that date will be
entitled to notice of and to vote at the Special Meeting or any adjournments
thereof. A list of stockholders entitled to vote at the Special Meeting will
be available at 5700 N. Lincoln Avenue, Chicago, Illinois for a period of ten
days prior to the Special Meeting and will also be available for inspection at
the meeting itself.
By Order of the Board of Directors,
/s/ Cynthia M. Mallo
Secretary
Chicago, Illinois
October 17, 1996
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE LIBERTY BANCORP THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES. AN ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. PLEASE DO
NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
<PAGE>
HINSDALE FINANCIAL CORPORATION
LIBERTY BANCORP, INC.
JOINT PROXY STATEMENT
----------------
HINSDALE FINANCIAL CORPORATION
PROSPECTUS
FOR
2,610,781 SHARES OF COMMON STOCK
($.01 PAR VALUE PER SHARE)
----------------
This Joint Proxy Statement/Prospectus relates to the proposed merger of
Liberty Bancorp, Inc., a Delaware corporation ("Liberty Bancorp"), with and
into Hinsdale Financial Corporation, a Delaware corporation ("Hinsdale
Financial"), and the merger of Liberty Bancorp's principal subsidiary, Liberty
Federal Savings Bank, into Hinsdale Financial's principal subsidiary, Hinsdale
Federal Bank for Savings (collectively, the "Merger"), in a "merger of equals"
transaction as contemplated by the Agreement and Plan of Merger, dated as of
August 2, 1996 (the "Merger Agreement"), by and between Hinsdale Financial and
Liberty Bancorp. Effective upon consummation of the Merger, the Certificate of
Incorporation of Hinsdale Financial will be amended to change the name of the
combined entity to Alliance Bancorp, and the Federal Charter of Hinsdale
Federal Bank for Savings will be amended to change the name of the combined
financial institution to Liberty Federal Bank. The Merger Agreement is
attached as Appendix I to this Joint Proxy Statement/Prospectus and
incorporated herein by reference.
This Joint Proxy Statement/Prospectus is being furnished to the holders of
shares of common stock, par value $.01 per share, of Hinsdale Financial
("Hinsdale Financial Common Stock") in connection with the solicitation of
proxies by the Board of Directors of Hinsdale Financial for use at a Special
Meeting of Stockholders of Hinsdale Financial (the "Hinsdale Financial Special
Meeting") scheduled to be held Tuesday, November 26, 1996, at the Chicago
Marriott O'Hare, 8535 West Higgins Road, Chicago, Illinois, at 3:30 p.m.,
Chicago time, and at any and all adjournments or postponements thereof.
This Joint Proxy Statement/Prospectus also is being furnished to the holders
of shares of common stock, par value $.01 per share, of Liberty Bancorp
("Liberty Bancorp Common Stock") in connection with the solicitation of
proxies by the Board of Directors of Liberty Bancorp for use at a Special
Meeting of Stockholders of Liberty Bancorp scheduled to be held on Tuesday,
November 26, 1996, at the Chicago Marriott O'Hare, 8535 West Higgins Road,
Chicago, Illinois, at 2:00 p.m., Chicago time, and at any and all adjournments
thereof (the "Liberty Bancorp Special Meeting" and, together with the Hinsdale
Financial Special Meeting, the "Special Meetings").
At the Hinsdale Financial Special Meeting, the holders of Hinsdale Financial
Common Stock will consider and vote upon a proposal to approve and adopt the
Merger Agreement. Also at the Hinsdale Financial Special Meeting, and as
provided in the Merger Agreement, holders of Hinsdale Financial Common Stock
will consider and vote upon proposals to (i) amend Hinsdale Financial's
Certificate of Incorporation (the "Hinsdale Financial Certificate") to
increase the total number of authorized shares of Hinsdale Financial Common
Stock to 11,000,000 (the "Shares Amendment"), and (ii) to amend the Hinsdale
Financial Certificate to change the name of the corporation, effective upon
consummation of the Merger, to "Alliance Bancorp" (the "Change of Name
Amendment" and together with the Shares Amendment, the "Certificate
Amendments"), as more fully described herein. The adoption of the Merger
Agreement is conditioned upon stockholder approval of the Certificate
Amendments, and the adoption of the Certificate Amendments is conditioned upon
stockholder approval of the Merger Agreement.
<PAGE>
At the Liberty Bancorp Special Meeting, the holders of Liberty Bancorp
Common Stock will consider and vote upon a proposal to approve the Merger
Agreement and the transactions contemplated thereby.
Subject to the terms, conditions and procedures set forth in the Merger
Agreement, each share of Liberty Bancorp Common Stock issued and outstanding
immediately prior to the Merger will be converted into the right to receive
1.054 shares of Alliance Bancorp Common Stock (the "Exchange Ratio"), with
cash paid in lieu of fractional share interests. Based on the last reported
sale price for Hinsdale Financial Common Stock on the Nasdaq National Market
on October 16, 1996 ($23.375 per share), the value of 1.054 shares of Hinsdale
Financial/Alliance Bancorp Common Stock as of that date would have been
approximately $24.64. The last reported sale price for Liberty Bancorp Common
Stock on the Nasdaq National Market on that date was $23.875 per share. As of
August 1, 1996, the last trading day preceding public announcement of the
proposed Merger, the last reported per share sale prices for Hinsdale
Financial Common Stock and Liberty Bancorp Common Stock on the Nasdaq National
Market were $23.25 and $24.125, respectively. Hinsdale Financial's and Liberty
Bancorp's respective financial advisors have rendered opinions to the effect
that as of August 2 and October 17, 1996, from a financial point of view, the
Exchange Ratio was fair to the respective stockholders of Hinsdale Financial
and Liberty Bancorp. The Merger is subject to certain conditions, including
the approval of the stockholders of Hinsdale Financial and Liberty Bancorp and
the approval of the Office of Thrift Supervision ("OTS"). For additional
information regarding the Merger Agreement and the terms of the Merger, see
"The Merger."
This Joint Proxy Statement/Prospectus also constitutes a prospectus of
Hinsdale Financial, filed as part of the Registration Statement (defined
below) with respect to 2,610,781 shares of Hinsdale Financial/Alliance Bancorp
Common Stock to be issued upon consummation of the Merger pursuant to the
terms of the Merger Agreement.
This Joint Proxy Statement/Prospectus does not cover any resales of the
Alliance Bancorp Common Stock offered hereby to be received by the
stockholders deemed to be affiliates of Hinsdale Financial or Liberty Bancorp
upon consummation of the Merger. No person is authorized to make use of this
Joint Proxy Statement/Prospectus in connection with such resales, although
such securities may be traded without the use of this Joint Proxy
Statement/Prospectus by those stockholders of Liberty Bancorp not deemed to be
affiliates of Hinsdale Financial or Liberty Bancorp.
This Joint Proxy Statement/Prospectus, and the accompanying notice and White
Proxy Card, are first being mailed to stockholders of Hinsdale Financial and
Liberty Bancorp on or about October 21, 1996.
THE SHARES OF HINSDALE FINANCIAL/ALLIANCE BANCORP COMMON STOCK OFFERED
HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION, THE OFFICE OF THRIFT SUPERVISION, ANY STATE SECURITIES COMMISSION
OR ANY OTHER GOVERNMENTAL AGENCY, AND NEITHER THE SECURITIES AND EXCHANGE
COMMISSION, THE OFFICE OF THRIFT SUPERVISION, ANY STATE SECURITIES COMMISSION
NOR ANY OTHER AGENCY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SHARES OF HINSDALE FINANCIAL/ALLIANCE BANCORP COMMON STOCK OFFERED
HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR
SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND
OR ANY OTHER GOVERNMENTAL AGENCY.
----------------
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS OCTOBER 17, 1996.
<PAGE>
AVAILABLE INFORMATION
Hinsdale Financial and Liberty Bancorp are subject to the informational
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and, in accordance therewith, file reports, proxy statements
and other information with the Securities and Exchange Commission (the "SEC").
Such reports, proxy statements and other information filed by Hinsdale
Financial and Liberty Bancorp can be obtained, upon payment of prescribed
fees, from the Public Reference Section of the SEC at Judiciary Plaza, 450
Fifth Street, N.W., Washington D.C. 20549. In addition, such information can
be inspected and copied at the public reference facilities of the SEC located
at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the SEC's
Regional Offices located at Northwestern Atrium Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor,
New York, New York 10048. Hinsdale Financial and Liberty Bancorp file their
reports, proxy statements and other information (including the registration
statement referred to below) with the SEC electronically through the
Electronic Data Gathering, Analysis, and Retrieval ("EDGAR") system, which
filings are publicly available through the SEC's Web site at
http://www.sec.gov.
Hinsdale Financial has filed with the SEC a registration statement on Form
S-4 (together with all amendments, schedules, and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Hinsdale Financial/Alliance
Bancorp Common Stock to be issued pursuant to and as contemplated by the
Merger Agreement. This Joint Proxy Statement/Prospectus does not contain all
the information set forth in the Registration Statement, certain parts of
which have been omitted in accordance with the rules and regulations of the
SEC. The Registration Statement is available for inspection and copying as set
forth above. Statements contained in this Joint Proxy Statement/Prospectus or
in any document incorporated by reference in this Joint Proxy
Statement/Prospectus as to the contents of any contract or other document are
not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS
(EXCLUDING EXHIBITS NOT SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE,
WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS
JOINT PROXY STATEMENT/PROSPECTUS IS DELIVERED BY OR ON BEHALF OF HINSDALE
FINANCIAL OR LIBERTY BANCORP, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON,
IN THE CASE OF DOCUMENTS RELATING TO HINSDALE FINANCIAL, TO RICHARD A.
HOJNICKI, CORPORATE SECRETARY, HINSDALE FINANCIAL CORPORATION, ONE GRANT
SQUARE, HINSDALE, ILLINOIS 60521, TELEPHONE (630) 323-1776; OR IN THE CASE OF
DOCUMENTS RELATING TO LIBERTY BANCORP, TO CYNTHIA M. MALLO, SECRETARY, LIBERTY
BANCORP, INC., 5700 N. LINCOLN AVENUE, CHICAGO, ILLINOIS 60659, TELEPHONE
(312) 334-1200. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO
THE SPECIAL MEETINGS, ANY REQUEST SHOULD BE MADE BY NOVEMBER 19, 1996. PERSONS
REQUESTING COPIES OF EXHIBITS TO DOCUMENTS WHICH ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE IN SUCH DOCUMENTS MAY BE CHARGED THE COST OF
REPRODUCTION AND MAILING.
The following documents previously filed with the SEC by Hinsdale Financial
(File No. 0-20082) are hereby incorporated by reference in this Joint Proxy
Statement/Prospectus. Except as noted below, these documents are not presented
or delivered herewith:
1. The Annual Report on Form 10-K of Hinsdale Financial for the fiscal
year ended September 30, 1995.
2. The Quarterly Reports on Form 10-Q of Hinsdale Financial for the
quarterly periods ended December 31, 1995, March 31 and June 30, 1996.
3. The Current Report on Form 8-K of Hinsdale Financial dated August 19,
1996.
(i)
<PAGE>
4. The following portions of Hinsdale Financial's Annual Report to
Stockholders for the fiscal year ended September 30, 1995: Five Year
Financial Summary (pages 14 to 15); Management's Discussion and Analysis of
Financial Condition and Results of Operations (pages 5 to 13); Corporate
Information (page 38); and Quarterly Results of Operations (page 37).
Accompanying this Joint Proxy Statement/Prospectus are Hinsdale Financial's
Annual Report to Stockholders for the fiscal year ended September 30, 1995 and
its Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
The following documents previously filed with the SEC by Liberty Bancorp
(File No. 0-19525) are hereby incorporated by reference in this Joint Proxy
Statement/Prospectus. Except as noted below, these documents are not presented
or delivered herewith:
1. The Annual Report on Form 10-K of Liberty Bancorp for the year ended
December 31, 1995.
2. The Quarterly Reports on Form 10-Q of Liberty Bancorp for the
quarterly periods ended March 31 and June 30, 1996.
3. The Current Report on Form 8-K of Liberty Bancorp dated August 19,
1996.
4. The following portions of Liberty Bancorp's Annual Report to
Stockholders for the year ended December 31, 1995: Selected Financial Data
(page 8); Selected Financial Ratios and Other Data (page 9); Management's
Discussion and Analysis of Financial Condition and Results of Operations
(pages 10 to 20); Shareholder Information (page 42); and Quarterly Results
of Operations (page 41).
Accompanying this Joint Proxy Statement/Prospectus are Liberty Bancorp's
Annual Report to Stockholders for the year ended December 31, 1995 and its
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
All documents filed by Hinsdale Financial or Liberty Bancorp, respectively,
with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act after the date of this Joint Proxy Statement/Prospectus and prior to the
date of the Special Meetings shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Joint Proxy Statement/Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Joint Proxy Statement/Prospectus.
----------------
All information contained in this Joint Proxy Statement/Prospectus with
respect to Hinsdale Financial and its subsidiaries has been supplied by
Hinsdale Financial, and all information with respect to Liberty Bancorp and
its subsidiaries has been supplied by Liberty Bancorp.
No person is authorized to give any information or to make any
representation other than those contained or incorporated by reference in this
Joint Proxy Statement/Prospectus, and, if given or made, such information or
representation should not be relied upon as having been authorized. This Joint
Proxy Statement/Prospectus does not constitute an offer to sell, or a
solicitation of an offer to purchase, the securities offered by this Joint
Proxy Statement/Prospectus, or the solicitation of a proxy, in any
jurisdiction, to or from any person to whom or from whom it is unlawful to
make such offer, solicitation of an offer or proxy solicitation in such
jurisdiction.
----------------
(ii)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION.................................................... (i)
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................... (i)
TABLE OF CONTENTS........................................................ (iii)
SUMMARY.................................................................. 1
THE PARTIES TO THE MERGER.............................................. 1
Hinsdale Financial Corporation and Hinsdale Federal Bank for
Savings............................................................. 1
Liberty Bancorp, Inc. and Liberty Federal Savings Bank............... 1
THE SPECIAL MEETINGS................................................... 2
Hinsdale Financial Special Meeting................................... 2
Liberty Bancorp Special Meeting...................................... 3
THE MERGER............................................................. 4
General.............................................................. 4
Reasons for the Merger; Recommendations of the Boards of Directors... 4
Merger Consideration................................................. 5
Treatment of Liberty Bancorp Stock Options........................... 5
Opinions of Financial Advisors....................................... 6
Effective Time and Closing Date...................................... 6
No Appraisal Rights.................................................. 6
Interests of Certain Persons in the Merger........................... 6
Conditions to the Merger............................................. 7
Regulatory Approvals................................................. 7
Waiver and Amendment; Termination.................................... 7
Covenants Pending Closing............................................ 8
Expenses............................................................. 8
Accounting Treatment................................................. 8
Federal Income Tax Consequences of the Merger........................ 8
Effects of the Merger on Stockholders................................ 8
Nasdaq Listing....................................................... 9
MANAGEMENT AND OPERATIONS AFTER THE MERGER............................. 9
CERTAIN RELATED TRANSACTIONS........................................... 9
Stock Option Agreements.............................................. 9
The Bank Merger Agreement............................................ 10
UNAUDITED COMPARATIVE PER COMMON SHARE DATA............................ 10
COMPARATIVE STOCK PRICES AND DIVIDEND INFORMATION...................... 12
RECENT DEVELOPMENTS.................................................... 13
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF HINSDALE FINANCIAL
CORPORATION............................................................. 14
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF LIBERTY BANCORP, INC... 16
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS........................ 17
Pro Forma Combined Condensed Statement of Financial Condition as of
June 30, 1996......................................................... 17
Pro Forma Combined Condensed Statements of Income...................... 18
Pro Forma Capital Ratios............................................... 19
HINSDALE FINANCIAL CORPORATION AND HINSDALE FEDERAL BANK FOR SAVINGS..... 20
Hinsdale Financial Corporation......................................... 20
Hinsdale Federal Bank for Savings...................................... 20
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C>
LIBERTY BANCORP, INC. AND LIBERTY FEDERAL SAVINGS BANK..................... 21
Liberty Bancorp, Inc..................................................... 21
Liberty Federal Savings Bank............................................. 21
THE SPECIAL MEETINGS....................................................... 22
Hinsdale Financial Special Meeting....................................... 22
Liberty Bancorp Special Meeting.......................................... 24
THE MERGER................................................................. 27
General.................................................................. 27
Background of and Reasons for the Merger................................. 27
Recommendations of the Boards of Directors............................... 31
Merger Consideration..................................................... 32
Treatment of Liberty Bancorp Stock Options............................... 32
Opinion of Financial Advisor to Hinsdale Financial....................... 33
Opinions of Liberty Bancorp's Financial Advisors......................... 36
Effective Time and Closing Date.......................................... 43
No Appraisal Rights...................................................... 43
Fractional Shares........................................................ 44
Exchange of Certificates................................................. 44
Interests of Certain Persons in the Merger............................... 45
Effect on Employees and Employee Benefit Plans of Liberty Bancorp and
Hinsdale Financial...................................................... 46
Representations and Warranties........................................... 47
Conditions to the Merger................................................. 47
Regulatory Approvals..................................................... 49
Waiver and Amendment; Termination........................................ 49
Covenants Pending Closing................................................ 50
Expenses................................................................. 51
Accounting Treatment..................................................... 51
Resales of Hinsdale Financial Common Stock by Affiliates................. 52
Federal Income Tax Consequences of the Merger............................ 52
Nasdaq Listing........................................................... 53
Change of Fiscal Year.................................................... 53
MANAGEMENT AND OPERATIONS AFTER THE MERGER................................. 54
Post-Merger Dividend Policy.............................................. 55
CERTAIN RELATED TRANSACTIONS............................................... 56
Stock Option Agreements.................................................. 56
The Bank Merger Agreement................................................ 58
DESCRIPTION OF HINSDALE FINANCIAL/ALLIANCE BANCORP CAPITAL STOCK........... 59
General.................................................................. 59
Common Stock............................................................. 59
Preferred Stock.......................................................... 60
Certain Provisions of Delaware Corporate Law and Hinsdale
Financial/Alliance Bancorp's Certificate of Incorporation............... 60
COMPARISON OF RIGHTS OF STOCKHOLDERS OF HINSDALE FINANCIAL CORPORATION AND
LIBERTY BANCORP, INC...................................................... 61
AMENDMENTS TO CERTIFICATE OF INCORPORATION OF HINSDALE FINANCIAL
CORPORATION............................................................... 62
General.................................................................. 62
Increase in Authorized Shares of Capital Stock........................... 62
Change of Name to Alliance Bancorp....................................... 63
</TABLE>
(iv)
<PAGE>
<TABLE>
<S> <C>
LEGAL MATTERS............................................................... 63
EXPERTS..................................................................... 64
STOCKHOLDER PROPOSALS....................................................... 64
INDEPENDENT ACCOUNTANTS..................................................... 64
OTHER MATTERS............................................................... 65
</TABLE>
APPENDICES
<TABLE>
<C> <S>
I Agreement and Plan of Merger dated as of August 2, 1996 (including the
Stock Option Agreements and the Bank Merger Agreement but omitting other
schedules and exhibits)
II Text of proposed amendments to Certificate of Incorporation of Hinsdale
Financial/Alliance Bancorp
III Fairness Opinion of Robert W. Baird & Co. Incorporated
IV Fairness Opinion of Chicago Capital, Inc.
V Fairness Opinion of Morgan Keegan & Company, Inc.
</TABLE>
(v)
<PAGE>
SUMMARY
The following is a brief summary of certain information contained elsewhere
or incorporated by reference in this Joint Proxy Statement/Prospectus. Certain
capitalized terms used in this summary are defined elsewhere in this Joint
Proxy Statement/Prospectus. This summary is not intended to be a complete
description of all material facts regarding Hinsdale Financial, Liberty Bancorp
and the matters to be considered at the Special Meetings and is qualified in
its entirety by, and reference is made to, the more detailed information
contained elsewhere in this Joint Proxy Statement/Prospectus, the accompanying
Appendices and the documents referred to and incorporated by reference herein.
THE PARTIES TO THE MERGER
HINSDALE FINANCIAL CORPORATION AND HINSDALE FEDERAL BANK FOR SAVINGS
Hinsdale Financial, a Delaware corporation, is the holding company for
Hinsdale Federal Bank for Savings ("Hinsdale Federal"), a federally chartered
savings bank headquartered in Hinsdale, Illinois. As of June 30, 1996, Hinsdale
Financial had total consolidated assets of $662.5 million, deposits of $466.1
million and stockholders' equity of $55.5 million. Hinsdale Financial's
business has consisted primarily of the business of Hinsdale Federal and its
subsidiaries. The executive offices of Hinsdale Financial are located at One
Grant Square, Hinsdale, Illinois 60521, and the telephone number is (630) 323-
1776.
Hinsdale Federal is a community-oriented institution providing financial
services through ten retail banking facilities in DuPage and western Cook
counties in Illinois. Hinsdale Federal offers a variety of deposit products in
an attempt to attract funds from the general public in highly competitive
market areas surrounding its offices. In addition to deposit products, Hinsdale
Federal also offers its customers financial advice and security brokerage
services through INVEST Financial Corporation ("INVEST"). Hinsdale Federal
invests its retail deposits in mortgage and consumer loans, investment
securities and mortgage-backed securities, secured primarily by one-to four-
family residential loans. Hinsdale Federal also owns Preferred Mortgage
Associates, Ltd. ("Preferred"), which is one of the largest mortgage brokers in
the Chicago metropolitan area and which has four mortgage origination offices,
including its headquarters in Downers Grove, Illinois. See "Selected
Consolidated Financial and Other Data of Hinsdale Financial Corporation,"
"Hinsdale Financial Corporation and Hinsdale Federal Bank for Savings" and
"Unaudited Pro Forma Combined Financial Statements."
Additional information concerning Hinsdale Financial and Hinsdale Federal is
included in the Hinsdale Financial documents incorporated by reference herein.
See "Incorporation of Certain Documents by Reference."
LIBERTY BANCORP, INC. AND LIBERTY FEDERAL SAVINGS BANK
Liberty Bancorp is a Delaware corporation incorporated in August, 1991 as a
savings and loan holding company. As of June 30, 1996, Liberty Bancorp had
total consolidated assets of $651.2 million, deposits of $508.6 million and
stockholders' equity of $64.0 million. Liberty Bancorp's executive offices are
located at 5700 N. Lincoln Avenue, Chicago, Illinois 60659, and its telephone
number is (312) 334-1200. Liberty Bancorp's business has consisted primarily of
the business of Liberty Federal Savings Bank ("Liberty Federal Savings"), its
wholly-owned subsidiary.
Liberty Federal Savings is a community-oriented financial institution
offering a variety of traditional financial services to meet the financial
needs of the communities it serves. Liberty Federal Savings operates out of its
main office located in Chicago and its branch offices located in Glenview,
Morton Grove and Norridge, Illinois. Its deposit base is concentrated in the
communities surrounding its offices, while its lending base extends throughout
the northwestern portion of Chicago, suburban Cook and DuPage counties,
Illinois. Liberty Federal Savings also purchases loans that meet the
institution's underwriting standards, which are secured by
1
<PAGE>
automobiles and real estate located primarily in Chicago and the contiguous
counties. It also purchases commercial leases secured by assets throughout the
United States. See "Selected Consolidated Financial and Other Data of Liberty
Bancorp, Inc.," "Liberty Bancorp, Inc. and Liberty Federal Savings Bank" and
"Unaudited Pro Forma Combined Financial Statements."
Additional information concerning Liberty Bancorp and Liberty Federal Savings
is included in the Liberty Bancorp documents incorporated by reference herein.
See "Incorporation of Certain Documents by Reference."
THE SPECIAL MEETINGS
HINSDALE FINANCIAL SPECIAL MEETING
Meeting Date. The Hinsdale Financial Special Meeting will be held on Tuesday,
November 26, 1996, at the Chicago Marriott O'Hare, 8535 West Higgins Road,
Chicago, Illinois, at 3:30 p.m., Chicago time, and any and all adjournments or
postponements thereof.
Record Date. Only holders of record of Hinsdale Financial Common Stock at the
close of business on October 14, 1996 (the "Hinsdale Financial Record Date")
are entitled to notice of and to vote at the Hinsdale Financial Special
Meeting.
Matters to be Considered. At the Hinsdale Financial Special Meeting, holders
of shares of Hinsdale Financial Common Stock will vote on the following
proposals (the "Hinsdale Financial Proposals"): the approval and adoption of
the Merger Agreement and the transactions contemplated thereby, including the
Merger of Liberty Bancorp with and into Hinsdale Financial and the issuance by
Hinsdale Financial/Alliance Bancorp of up to 2,610,781 shares of Hinsdale
Financial/Alliance Bancorp Common Stock in connection with the Merger; and the
approval and adoption of amendments to the Hinsdale Financial Certificate to
(i) increase the total number of authorized shares of Hinsdale Financial common
stock to 11,000,000 (the "Shares Amendment"), and (ii) change the name of the
corporation, effective upon consummation of the Merger, to "Alliance Bancorp"
(the "Change of Name Amendment" and together with the Shares Amendment, the
"Certificate Amendments"). See "The Merger" and "Amendments to Certificate of
Incorporation of Hinsdale Financial Corporation." HINSDALE FINANCIAL'S BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT HINSDALE FINANCIAL STOCKHOLDERS VOTE FOR
EACH OF THE HINSDALE FINANCIAL PROPOSALS. Hinsdale Financial stockholders may
also consider and vote upon such other matters as are properly brought before
the Hinsdale Financial Special Meeting, including proposals to adjourn the
Hinsdale Financial Special Meeting to permit the further solicitation of
proxies by Hinsdale Financial's Board of Directors in the event that there are
not sufficient votes to approve any proposal at the time of the Hinsdale
Financial Special Meeting; provided, however, that any proxy which is voted
against any of the Hinsdale Financial Proposals will not be voted in favor of
adjournment to solicit further proxies for such proposal.
Votes Required. The affirmative vote of the holders of a majority of the
outstanding shares of Hinsdale Financial Common Stock is required for approval
and adoption of the Merger Agreement and the Certificate Amendments. As of the
Hinsdale Financial Record Date, there were 2,695,085 shares of Hinsdale
Financial Common Stock entitled to be voted at the Hinsdale Financial Special
Meeting.
With a quorum, or in the absence of such, the affirmative vote of a majority
of the shares represented at the Hinsdale Financial Special Meeting may
authorize the adjournment of the meeting.
Approval of the Merger Agreement by the stockholders of Hinsdale Financial is
a condition to, and required for, consummation of the Merger. The adoption of
the Merger Agreement is also conditioned upon stockholder approval of the
Certificate Amendments, and the adoption of the Certificate Amendments is
conditioned upon stockholder approval of the Merger Agreement. See "The
Merger--Conditions to the Merger."
2
<PAGE>
Proxies. Any proxy given pursuant to this solicitation or otherwise may be
revoked by the person giving it at any time before it is voted either by
delivering to the Secretary of Hinsdale Financial at One Grant Square,
Hinsdale, Illinois 60521 on or before the taking of the vote at the Hinsdale
Financial Special Meeting, a written notice of revocation bearing a later date
than the date of the proxy or a later dated proxy relating to the same shares,
or by attending the Hinsdale Financial Special Meeting and voting in person.
Attendance at the Hinsdale Financial Special Meeting will not in itself
constitute the revocation of a proxy. Moreover, 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 Special
Meeting.
Security Ownership. As of the Hinsdale Financial Record Date, directors and
executive officers of Hinsdale Financial and their affiliates were beneficial
owners of 173,993 shares (excluding shares underlying stock options), or 6.5%
of the then outstanding shares, of Hinsdale Financial Common Stock. The
directors of Hinsdale Financial have entered into voting agreements with
Liberty Bancorp (the "Liberty Bancorp Voting Agreements") whereby such
directors have agreed to vote or cause to be voted the shares of Hinsdale
Financial Common Stock owned by them (109,183 shares in the aggregate) for
approval and adoption of the Merger Agreement at the Hinsdale Financial Special
Meeting. As of the Hinsdale Financial Record Date, directors and executive
officers of Liberty Bancorp and their affiliates owned 5,125 shares of Hinsdale
Financial Common Stock. It is expected that such shares will be voted in favor
of the Hinsdale Financial Proposals.
For additional information, see "The Special Meetings--Hinsdale Financial
Special Meeting."
LIBERTY BANCORP SPECIAL MEETING
Meeting Date. The Liberty Bancorp Special Meeting is scheduled to be held on
Tuesday, November 26, 1996, at the Chicago Marriott O'Hare, 8535 West Higgins
Road, Chicago, Illinois, at 2:00 p.m., Chicago time, and any and all
adjournments or postponements thereof.
Record Date. Only holders of record of Liberty Bancorp Common Stock at the
close of business on October 14, 1996 (the "Liberty Bancorp Record Date") are
entitled to notice of and to vote at the Liberty Bancorp Special Meeting.
Matters to be Considered. At the Liberty Bancorp Special Meeting, holders of
shares of Liberty Bancorp Common Stock will vote on a proposal (the "Liberty
Bancorp Proposal") to approve the Merger Agreement and the transactions
contemplated thereby. LIBERTY BANCORP'S BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT LIBERTY BANCORP'S STOCKHOLDERS VOTE FOR THE LIBERTY BANCORP
PROPOSAL. Liberty Bancorp stockholders also may consider and vote upon such
other matters as are properly brought before the Liberty Bancorp Special
Meeting, including proposals to adjourn the Liberty Bancorp Special Meeting to
permit the further solicitation of proxies by Liberty Bancorp's Board of
Directors in the event that there are not sufficient votes to approve the
proposal at the time of the Liberty Bancorp Special Meeting; provided, however,
that no proxy which is voted against the Liberty Bancorp Proposal will be voted
in favor of adjournment to solicit further proxies for such proposal.
Vote Required. The affirmative vote of the holders of a majority of the
outstanding shares of Liberty Bancorp Common Stock entitled to vote at the
Liberty Bancorp Special Meeting is required for approval of the Liberty Bancorp
Proposal. As of the Liberty Bancorp Record Date, there were 2,477,022 shares of
Liberty Bancorp Common Stock entitled to be voted at the Liberty Bancorp
Special Meeting.
With a quorum, or in the absence of such, the affirmative vote of a majority
of the shares of Liberty Bancorp Common Stock represented at the Liberty
Bancorp Special Meeting may authorize the adjournment of the meeting.
Approval of the Liberty Bancorp Proposal by the stockholders of Liberty
Bancorp is a condition to, and required for, consummation of the Merger. See
"The Merger--Conditions to the Merger."
3
<PAGE>
Proxies. Any proxy given pursuant to this solicitation or otherwise may be
revoked by the person giving it at any time before it is voted by delivering to
the Secretary of Liberty Bancorp at 5700 N. Lincoln Avenue, Chicago, Illinois
60659 on or before the taking of the vote at the Liberty Bancorp Special
Meeting, a written notice of revocation bearing a later date than the proxy or
a later dated proxy relating to the same shares of Liberty Bancorp Common
Stock, or by attending the Liberty Bancorp Special Meeting and voting in
person. Attendance at the Liberty Bancorp Special Meeting will not in itself
constitute the revocation of a proxy. Moreover, 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 Special
Meeting.
Security Ownership. As of the Liberty Bancorp Record Date, directors and
executive officers of Liberty Bancorp and their affiliates beneficially owned
401,894 shares (excluding shares underlying stock options), or 16.2% of the
then outstanding shares, of Liberty Bancorp Common Stock. The directors of
Liberty Bancorp have entered into voting agreements with Hinsdale Financial
(the "Hinsdale Financial Voting Agreements") whereby such directors have agreed
to vote the shares of Liberty Bancorp Common Stock owned by them (344,173
shares in the aggregate) for approval of the Merger Agreement. As of the
Liberty Bancorp Record Date, directors and executive officers of Hinsdale
Financial and their affiliates did not beneficially own any shares of Liberty
Bancorp Common Stock.
For additional information, see "The Special Meetings--Liberty Bancorp
Special Meeting."
THE MERGER
The following summary is qualified in its entirety by reference to the full
text of the Merger Agreement, which is attached hereto in Appendix I and
incorporated by reference herein.
GENERAL
The stockholders of Hinsdale Financial and Liberty Bancorp, respectively, are
each being asked to consider and vote upon, among other things, a proposal to
approve the Merger Agreement, pursuant to which Liberty Bancorp will be merged
with and into Hinsdale Financial in a "merger of equals" transaction, pursuant
to which: the combined entity will operate under the name "Alliance Bancorp;"
each share of Liberty Bancorp Common Stock issued and outstanding immediately
prior to the Merger will be converted into the right to receive 1.054 shares of
Alliance Bancorp Common Stock; Hinsdale Financial stockholders will maintain
one share of Alliance Bancorp common stock for each share of Hinsdale Financial
common stock they own; and Liberty Federal Savings will be merged with and into
Hinsdale Federal and will operate under the name Liberty Federal Bank. See "The
Merger--General."
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
General. The Boards of Directors of Hinsdale Financial and Liberty Bancorp
believe that the terms of the Merger are fair to and in the best interest of
their respective companies and stockholders and that the Merger will enhance
the operational and strategic value of each company's franchise. See "The
Merger--Background of and Reasons for the Merger."
Hinsdale Financial. The Hinsdale Financial Board of Directors has unanimously
adopted the Merger Agreement and approved the transactions contemplated thereby
and has determined that the Merger and the issuance of the shares of Hinsdale
Financial/Alliance Bancorp Common Stock pursuant thereto are fair to, and in
the best interests of, Hinsdale Financial and its stockholders. THE HINSDALE
FINANCIAL BOARD OF DIRECTORS THEREFORE RECOMMENDS A VOTE FOR APPROVAL OF THE
HINSDALE FINANCIAL PROPOSALS AT THE HINSDALE FINANCIAL SPECIAL MEETING.
4
<PAGE>
For a discussion of the factors considered by the Hinsdale Financial Board of
Directors in reaching its decision to adopt the Merger Agreement and approve
the transactions contemplated thereby, see "The Merger--Background of and
Reasons for the Merger."
Liberty Bancorp. The Liberty Bancorp Board of Directors has unanimously
adopted the Merger Agreement and approved the transactions contemplated thereby
and has determined that the Merger is fair to, and in the best interests of,
Liberty Bancorp and its stockholders. THE LIBERTY BANCORP BOARD OF DIRECTORS
THEREFORE RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE LIBERTY BANCORP
PROPOSAL AT THE LIBERTY BANCORP SPECIAL MEETING.
For a discussion of the factors considered by the Liberty Bancorp Board of
Directors in reaching its decision to adopt the Merger Agreement and approve
the transactions contemplated thereby, see "The Merger--Background of and
Reasons for the Merger."
MERGER CONSIDERATION
Subject to the terms, conditions and procedures set forth in the Merger
Agreement, each share of Liberty Bancorp Common Stock issued and outstanding
immediately prior to the Merger will be converted into the right to receive
1.054 shares (the "Exchange Ratio") of Hinsdale Financial/Alliance Bancorp
Common Stock (the "Merger Consideration"). See "The Merger--Merger
Consideration." Each share of Hinsdale Financial Common Stock issued and
outstanding at the Effective Time (as hereinafter defined) will remain
outstanding and unchanged as a share of Alliance Bancorp as a result of the
Merger, and without any action on behalf of a Hinsdale Financial stockholder.
The number of shares of Hinsdale Financial/Alliance Bancorp Common Stock to
be received for each share of Liberty Bancorp Common Stock has been fixed at
1.054. Based on the last reported sale price for Hinsdale Financial Common
Stock on the Nasdaq National Market on October 16, 1996 ($23.375 per share),
the value of 1.054 shares of Hinsdale Financial Common Stock as of that date
would have been approximately $24.64 per share. The last reported sale price
for Liberty Bancorp Common Stock on the Nasdaq National Market on that date was
$23.875 per share. The market value of Hinsdale Financial/Alliance Bancorp
Common Stock to be received in the Merger, however, is subject to fluctuation.
Fluctuations in the market price of Hinsdale Financial Common Stock would
result in an increase or decrease in the value of the Merger Consideration to
be received by Liberty Bancorp stockholders in the Merger. An increase in the
market value of Hinsdale Financial Common Stock would increase the market value
of the Merger Consideration to be received in the Merger. A decrease in the
market value of Hinsdale Financial Common Stock would have the opposite effect.
See "The Merger--Merger Consideration."
Following the Effective Time (as hereinafter defined), the former
stockholders of Liberty Bancorp would own approximately 2,610,781 shares, or
49.2%, of the shares of Alliance Bancorp Common Stock outstanding.
TREATMENT OF LIBERTY BANCORP STOCK OPTIONS
At the Liberty Bancorp Record Date, there were options ("Liberty Bancorp
Stock Options") outstanding with respect to 396,774 shares of Liberty Bancorp
Common Stock under the stock option plans of Liberty Bancorp (the "Liberty
Bancorp Option Plans"). Except as described below, at the Effective Time, each
Liberty Bancorp Stock Option shall become an option to purchase the number of
shares of Alliance Bancorp Common Stock that would have been received by the
holder of such option in the Merger had the option been exercised in full for
shares of Liberty Bancorp Common Stock immediately prior to the Effective Time,
upon the same terms and conditions under the relevant option as were applicable
immediately prior to the Effective Time, except the exercise price per share
will be proratably adjusted by the Exchange Ratio and any fractional shares.
See "The Merger--Treatment of Liberty Bancorp Stock Options."
5
<PAGE>
OPINIONS OF FINANCIAL ADVISORS
Hinsdale Financial. Hinsdale Financial has retained Robert W. Baird & Co.
Incorporated ("Baird") as its financial advisor in connection with the
transactions contemplated by the Merger Agreement and to evaluate the financial
terms of the Merger. See "The Merger--Background of and Reasons for the
Merger."
On August 2, 1996, Baird delivered to the Board of Directors of Hinsdale
Financial its oral opinion, confirmed by its written opinion as of October 17,
1996, that as of the dates of such opinions and based on the matters stated
therein, the Exchange Ratio is fair, from a financial point of view, to the
holders of the outstanding shares of Hinsdale Financial Common Stock. A copy of
Baird's opinion dated October 17, 1996, is attached to this Joint Proxy
Statement/Prospectus as Appendix III and is incorporated by reference herein.
See "The Merger--Opinion of Financial Advisor to Hinsdale Financial."
Liberty Bancorp. Liberty Bancorp has retained Chicago Capital, Inc. ("Chicago
Capital") as its financial advisor in connection with the transactions
contemplated by the Merger Agreement and to evaluate the financial terms of the
Merger. Additionally, Liberty Bancorp retained Morgan Keegan & Company, Inc.
("Morgan Keegan") to render an opinion as to the fairness to Liberty Bancorp's
shareholders, from a financial point of view, of the Exchange Ratio. See "The
Merger--Background of and Reasons for the Merger."
On August 2, 1996, Chicago Capital and Morgan Keegan delivered to the Board
of Directors of Liberty Bancorp their oral opinion, confirmed by their written
opinions as of October 17, 1996, that as of the dates of such opinions and
based on the matters stated therein, the Exchange Ratio is fair, from a
financial point of view, to the holders of Liberty Bancorp Common Stock. A copy
of the opinion of Chicago Capital and Morgan Keegan, each dated October 17,
1996, are attached to this Joint Proxy Statement/Prospectus as Appendix IV and
Appendix V, respectively, and are incorporated by reference herein. See "The
Merger--Opinions of Liberty Bancorp's Financial Advisors."
EFFECTIVE TIME AND CLOSING DATE
The Merger shall become effective at the time and on the date (the "Effective
Time") of the filing of a certificate of merger with the Secretary of State of
Delaware. Such filing will occur only after the receipt of all requisite
regulatory approvals, approval of the Merger Agreement by the requisite vote of
Hinsdale Financial's and Liberty Bancorp's respective stockholders and the
satisfaction or waiver of all other conditions to the Merger. The closing of
the Merger shall occur within 30 days after the satisfaction or waiver of all
conditions and obligations precedent of Hinsdale Financial and Liberty Bancorp
to consummate the Merger, or at another time agreed to by Hinsdale Financial
and Liberty Bancorp (the "Closing Date"). Unless the parties otherwise agree,
the Merger Agreement shall terminate if the Effective Time does not occur by
June 30, 1997.
NO APPRAISAL RIGHTS
Stockholders of Hinsdale Financial and Liberty Bancorp will not have
appraisal rights under the Delaware General Corporation Law (the "DGCL") in
connection with the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Hinsdale Financial's management and the Hinsdale Financial
Board of Directors, and Liberty Bancorp's management and the Liberty Bancorp
Board of Directors, respectively, may be deemed to have certain interests in
the Merger in addition to their interests as stockholders of Hinsdale Financial
and Liberty Bancorp, as the case may be, generally. These interests include,
among others, provisions in the Merger Agreement relating to indemnification of
Liberty Bancorp directors and officers, directors' and officers' liability
insurance, the election or appointment of seven members from each of the
Hinsdale Financial and Liberty Bancorp Board to the Board of Alliance Bancorp,
and the appointment of Mr. Novy as Chairman of the Board
6
<PAGE>
and Mr. Bristol as President and Chief Executive Officer of Alliance Bancorp,
as described below. The Merger Agreement also provides that following the
Merger, Alliance Bancorp will adopt an option plan allowing for the grant of
options for up to 300,000 shares of Alliance Bancorp Common Stock. See "The
Merger--Interests of Certain Persons in the Merger."
CONDITIONS TO THE MERGER
The respective obligations of the parties to consummate the Merger are
subject to the satisfaction or waiver of certain conditions specified in the
Merger Agreement, including, among other things, the receipt of the requisite
regulatory and stockholder approvals, the accuracy of the representations and
warranties contained therein, the performance of all obligations imposed
thereby, the receipt by Hinsdale Financial and Liberty Bancorp of certain tax
opinions and the satisfaction of certain other conditions. See "The Merger--
Conditions to the Merger."
REGULATORY APPROVALS
The Merger is subject to the approval of the OTS. On September 27, 1996,
Hinsdale Financial filed an application for approval of the Merger with the
OTS. Hinsdale Financial expects OTS approval of the Merger in late December,
1996, or January, 1997. No assurance can be given, however, as to the ultimate
timing of OTS approval. Under federal law, a period of 15 days must expire
following approval by the OTS within which period the United States Department
of Justice (the "Department of Justice") may file objections to the Merger
under the federal antitrust laws. The parties do not expect the Department of
Justice to file any such objection to the proposed Merger.
It is a condition to the consummation of the Merger that all requisite
regulatory approvals be obtained without any condition or restriction that
would have or result in a material adverse effect on Alliance Bancorp as the
surviving corporation. See "The Merger--Regulatory Approvals."
WAIVER AND AMENDMENT; TERMINATION
Prior to the Effective Time, the Hinsdale Financial and Liberty Bancorp
Boards of Directors may extend the time for performance of any obligations
under the Merger Agreement, waive any inaccuracies in the representations and
warranties contained in the Merger Agreement and waive compliance with any
agreements or conditions of the Merger Agreement.
Subject to applicable law, the Merger Agreement may be amended by action of
the Hinsdale Financial and Liberty Bancorp Boards of Directors at any time
before or after approval of the Merger Agreement by the stockholders of
Hinsdale Financial and Liberty Bancorp; provided that, after approval of the
Merger Agreement by the stockholders of Hinsdale Financial and Liberty Bancorp,
no amendment may change the amount or form of the Merger Consideration to be
received by Liberty Bancorp stockholders in the Merger without their approval.
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether prior to or after approval of the matters presented herein by
Hinsdale Financial and Liberty Bancorp stockholders, either by mutual consent
of the parties in writing or by either party if, among other things: (i) the
required regulatory approvals are not obtained or a condition is attached that
would adversely affect the combined entity; (ii) the Merger is not consummated
by June 30, 1997, or such later date as may be agreed to by the parties; (iii)
the required stockholder approvals are not obtained; (iv) the other party has
not met one or more of its conditions or obligations under the Merger
Agreement; (v) the other party has materially breached any representation,
warranty, covenant or agreement set forth in the Merger Agreement and has
failed to, or cannot, cure in a timely manner such breach after receiving
written notice of such breach (and the breach, in the reasonable opinion of
7
<PAGE>
the non-breaching party, would have or be reasonably likely to have a material
adverse effect on the breaching party or upon consummation of the Merger); or
(vi) any event occurs which renders impossible the satisfaction in any material
respect of one or more of the conditions to that party's obligations to effect
the Merger and noncompliance with that covenant has not been waived by the
terminating party. See "The Merger--Waiver and Amendment; Termination."
COVENANTS PENDING CLOSING
Each of Hinsdale Financial and Liberty Bancorp has agreed to certain
covenants with respect to the conduct of its business and other matters pending
the closing of the Merger. See "The Merger--Covenants Pending Closing."
EXPENSES
All expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby are to be paid by the party incurring such
expenses, except that Hinsdale Financial and Liberty Bancorp shall bear equally
all printing and mailing expenses associated with this Joint Proxy
Statement/Prospectus as well as certain proxy solicitation costs.
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for under the purchase
method of accounting in accordance with generally accepted accounting
principles. Under purchase accounting, the assets and liabilities of Liberty
Bancorp as of the Effective Date would be recorded at their respective fair
market values, to the extent of the purchase price, and added to those of
Alliance Bancorp. Consolidated financial statements of Alliance Bancorp issued
after consummation of the Merger would reflect such values. Goodwill (the
excess of the purchase price over the fair value of the net assets acquired),
if any, which arises from the Merger will be amortized to operations over the
period estimated to be benefitted. See "The Merger--Accounting Treatment."
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
It is a condition to the obligations of Hinsdale Financial and Liberty
Bancorp to consummate the Merger that each shall have received an opinion of
counsel to the effect that the Merger will be treated as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and for federal income tax purposes no gain or loss will
be recognized as a result of the Merger by Hinsdale Financial, Liberty Bancorp,
Hinsdale Federal, Liberty Federal Savings, any Hinsdale Financial stockholder
or any Liberty Bancorp stockholder upon receipt solely of Alliance Bancorp
Common Stock in the Merger (except with respect to cash received by a Liberty
Bancorp stockholder in lieu of a fractional share interest in Alliance Bancorp
Common Stock). Each of these conditions is waivable at the option of the party
entitled to receipt of the requisite opinion. Liberty Bancorp stockholders are
urged to consult their tax advisors concerning the specific tax consequences to
them of the Merger, including the applicability and effect of various state,
local and foreign tax laws. See "The Merger--Federal Income Tax Consequences of
the Merger" and "--Conditions to the Merger."
EFFECTS OF THE MERGER ON STOCKHOLDERS
As a result of the Merger, holders of Liberty Bancorp Common Stock who
receive shares of Alliance Bancorp Common Stock in the Merger will become
stockholders of Alliance Bancorp. The law applicable to, and the corporate
charters and bylaws of, Hinsdale Financial/Alliance Bancorp and Liberty Bancorp
are substantially identical. See "Comparison of Rights of Stockholders of
Hinsdale Financial Corporation and Liberty Bancorp, Inc." For information
regarding the financial impact of the Merger to the respective stockholders of
Hinsdale Financial and Liberty Bancorp, see the unaudited pro forma combined
financial
8
<PAGE>
information regarding Hinsdale Financial and Liberty Bancorp upon the
consummation of the Merger, including unaudited pro forma per share data, in
"--Unaudited Comparative Per Common Share Data" and "Unaudited Pro Forma
Combined Financial Statements."
NASDAQ LISTING
Both Hinsdale Financial Common Stock and Liberty Bancorp Common Stock
currently are quoted on the Nasdaq National Market (symbols: HNFC and LBCI,
respectively). It is a condition to consummation of the Merger that the
Alliance Bancorp Common Stock to be issued to the stockholders of Liberty
Bancorp pursuant to the Merger Agreement will be quoted on the Nasdaq National
Market. See "The Merger--Conditions to the Merger."
MANAGEMENT AND OPERATIONS AFTER THE MERGER
As provided in the Merger Agreement, the Board of Directors of Alliance
Bancorp as of the Effective Time will consist of 14 members, one-half of whom
will be former members of (or designated by the former members of) the Hinsdale
Financial Board and one-half of whom will be former members of the Liberty
Bancorp Board, in each case prior to the Effective Time. For the list of
individuals who will become members of the Alliance Bancorp Board of Directors,
as of the Effective Time, see "Management and Operations After the Merger." The
class and term of each of the directors has not been determined.
In addition, as of the Effective Time, (i) Fredric G. Novy will serve as
Chairman of the Board of Directors of Alliance Bancorp and Liberty Federal
Bank; (ii) Kenne P. Bristol will serve as President and Chief Executive Officer
of Alliance Bancorp and Liberty Federal Bank; (iii) the Executive Committee of
the Board of Directors of Alliance Bancorp will consist of nine persons, five
of whom will be former members of the Hinsdale Financial Board and four of whom
will be former members of the Liberty Bancorp Board; (iv) William R. Rybak will
serve as Chairman of the Executive Committee; and (v) Edward J. Burns will
serve as Vice-Chairman of the Executive Committee. Other senior management
positions of Alliance Bancorp and Liberty Federal Bank generally are expected
to be filled by persons currently employed by Hinsdale Federal or Liberty
Federal Savings.
Upon consummation of the Merger, the combined company will be headquartered
in Hinsdale, Illinois. The combined entity will have 14 full service offices
located in Chicago and Cook and DuPage counties, Illinois, with approximately
$1.3 billion in total assets and $1.0 billion in total deposits. It is
anticipated that all of such branches will remain open after the Merger.
Concurrently with or shortly following the consummation of the Merger between
Hinsdale Financial and Liberty Bancorp, Liberty Federal Savings will be merged
into Hinsdale Federal, and the resulting institution will be re-named "Liberty
Federal Bank." Following consummation of the Merger, Alliance Bancorp intends
to pay a quarterly cash dividend at an annual rate of $0.65 per share.
CERTAIN RELATED TRANSACTIONS
STOCK OPTION AGREEMENTS
As an inducement and a condition to entering into the Merger Agreement, each
of Hinsdale Financial and Liberty Bancorp received a stock option to purchase
shares of the other party's common stock representing 19.9% of the issued and
outstanding shares of such common stock. The options may be exercised only upon
the occurrence of an "Initial Triggering Event," such as a person commencing a
tender offer for 25% or more of either issuer's outstanding common stock,
followed by a "Subsequent Triggering Event," such as a person acquiring 25% or
more of the issuer's common stock or the issuer, or without the grantee's
consent, entering
9
<PAGE>
into an agreement with an other person to enter into various forms of
acquisition transactions. No triggering event has occurred as of the date
hereof. Pursuant to the Hinsdale Financial Stock Option Agreement, Hinsdale
Financial granted to Liberty Bancorp an option to purchase up to 535,340 shares
of Hinsdale Financial Common Stock at an exercise price of $23.25 per share,
subject to the terms and conditions set forth therein. Pursuant to the Liberty
Bancorp Stock Option Agreement, Liberty Bancorp granted to Hinsdale Financial
an option to purchase up to 492,927 shares of Liberty Bancorp Common Stock at
an exercise price of $24.125 per share, subject to the terms and conditions set
forth therein. In addition, each Stock Option Agreement grants the holder of
the option, upon the occurrence of a "Repurchase Event," the right to require
the other party to repurchase for cash the option and any shares that may have
been acquired thereunder.
The Stock Option Agreements are intended to increase the likelihood that the
Merger will be consummated in accordance with the terms of the Merger
Agreement. Consequently, certain aspects of the Stock Option Agreements may
have the effect of discouraging persons who might now or prior to the Effective
Time be interested in acquiring all or a significant interest in either
Hinsdale Financial or Liberty Bancorp from considering or proposing such an
acquisition, even if such persons were prepared to pay a higher price per share
for Liberty Bancorp Common Stock than the price per share implicit in the
Merger Consideration or a higher price per share for Hinsdale Financial Common
Stock than the then-current market price of such shares.
Copies of the Stock Option Agreements are attached to this Joint Proxy
Statement/Prospectus at Appendix I. For additional information regarding the
Stock Option Agreements, see "Certain Related Transactions--Stock Option
Agreements."
THE BANK MERGER AGREEMENT
Pursuant to a Plan of Merger, dated as of August 2, 1996 (the "Bank Merger
Agreement"), by and between Hinsdale Federal and Liberty Federal Savings,
Liberty Federal Savings will be merged with and into Hinsdale Federal (the
"Bank Merger") immediately following the Company Merger, and the resulting
financial institution shall operate under the name "Liberty Federal Bank." See
"Certain Related Transactions--The Bank Merger Agreement."
UNAUDITED COMPARATIVE PER COMMON SHARE DATA
The following table sets forth certain unaudited comparative data relating to
book value per common share, cash dividends declared per common share and net
income from continuing operations per common share: (i) on an historical basis
for Hinsdale Financial and Liberty Bancorp; (ii) on a pro forma basis per share
of Alliance Bancorp Common Stock to reflect consummation of the Merger at the
beginning of each period; and (iii) on an equivalent pro forma basis per share
of Liberty Bancorp Common Stock to reflect consummation of the Merger at the
Exchange Ratio. Pro forma information has been prepared giving effect to the
Merger using purchase accounting. See "The Merger--Accounting Treatment." This
information should be read in conjunction with the consolidated financial
statements of Hinsdale Financial, which are attached to, or incorporated by
reference in, this Joint Proxy Statement/Prospectus, and the financial
statements of Liberty Bancorp which are attached to, or incorporated by
reference in, this Joint Proxy Statement/Prospectus. See "Incorporation of
Certain Documents by Reference."
The following information is not necessarily indicative of the results of
operations or combined financial position that would have resulted had the
Merger been consummated at the beginning of the periods indicated, nor is it
necessarily indicative of the results of operations for future periods or
future combined financial position.
Alliance Bancorp expects to achieve certain operating cost savings through
the consolidation of certain back office and support functions, through the
elimination of redundant costs and through the streamlining of
10
<PAGE>
employee benefit costs. Alliance Bancorp expects that operating cost savings
will be achieved in various amounts at various times and not ratably over or at
the beginning of any specific period. Accordingly, there can be no certainty of
the amount or timing of any operating cost savings which may be realized. The
pro forma financial information does not reflect any of these anticipated
operating cost savings.
Hinsdale Financial's fiscal year ends September 30 and Liberty Bancorp's
fiscal year ends December 31. In the following tables, financial data for the
fiscal year ended September 30, 1995 includes Liberty Bancorp's financial data
as of and for the 12 months ended December 31 and information regarding
Hinsdale Financial is presented consistent with the fiscal year of Hinsdale
Financial ended September 30. The information at and for the nine months ended
June 30, 1996, is based on the respective historical unaudited financial
statements of Hinsdale Financial and Liberty Bancorp. All adjustments necessary
to arrive at a fair presentation of interim period data have been included and
are of a normal and recurring nature.
<TABLE>
<CAPTION>
AT
JUNE 30,
1996
--------
<S> <C>
Book Value Per Common Share:
Historical:
Hinsdale Financial................................................... $20.62
Liberty Bancorp...................................................... $25.84
Pro Forma:
Pro forma combined per share of Alliance Bancorp Common Stock(1)..... $22.71
Equivalent pro forma per share of Liberty Bancorp Common Stock(2).... $23.93
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS FISCAL YEAR
ENDED ENDED
JUNE 30, 1996 SEPTEMBER 30, 1995
------------- ------------------
<S> <C> <C>
Cash Dividends Declared Per Common Share:
Historical:
Hinsdale Financial.......................... -- --
Liberty Bancorp............................. $0.45 $0.60
Pro Forma:
Combined per share of Alliance Bancorp
Common Stock(1)(3)......................... $0.4875 $0.65
Equivalent pro forma per share of Liberty
Bancorp Common Stock(2)(3)................. $0.5138 $0.69
Net Income from Continuing Operations Per
Share:
Historical:
Hinsdale Financial.......................... $1.19 $1.61
Liberty Bancorp............................. $1.02 $1.28
Pro Forma:
Combined per share of Alliance Bancorp
Common Stock(1)............................ $1.39 $1.85
Equivalent pro forma per share of Liberty
Bancorp Common Stock(2).................... $1.46 $1.95
</TABLE>
- --------
(1) Pro forma amounts are calculated based upon the assumption that all of the
issued and outstanding shares of Liberty Bancorp Common Stock are converted
into shares of Alliance Bancorp Common Stock and that no cash is paid for
fractional shares.
(2) The equivalent pro forma amounts are calculated by multiplying the pro
forma combined amounts by the Exchange Ratio.
(3) Pro forma dividend amounts assume that Alliance Bancorp would have declared
a cash dividend per common share at an annual rate equal to $0.65 per
share.
11
<PAGE>
COMPARATIVE STOCK PRICES AND DIVIDEND INFORMATION
Hinsdale Financial Common Stock and Liberty Bancorp Common Stock are quoted
on the Nasdaq National Market (symbols: HNFC and LBCI, respectively). The
following table sets forth the reported high and low sales prices of shares of
Hinsdale Financial Common Stock and Liberty Bancorp Common Stock, as reported
on the Nasdaq National Market, and the quarterly cash dividends per share
declared, for the periods indicated. The stock prices and dividend amounts have
been restated to give the effect to stock splits and stock dividends. The stock
prices do not include retail mark-ups, mark-downs or commissions.
<TABLE>
<CAPTION>
HINSDALE FINANCIAL LIBERTY BANCORP
COMMON STOCK COMMON STOCK
----------------------- ------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1994 CALENDAR YEAR
First Quarter............... $18.60 $16.00 $-- $25.25 $22.50 $0.15
Second Quarter.............. 20.60 15.80 -- 27.00 22.25 1.65
Third Quarter............... 19.80 18.20 -- 32.00 24.50 0.15
Fourth Quarter.............. 19.20 16.40 -- 27.00 20.75 0.15
1995 CALENDAR YEAR
First Quarter............... 18.60 16.80 -- 26.00 21.25 0.15
Second Quarter.............. 18.60 16.60 -- 26.50 23.75 0.15
Third Quarter............... 23.00 17.80 -- 26.88 25.50 0.15
Fourth Quarter.............. 27.75 21.00 -- 26.75 24.75 0.15
1996 CALENDAR YEAR
First Quarter............... 22.50 21.00 -- 26.00 24.63 0.15
Second Quarter.............. 26.75 21.00 -- 26.50 22.25 0.15
Third Quarter............... 26.25 22.00 -- 25.00 23.13 0.15
Fourth Quarter (through
October 16, 1996).......... 23.75 23.25 -- 24.25 23.625 --
</TABLE>
Alliance Bancorp intends to pay a quarterly cash dividend at an annual rate
of $0.65 per share.
The following table sets forth the last reported sale prices per share of
Hinsdale Financial Common Stock and Liberty Bancorp Common Stock and the
equivalent per share price for Liberty Bancorp Common Stock giving the effect
to the Merger on (i) August 1, 1996, the last trading day preceding public
announcement of the signing of the Merger Agreement; and (ii) October 16, 1996,
the last practicable date prior to the mailing of this Joint Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
HINSDALE FINANCIAL LIBERTY BANCORP EQUIVALENT PRICE PER
COMMON STOCK COMMON STOCK LIBERTY BANCORP SHARE(1)
------------------ --------------- ------------------------
<S> <C> <C> <C>
August 1, 1996..... $23.25 $24.125 $24.51
October 16, 1996... $23.375 $23.875 $24.64
</TABLE>
- --------
(1) The equivalent price per share of Liberty Bancorp Common Stock at each
specified date was determined by multiplying (i) the last reported sale
price of Hinsdale Financial Common Stock on such date and (ii) the Exchange
Ratio of 1.054.
As of October 14, 1996, the 2,695,085 outstanding shares of Hinsdale
Financial Common Stock were held by approximately 410 record owners and the
2,477,022 outstanding shares of Liberty Bancorp Common Stock by approximately
461 record owners.
The number of shares of Hinsdale Financial/Alliance Bancorp Common Stock to
be received for each share of Liberty Bancorp Common Stock has been fixed at
1.054. Liberty Bancorp stockholders are advised to obtain current market
quotations for Hinsdale Financial Common Stock. The market price of Hinsdale
Financial
12
<PAGE>
Common Stock may fluctuate between the date of this Joint Proxy
Statement/Prospectus and the Effective Time. Fluctuations in the market price
of Hinsdale Financial Common Stock would result in an increase or decrease in
the value of the Merger Consideration to be received by holders of Liberty
Bancorp Common Stock in the Merger. An increase in the market value of Hinsdale
Financial Common Stock would increase the market value of the Merger
Consideration to be received in the Merger. A decrease in the market value of
Hinsdale Financial Common Stock would have the opposite effect. The market
value of the Merger Consideration at the time of the Merger will depend upon
the market value of a share of Hinsdale Financial Common Stock at such time.
See "The Merger--Merger Consideration."
The timing and amount of the future dividends of Alliance Bancorp will depend
upon earnings, cash requirements, Alliance Bancorp's financial condition and
other factors deemed relevant by the Alliance Bancorp Board of Directors.
Dividends may also be limited by certain regulatory restrictions. See
"Management and Operations After The Merger--Post-Merger Dividend Policy."
RECENT DEVELOPMENTS
On September 30, 1996 legislation was signed into law by the President of the
United States that will, among other things, recapitalize the Savings
Association Insurance Fund ("SAIF") of the Federal Deposit Insurance
Corporation ("FDIC") by means of a one-time special assessment on SAIF deposits
as of March 31, 1995. The deposit accounts in both Hinsdale Federal and Liberty
Federal Savings are insured by the FDIC through the SAIF and will be subject to
this special assessment. The special assessment is expected to total
$1.8 million, or $0.68 per share, on an after-tax basis for Hinsdale Financial,
and $2.0 million, or $0.79 per share, on an after-tax basis for Liberty
Bancorp, and will be recorded as an expense in the three month period ended
September 30, 1996. On a pro forma basis giving effect to the Merger, the
after-tax charge related to the special assessment is estimated to total $3.8
million, or $0.72 per share. As a result of the special assessment and
recapitalization of SAIF, the ongoing deposit insurance premium costs to both
Hinsdale Federal and Liberty Federal Savings are expected to be reduced
significantly. Hinsdale Financial estimates that its annual after-tax savings
will approximate $0.18 per share, and Liberty Bancorp estimates that its annual
after-tax savings will approximate $0.22 per share. On a pro forma basis giving
effect to the Merger, the annual after-tax savings per share of Alliance
Bancorp Common Stock is estimated to be $0.20.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATAOF HINSDALE FINANCIAL CORPORATION
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT JUNE 30, -----------------------------------------------
1996 1995 1994 1993 1992 1991
----------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL
CONDITION DATA:
Total assets............ $662,482 $703,707 $643,289 $537,832 $515,430 $536,150
Investment securities... 1,998 1,998 22,734 37,673 36,827 6,999
Mortgage-backed
securities............. 5,654 7,147 30,701 162,349 192,797 217,875
Loans receivable, net... 599,378 614,371 544,284 286,273 230,767 244,950
Real estate............. 2,020 1,872 6,030 6,608 13,839 15,016
Supervisory goodwill.... -- -- -- -- -- (2) 7,687 (1)
Deposits................ 466,109 445,505 419,436 437,632 450,974 483,576
Collateralized mortgage
obligations............ 3,003 4,353 6,063 11,278 16,306 22,301
Borrowed funds.......... 121,599 185,339 160,857 37,029 1,200 --
Stockholders' equity.... 55,463 51,977 46,716 41,516 37,848 21,144 (1)
Book value per
share(5)............... 20.62 19.39 17.64 15.74 13.86 N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED SEPTEMBER 30,
--------------- --------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Total interest income... $34,581 $34,133 $45,944 $37,028 $34,024 $38,534 $ 47,063
Total interest expense.. 22,082 20,517 28,442 18,968 17,933 25,034 34,844
------- ------- ------- ------- ------- ------- --------
Net interest income.... 12,499 13,616 17,502 18,060 16,091 13,500 12,219
Provision for loan
losses................. 50 160 185 125 300 15 21
------- ------- ------- ------- ------- ------- --------
Net interest income
after provision for
loan losses............ 12,449 13,456 17,317 17,935 15,791 13,485 12,198
------- ------- ------- ------- ------- ------- --------
Noninterest income:
Gain on sales of loans
receivable, mortgage-
backed securities and
investment
securities............ 300 301 344 369 1,446 2,175 1,548
Gain on sales of other
assets................ -- -- 300 -- -- 277 5,007
Other.................. 9,269 3,572 6,104 4,713 4,350 4,065 5,137
------- ------- ------- ------- ------- ------- --------
Total noninterest
income................ 9,569 3,873 6,748 5,082 5,796 6,517 11,692
------- ------- ------- ------- ------- ------- --------
Noninterest expense:
General and
administrative
expenses.............. 16,947 11,569 16,697 15,312 13,915 14,020 13,324
Amortization of cost in
excess of fair value
of net assets
acquired.............. -- -- -- -- -- 61 1,156
Write-off of cost in
excess of fair value
of net assets
acquired.............. -- -- -- -- -- 7,626 (2) 27,571 (1)
Provision for real
estate losses......... -- -- -- -- -- 485 78
------- ------- ------- ------- ------- ------- --------
Total non-interest
expense............... 16,947 11,569 16,697 15,312 13,915 22,192 42,129
------- ------- ------- ------- ------- ------- --------
Income (loss) before
income taxes........... 5,071 5,760 7,368 7,705 7,672 (2,190) (18,239)
Income tax expense...... 1,716 2,276 2,909 2,989 3,074 1,858 3,225
------- ------- ------- ------- ------- ------- --------
Income (loss) before
cumulative effect of
change in accounting
principle.............. 3,355 3,484 4,459 4,716 4,598 (4,048) (21,464)
------- ------- ------- ------- ------- ------- --------
Cumulative effect of
change in accounting
for income taxes....... -- -- -- -- -- 2,102 (3) --
------- ------- ------- ------- ------- ------- --------
Net income (loss)....... $ 3,355 $ 3,484 $ 4,459 $ 4,716 $ 4,598 $(1,946)(2) $(21,464)(1)
======= ======= ======= ======= ======= ======= ========
Primary earnings per
share(5)............... $ 1.20 $ 1.26 $ 1.61 $ 1.69 $ 1.65 $ 0.34 (4) $ N/A
Fully diluted earnings
per share(5)........... $ 1.19 $ 1.26 $ 1.61 $ 1.69 $ 1.63 $ 0.34 (4) $ N/A
======= ======= ======= ======= ======= ======= ========
Cash dividends paid per
common share........... $ -- $ -- $ -- $ -- $ -- $ -- $ N/A
------- ------- ------- ------- ------- ------- --------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR
THE NINE MONTHS
ENDED JUNE 30, AT OR FOR THE YEAR ENDED SEPTEMBER 30,
------------------ --------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL
RATIOS AND OTHER DATA:
Return on average
assets................. 0.66% 0.69% 0.66% 0.81% 0.88% (0.37)% (3.67)%
Return on average
equity................. 8.36 9.58 9.07 10.73 11.61 (8.70)(2) (46.93)(1)
Stockholders' equity to
total assets........... 8.37 7.19 7.39 7.26 7.72 7.34 3.94
Interest rate spread
during the year........ 2.18 2.50 2.35 2.98 3.05 2.70 2.55
Net yield on average
interest-earning
assets................. 2.54 2.81 2.67 3.22 3.25 2.73 2.38
Non-performing loans to
total loans............ 0.12 0.17 0.21 0.18 0.32 0.65 0.21
Non-performing assets to
total assets........... 0.13 0.76 0.18 0.85 1.04 2.50 2.23
Average interest-earning
assets to average
interest-bearing
liabilities............ 1.09x 1.07x 1.07x 1.07x 1.06x 1.00x 0.98x
Loan originations....... $407,819 $136,667 $262,154 $403,414 $228,965 $169,885 $69,273
Full-service customer
service facilities..... 9 9 9 9 9 9 9
</TABLE>
- --------
(1) During 1991, Hinsdale Federal determined that the enactment of the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA") and changing economic conditions in the thrift industry had
altered the environment in which Hinsdale Federal operated and impaired
the ability to profitably realize the intangible benefits from the
acquisition of North America Federal Savings and Loan Association ("NAF")
in 1982. Accordingly in 1991, Hinsdale Federal recorded a write-down of
goodwill of approximately $27.6 million, reducing income and stockholders'
equity for this substantial charge. Hinsdale Federal also reevaluated the
useful life of the remaining unimpaired goodwill and reduced the
amortization period from 40 years to 20 years.
(2) On the basis of several factors, management of Hinsdale Federal determined
that Hinsdale Federal's remaining goodwill was permanently impaired and
accordingly, during fiscal 1992, charged the remaining carrying value of
goodwill to expense.
(3) Reflects the adoption of Statement of Financial Accounting Standards No.
109 ("Statement 109").
(4) Earnings per share for the year ended September 30, 1992 was based upon
net income from July 7, 1992 (the date of Hinsdale Federal's conversion to
stock form) through September 30, 1992.
(5) All share amounts have been adjusted to reflect the 25% common stock
dividend declared on October 18, 1995.
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATAOF LIBERTY BANCORP, INC.
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT JUNE 30, -------------------------------------------------
1996 1995 1994 1993 1992 1991
----------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL
CONDITION DATA:
Total assets............ $651,198 $ 680,537 $ 595,444 $ 524,764 $ 504,037 $ 493,924
Loans receivable, net... 475,503 513,586 502,359 411,060 403,978 392,757
Interest-earning
deposits............... 6,230 5,715 5,101 25,726 6,617 31,621
Investment securities... 28,038 30,098 21,061 22,618 20,907 16,798
Mortgage-backed
securities, net........ 108,364 98,138 37,494 34,740 44,932 28,593
Deposits................ 508,644 487,388 453,084 440,931 426,701 420,740
Borrowed funds.......... 67,500 117,500 62,000 1,889 2,267 2,645
Stockholders' equity.... 64,017 64,677 69,842 73,425 67,383 64,512
Book value per share.... 25.84 25.34 24.31 24.47 22.33 19.51
</TABLE>
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
--------------- -----------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Total interest income... $23,749 $20,232 $42,923 $37,486 $37,786 $40,941 $40,645
Total interest expense.. 14,964 12,169 26,911 19,211 18,109 21,681 27,479
------- ------- ------- ------- ------- ------- -------
Net interest income.... 8,785 8,063 16,012 18,275 19,677 19,260 13,166
Provision for (recovery
of) loan losses........ -- -- -- (2) 883 874 865
------- ------- ------- ------- ------- ------- -------
Net income after
provision for loan
losses................. 8,785 8,063 16,012 18,277 18,794 18,386 12,301
Total noninterest
income................. 610 461 851 530 2,163 690 439
Total noninterest
expense................ 6,351 5,464 10,987 10,427 9,927 9,174 6,734
------- ------- ------- ------- ------- ------- -------
Income before taxes and
cumulative effect of
changes in accounting
principles............. 3,044 3,060 5,876 8,380 11,030 9,902 6,006
Income tax expense...... 1,157 1,163 2,222 3,198 4,133 3,540 2,512
------- ------- ------- ------- ------- ------- -------
Income before cumulative
effect of change in
accounting principle... 1,887 1,897 3,654 5,182 6,897 6,362 3,494
Cumulative effect of
change in accounting
for income taxes(1).... -- -- -- -- -- 936 --
Post-retirement
benefits(2) other than
pensions............... -- -- -- -- -- (455) --
------- ------- ------- ------- ------- ------- -------
Net income.............. $ 1,887 $ 1,897 $ 3,654 $ 5,182 $ 6,897 $ 6,843 $ 3,494
======= ======= ======= ======= ======= ======= =======
Primary earnings per
share.................. $ 0.71 $ 0.65 $ 1.28 $ 1.65 $ 2.17 $ 2.06 $ N/A(3)
Fully diluted earnings
per share.............. $ 0.71 $ 0.65 $ 1.28 $ 1.65 $ 2.16 $ 2.04 $ N/A(3)
======= ======= ======= ======= ======= ======= =======
Cash dividends paid per
common share........... $ 0.30 $ 0.30 $ 0.60 $ 2.10 $ 0.45 $ -- $ N/A(3)
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED JUNE 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------- ------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RA-
TIOS AND OTHER DATA:
Interest rate spread
during the year........ 2.28% 2.29% 2.13% 2.86% 3.36% 3.30% 2.46%
Net interest margin..... 2.72 2.80 2.66 3.34 3.86 3.95 3.00
Return on average as-
sets................... 0.57 0.64 0.59 0.92 1.32 1.37 0.78
Return on average equi-
ty..................... 5.88 5.58 5.46 7.20 9.82 10.35 9.25
Operating expenses to
average assets......... 1.91 1.84 1.77 1.85 1.89 1.84 1.50
Non-performing loans to
total loans............ 0.08 0.08 0.11 0.28 0.37 0.24 0.18
Non-performing assets to
total assets........... 0.06 0.12 0.08 0.24 0.29 0.27 0.17
Stockholders' equity to
total assets........... 9.83 10.78 9.50 11.73 13.99 13.37 13.06
Full-service customer
service facilities..... 5 4 4 3 3 2 2
</TABLE>
- --------
(1) Reflects adoption at January 1, 1992 of Statement of Financial Accounting
Standards No. 109 ("SFAS 109").
(2) Reflects adoption at January 1, 1992 of Statement of Financial Accounting
Standards No. 106 ("SFAS 106").
(3) The information is not meaningful as the stock conversion was completed
December 23, 1991.
16
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
PRO FORMA COMBINED CONDENSED STATEMENT OF FINANCIAL CONDITION AS OF JUNE 30,
1996
The following unaudited pro forma combined condensed balance sheet
information reflects (i) the historical consolidated balance sheets of
Hinsdale Financial and Liberty Bancorp as of June 30, 1996 and (ii) the pro
forma combined condensed balance sheet of Alliance Bancorp as of such date,
after giving effect to the Merger using the purchase method of accounting. See
"The Merger--Accounting Treatment." Such pro forma financial information does
not necessarily reflect what the actual results of Alliance Bancorp would be
following consummation of the Merger. The unaudited information should be read
in conjunction with the historical consolidated financial statements of
Hinsdale Financial, including the notes thereto, incorporated by reference in
this Joint Proxy Statement/Prospectus and the historical consolidated
financial statements of Liberty Bancorp, including the notes thereto,
incorporated by reference in this Joint Proxy Statement/Prospectus. See
"Available Information" and "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
AT JUNE 30, 1996
----------------------------------------------
HINSDALE LIBERTY PRO FORMA PRO FORMA
FINANCIAL BANCORP ADJUSTMENTS(1) COMBINED
--------- -------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Cash and interest-bearing
deposits..................... $ 32,296 $ 13,184 $ -- $ 45,480
Investment securities, held to
maturity..................... -- 27,762 396 28,158
Investment and mortgage-backed
securities, available for
sale......................... 7,652 108,430 -- 116,082
Loans......................... 599,378 475,503 (7,000) 1,067,881
Goodwill and other intangible
assets....................... -- 163 6,181 6,344
Other assets.................. 23,156 26,156 3,871 53,183
-------- -------- ------- ----------
Total assets................ $662,482 $651,198 $ 3,448 $1,317,128
======== ======== ======= ==========
LIABILITIES:
Deposits...................... $466,109 $508,644 $ 1,518 $ 976,271
Borrowings and collaterized
mortgage obligations......... 124,602 67,500 (74) 192,028
Other liabilities............. 16,308 11,037 1,000 28,345
-------- -------- ------- ----------
Total liabilities........... 607,019 587,181 2,444 1,196,644
-------- -------- ------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock............... -- -- -- --
Common stock.................. 22 33 (7) 48
Additional paid-in capital.... 20,950 31,625 33,370 85,945
Retained earnings,
substantially restricted..... 36,324 52,120 (52,120) 36,324
Treasury stock, at cost....... (1,284) (18,491) 18,491 (1,284)
Common stock purchased by:
Employee Stock Ownership
Plan........................ (557) (945) 945 (557)
Bank Recognition and
Retention Plans.............. (86) (177) 177 (86)
Net unrealized gain (loss) on
securities available for
sale, net of tax............. 94 (148) 148 94
-------- -------- ------- ----------
Total stockholders' equity.. 55,463 64,017 1,004 120,484
-------- -------- ------- ----------
Total liabilities and
stockholders' equity..... $662,482 $651,198 $ 3,448 $1,317,128
======== ======== ======= ==========
</TABLE>
- --------
(1) Reflects excess of estimated net fair value of assets acquired and
liabilities assumed in the Merger as follows: issuance of stock and vested
options $65,021, less Liberty Bancorp's June 30, 1996 stockholders' equity
of $64,017 results in an excess value of capital over book value of
$1,004. Adjustments to reflect fair value are estimated as follows:
increase securities $396; decrease loans $7,000; increase premises and
equipment $1,000; increase servicing rights $200; decrease other
intangibles $163; increase deposit liability $1,518; decrease borrowings
$74; and increase deferred assets by $2,671 for the tax effect of these
adjustments. The purchase accounting adjustments are based on preliminary
estimates of fair values. Actual fair values will be determined at date of
Merger. The following sets forth the break-down of total acquisition costs
of $1,000: acquisition advice $475; legal $250; accounting $100 and other
$175.
17
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
The following unaudited pro forma combined condensed statements of income
reflect the historical consolidated statements of income for Hinsdale
Financial and Liberty Bancorp for the nine months ended June 30, 1996 and the
year ended September 30, 1995, and the pro forma combined condensed statements
of income of Alliance Bancorp, after giving effect to the Merger as if it was
consummated at the beginning of each period using the purchase method of
accounting. In the unaudited pro forma combined condensed statement of income,
Liberty Bancorp financial data is for the year ended December 31, 1995 and
information regarding Hinsdale Financial is for the fiscal year ended
September 30, 1995. The information for the nine months ended June 30, 1996 is
based on the respective historical unaudited financial statements of Hinsdale
Financial and Liberty Bancorp. All adjustments necessary to arrive at a fair
presentation of interim period operations of Hinsdale Financial and Liberty
Bancorp have been included and are of a normal and recurring nature. The
following pro forma combined condensed statements of income reflect the costs
associated with completing the Merger, but do not include any cost savings
anticipated to be realized following the Merger estimated to be at least $2.0
million. The unaudited information should be read in conjunction with the
historical financial statements of Hinsdale Financial and Liberty Bancorp,
including the notes thereto, incorporated by reference in this Joint Proxy
Statement/Prospectus. See "Available Information" and "Incorporation of
Certain Documents by Reference."
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30, 1996
------------------------------------------------------
HINSDALE LIBERTY PRO FORMA PRO FORMA
FINANCIAL BANCORP ADJUSTMENTS COMBINED
----------- ----------- ------------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income......... $ 34,581 $ 35,354 $ 2,328 (2) $ 72,263
Interest expense........ 22,082 22,541 (1,083)(3) 43,540
----------- ----------- ---------- -----------
Net interest income..... 12,499 12,813 3,411 28,723
Provision for possible
loan losses............ 50 -- -- 50
----------- ----------- ---------- -----------
Net interest income
after provision for
possible loan losses... 12,449 12,813 3,411 28,673
Noninterest income...... 9,569 780 (75)(4) 10,274
Noninterest expense..... 16,947 9,173 367 (5) 26,487
----------- ----------- ---------- -----------
Income before taxes..... 5,071 4,420 2,969 12,460
Provision for income
taxes.................. 1,716 1,682 1,281 (6) 4,679
----------- ----------- ---------- -----------
Net income............. $ 3,355 $ 2,738 $ 1,688 $ 7,781
=========== =========== ========== ===========
Net income per share.... $ 1.19 $ 1.02 $ 1.39(7)
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30, 1995
--------------------------------------------------------
HINSDALE LIBERTY PRO FORMA PRO FORMA
FINANCIAL BANCORP(1) ADJUSTMENTS COMBINED
----------- ----------- ------------ -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income......... $ 45,944 $ 42,923 $ 3,104 (2) $ 91,971
Interest expense........ 28,442 26,911 (1,444)(3) 53,909
----------- ----------- ----------- -----------
Net interest income..... 17,502 16,012 4,548 38,062
Provision for possible
loan losses............ 185 -- -- 185
----------- ----------- ----------- -----------
Net interest income
after provision for
possible loan losses... 17,317 16,012 4,548 37,877
Noninterest income...... 6,748 851 (100)(4) 7,499
Noninterest expense..... 16,697 10,987 490 (5) 28,174
----------- ----------- ----------- -----------
Income before taxes..... 7,368 5,876 3,958 17,202
Provision for income
taxes.................. 2,909 2,222 1,708 (6) 6,839
----------- ----------- ----------- -----------
Net income............. $ 4,459 $ 3,654 $ 2,250 $ 10,363
=========== =========== =========== ===========
Net income per share.... $ 1.61 $ 1.28 $ 1.85(7)
=========== =========== ===========
</TABLE>
- -------
(1) Liberty Bancorp information is for the year ended December 31, 1995.
(2) Reflects amortization of premium on investments and discount on loans over
projected average remaining lives of one year and three years
respectively, using the level yield method.
(3) Reflects amortization of premium on savings certificates of deposits and
discount in borrowings over the projected average remaining lives of one
year.
(4) Reflects amortization of premium on servicing rights of projected average
remaining lives of related loans of three years using the level yield
method.
(5) Reflects amortization of goodwill arising from merger (established at
$6,344) on a straight line basis over a 15 year period. Additionally,
includes additional depreciation on premises on the average lives of the
assets acquired of approximately 15 years straight-line.
(6) Reflects income tax expense attributable to purchase accounting
adjustments associated with the Merger.
(7) Reflects pro forma combined net income divided by fully diluted shares of
5,605,642 (2,994,861 existing shares plus 2,610,781 shares issued in
merger).
18
<PAGE>
PRO FORMA CAPITAL RATIOS
Set forth below are certain historical and pro forma consolidated capital
ratios for Liberty Federal Savings and Hinsdale Federal at June 30, 1996,
assuming consummation of the Merger as of that date.
<TABLE>
<CAPTION>
AT JUNE 30, 1996
---------------------------------------------
LIBERTY
FEDERAL SAVINGS HINSDALE FEDERAL
--------------- -----------------------------
PRO FORMA REGULATORY
ACTUAL ACTUAL COMBINED REQUIREMENT
--------------- ------ --------- -----------
<S> <C> <C> <C> <C>
Core capital to total tangible
assets......................... 8.30% 7.87% 8.08% 3.00%
Tangible equity to total tangi-
ble assets(1).................. 8.30 7.64 7.52 1.50
Core capital to risk-adjusted
assets(2)...................... 16.45 13.37 14.88 4.00(2)
Total capital to risk-adjusted
assets(3)...................... 17.48 13.71 15.54 8.00(2)
</TABLE>
- --------
(1) In the case of Hinsdale Federal, core capital and tangible equity capital
both equal total stockholders' equity less goodwill. The current OTS core
capital requirement for savings associations is 3.0% of total adjusted
assets. The OTS has proposed core capital requirements which would require
a core capital ratio of 3.0% of total adjusted assets for thrifts that
receive the highest supervisory rating for safety and soundness ("CAMEL"
rating), and a 4.0% to 5.0% core capital ratio requirement for all other
thrifts.
(2) Based on risk-based capital requirements under OTS regulations. The OTS
recently issued a rule which adds an interest rate risk ("IRR") component
to the risk-based capital requirements. Based upon their preliminary
review of the final rule, management of Hinsdale Federal and Liberty
Federal Savings do not believe that they will be subject to an IRR
component deduction.
(3) Total capital equals core capital plus supplementary capital, comprised of
the general loan loss reserves.
19
<PAGE>
HINSDALE FINANCIAL CORPORATION AND HINSDALE FEDERAL BANK FOR SAVINGS
HINSDALE FINANCIAL CORPORATION
Hinsdale Financial is a Delaware corporation organized in 1992 for the
purpose of becoming the holding company for Hinsdale Federal in connection
with Hinsdale Federal's conversion from mutual to stock form. Hinsdale
Financial is a unitary savings and loan holding company which, under existing
laws, generally is not restricted in the types of business activities in which
it may engage. Hinsdale Financial's business has consisted primarily of the
business of Hinsdale Federal and its subsidiaries. As of June 30, 1996,
Hinsdale Financial had total consolidated assets of $662.5 million, deposits
of $466.1 million and stockholders' equity of $55.5 million. The executive
offices of Hinsdale Financial are located at One Grant Square, Hinsdale,
Illinois 60521, and the telephone number is (630) 323-1776.
HINSDALE FEDERAL BANK FOR SAVINGS
Hinsdale Federal, a Federal savings bank chartered under the authority of
the OTS, originally was organized in 1934, and changed its charter from a
federal savings and loan association to a federal savings bank in 1991, and
converted from the mutual to the stock form of ownership in 1992. Hinsdale
Federal is a member of the Federal Home Loan Bank ("FHLB") System and its
deposit accounts are insured to the maximum allowable amount by the Federal
Deposit Insurance Corporation ("FDIC") . Hinsdale Federal is regulated by the
OTS and the FDIC and is further regulated by the Board of Governors of the
Federal Reserve System as to reserves required to be maintained against
deposits and certain other matters.
Hinsdale Federal is a community-oriented institution providing financial
services through ten retail banking facilities in DuPage and western Cook
counties in Illinois. Hinsdale Federal offers a variety of deposit products in
an attempt to attract funds from the general public in highly competitive
market areas surrounding its offices. In addition to deposit products,
Hinsdale Federal also offers its customers financial advice and security
brokerage services through INVEST. Hinsdale Federal invests its retail
deposits in mortgage and consumer loans, investment securities and mortgage-
backed securities, secured primarily by one-to four-family residential loans.
Hinsdale Federal also owns Preferred Mortgage Associates, Ltd., which is one
of the largest mortgage brokers in the Chicago metropolitan area and which has
four mortgage origination offices, including its headquarters in Downers
Grove, Illinois. See "Selected Consolidated Financial And Other Data of
Hinsdale Financial Corporation" and "Unaudited Pro Forma Combined Financial
Statements."
Additional information concerning Hinsdale Financial and Hinsdale Federal is
included in the Hinsdale Financial documents incorporated by reference herein.
See "Incorporation of Certain Documents by Reference."
20
<PAGE>
LIBERTY BANCORP, INC. AND LIBERTY FEDERAL SAVINGS BANK
LIBERTY BANCORP, INC.
Liberty Bancorp is a Delaware corporation incorporated in August, 1991 as a
savings and loan holding company. As of June 30, 1996, Liberty Bancorp had
total consolidated assets of $651.2 million, deposits of $508.6 million and
stockholders' equity of $64.0 million. Liberty Bancorp's executive offices are
located at 5700 N. Lincoln Avenue, Chicago, Illinois 60659, and its telephone
number is (312) 334-1200. Liberty Bancorp's business has consisted primarily
of the business of Liberty Federal Savings, its wholly-owned subsidiary.
LIBERTY FEDERAL SAVINGS BANK
Liberty Federal Savings was established in 1887 as a state chartered
building and loan association. In 1934 the institution converted to a
federally chartered institution, and in 1991 it converted from the mutual to
the stock form of ownership. Liberty Federal Savings is a member of the FHLB
System and its deposit accounts are insured to the maximum allowable amount by
the FDIC. Liberty Federal Savings is regulated by the OTS and the FDIC and is
further regulated by the Board of Governors of the Federal Reserve System as
to reserves required to be maintained against deposits and certain other
matters.
Liberty Federal Savings is a community-oriented financial institution
offering a variety of traditional financial services to meet the financial
needs of the communities it serves. Liberty Federal Savings operates out of
its main office located in Chicago and its branch offices located in Glenview,
Morton Grove and Norridge, Illinois. Its deposit base is concentrated in the
communities surrounding its offices, while its lending base extends throughout
the northwestern portion of Chicago and suburban Cook county, Illinois.
Liberty Federal Savings also purchases loans that meet the institution's
underwriting standards, which are secured by automobiles and real estate
located primarily in Chicago and the contiguous counties. It also purchases
commercial leases secured by assets throughout the United States. See
"Selected Consolidated Financial and Other Data of Liberty Bancorp, Inc." and
"Unaudited Pro Forma Combined Financial Statements."
Additional information concerning Liberty Bancorp and Liberty Federal
Savings is included in the Liberty Bancorp documents incorporated by reference
herein. See "Incorporation of Certain Documents by Reference."
21
<PAGE>
THE SPECIAL MEETINGS
HINSDALE FINANCIAL SPECIAL MEETING
Place, Time and Date. The Hinsdale Financial Special Meeting is scheduled to
be held on Tuesday, November 26, 1996, at the Chicago Marriott O'Hare, 8535
West Higgins Road, Chicago, Illinois, at 3:30 p.m., Chicago time. This Joint
Proxy Statement/Prospectus is being sent to holders of record, and certain
beneficial owners, of Hinsdale Financial Common Stock as of the Hinsdale
Financial Record Date and is accompanied by a form of proxy which the Hinsdale
Financial Board requests that stockholders execute and return to Hinsdale
Financial for use at the Hinsdale Financial Special Meeting and at any and all
adjournments or postponements thereof.
Matters to Be Considered. At the Hinsdale Financial Special Meeting, holders
of shares of Hinsdale Financial Common Stock will vote on the following
proposals (the "Hinsdale Financial Proposals"): the approval and adoption of
the Merger Agreement and the transactions contemplated thereby, including the
Merger of Liberty Bancorp with and into Hinsdale Financial and the issuance by
Hinsdale Financial/Alliance Bancorp of up to 2,610,781 shares of Alliance
Bancorp Common Stock in connection with the Merger; and the approval and
adoption of amendments to Hinsdale Financial's Certificate of Incorporation
(the "Hinsdale Financial Certificate") to (i) increase the number of
authorized shares of Hinsdale Financial Common Stock from 6,000,000 to
11,000,000 (the "Shares Amendment"), and (ii) to change the name of the
corporation, effective upon consummation of the Merger, to "Alliance Bancorp"
(the "Change of Name Amendment" and together with the Shares Amendment, the
"Certificate Amendments"). See "The Merger" and "Amendments to Certificate of
Incorporation of Hinsdale Financial Corporation." Hinsdale Financial
stockholders also may consider and vote upon such other matters as may
properly be brought before the Hinsdale Financial Special Meeting, including
proposals to adjourn the Hinsdale Financial Special Meeting in the event there
are not sufficient votes to approve any proposal at the time of the Hinsdale
Financial Special Meeting; provided, however, that any proxy which is voted
against any of the Hinsdale Financial Proposals will not be voted in favor of
adjournment to solicit further proxies for such proposals. The Board of
Directors of Hinsdale Financial knows of no business that will be presented
for consideration at the Hinsdale Financial Special Meeting other than the
matters described in this Joint Proxy Statement/Prospectus.
Hinsdale Financial Record Date; Votes Required. The Hinsdale Financial Board
has fixed the close of business on October 14, 1996 (the "Hinsdale Financial
Record Date") as the date for determining holders of Hinsdale Financial Common
Stock who are entitled to notice of and to vote at the Hinsdale Financial
Special Meeting. Only holders of record of Hinsdale Financial Common Stock at
the close of business on the Hinsdale Financial Record Date will be entitled
to notice of and to vote at the Hinsdale Financial Special Meeting. As of the
Hinsdale Financial Record Date, there were outstanding and entitled to vote at
the Hinsdale Financial Special Meeting 2,695,085 shares of Hinsdale Financial
Common Stock.
Except as indicated below, each holder of record of shares of Hinsdale
Financial Common Stock on the Hinsdale Financial Record Date will be entitled
to cast one vote per share on the Hinsdale Financial Proposals at the Hinsdale
Financial Special Meeting. Such vote may be exercised in person or by properly
executed proxy.
In accordance with the provisions of the Hinsdale Financial Certificate,
record holders of Hinsdale Financial Common Stock who beneficially own in
excess of 10% of the outstanding shares of Common Stock (the "Limit") are not
entitled to any vote with respect to the shares held in excess of the Limit.
The Hinsdale Financial Certificate authorizes the Board of Directors (i) to
make all determinations necessary to implement and apply the Limit, including
determining whether persons or entities are acting in concert, and (ii) to
demand that any person who is reasonably believed to beneficially own stock in
excess of the Limit supply information to Hinsdale Financial to enable the
Board to implement and apply the Limit.
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Hinsdale Financial Common Stock entitled
to vote at the Hinsdale Financial Special Meeting is necessary to
22
<PAGE>
constitute a quorum. Abstentions and broker non-votes (i.e., proxies from
brokers or nominees indicating that such persons have not received
instructions from the beneficial owners or other persons as to certain
proposals on which such beneficial owners or persons are entitled to vote
their shares but with respect to which the brokers or nominees have no
discretionary power to vote without such instructions) will be treated as
shares present at the Hinsdale Financial Special Meeting for purposes of
determining the presence of a quorum.
With a quorum, or in the absence of such, the affirmative vote of a majority
of the shares represented at the Hinsdale Financial Special Meeting may
authorize the adjournment of the meeting.
The affirmative vote of the holders of a majority of the outstanding shares
of Hinsdale Financial Common Stock is required for approval and adoption of
the Merger Agreement and the Certificate Amendments. Therefore, abstentions
and broker non-votes will have the same effect as votes against approval of
the Hinsdale Financial Proposals.
Approval of the Merger Agreement by the stockholders of Hinsdale Financial
is a condition to, and required for, consummation of the Merger. See "The
Merger--Conditions to the Merger." The adoption of the Merger Agreement is
conditioned upon stockholder approval of the Certificate Amendments, and the
adoption of the Certificate Amendments is conditioned upon stockholder
approval of the Merger Agreement.
As of the Hinsdale Financial Record Date, the directors and executive
officers of Hinsdale Financial and their affiliates beneficially owned in the
aggregate 173,993 shares (excluding shares underlying stock options), or
approximately 6.5% of the then outstanding shares, of Hinsdale Financial
Common Stock entitled to vote at the Hinsdale Financial Special Meeting. The
directors of Hinsdale Financial have entered into the Liberty Bancorp Voting
Agreements whereby such directors have agreed to vote all shares of Hinsdale
Financial Common Stock owned by them (109,183 shares in the aggregate) for
approval of the Merger Agreement. As of the Hinsdale Financial Record Date,
the directors and executive officers of Liberty Bancorp and their affiliates
beneficially owned 5,125 shares of Hinsdale Financial Common Stock. It is also
expected that such shares will be voted in favor of the Hinsdale Financial
Proposals.
Proxies. Shares of Hinsdale Financial Common Stock represented by properly
executed proxies received prior to or at the Hinsdale Financial Special
Meeting will, unless such proxies have been revoked, be voted at the Hinsdale
Financial Special Meeting and any adjournments or postponements thereof, in
accordance with the instructions indicated in the proxies. If no instructions
are indicated on a properly executed proxy, the shares will be voted FOR the
Hinsdale Financial Proposals.
Any proxy given pursuant to this solicitation or otherwise may be revoked by
the person giving it at any time before it is voted either by delivering to
the Secretary of Hinsdale Financial at One Grant Square, Hinsdale, Illinois
60521 on or before the taking of the vote at the Hinsdale Financial Special
Meeting, a written notice of revocation bearing a later date than the date of
the proxy or a later dated proxy relating to the same shares or by attending
the Hinsdale Financial Special Meeting and voting in person. Attendance at the
Hinsdale Financial Special Meeting will not in itself constitute the
revocation of a proxy. Moreover, 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 Special Meeting.
If any other matters are properly presented at the Hinsdale Financial
Special Meeting for consideration, the persons named in the proxy or acting
thereunder will have discretion to vote on such matters in accordance with
their best judgment. As of the date hereof, the Hinsdale Financial Board of
Directors knows of no such other matters.
In addition to solicitation by mail, directors, officers and employees of
Hinsdale Financial, who will not be specifically compensated for such
services, may solicit proxies from the stockholders of Hinsdale Financial,
personally or by telephone, telegram or other forms of communication.
Brokerage houses, nominees, fiduciaries and other custodians will be requested
to forward soliciting materials to beneficial owners and will be reimbursed
23
<PAGE>
for their reasonable expenses incurred in sending proxy material to beneficial
owners. In addition, Hinsdale Financial and Liberty Bancorp have engaged
Morrow & Co., Inc., a proxy solicitation firm ("Morrow"), to assist Hinsdale
Financial and Liberty Bancorp in distributing proxy materials and contacting
record and beneficial owners of Hinsdale Financial and Liberty Bancorp Common
Stock. Hinsdale Financial and Liberty Bancorp have agreed to pay Morrow
approximately $10,000, plus out-of-pocket expenses, for its services to be
rendered on behalf of Hinsdale Financial and Liberty Bancorp. Except as to the
expense of Morrow and printing and mailing expenses associated with the Joint
Proxy Statement/Prospectus (which Hinsdale Financial and Liberty Bancorp shall
bear equally), Hinsdale Financial will bear its own expenses in connection
with the solicitation of proxies for the Hinsdale Financial Special Meeting.
HOLDERS OF HINSDALE FINANCIAL COMMON STOCK ARE REQUESTED TO COMPLETE, DATE
AND SIGN THE ACCOMPANYING WHITE PROXY CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
LIBERTY BANCORP SPECIAL MEETING
Place, Time and Date. The Liberty Bancorp Special Meeting is scheduled to be
held on Tuesday, November 26, 1996, at the Chicago Marriott O'Hare, 8535 West
Higgins Road, Chicago, Illinois, at 2:00 p.m., Chicago time. This Joint Proxy
Statement/Prospectus is being sent to holders of record, and certain
beneficial owners, of Liberty Bancorp Common Stock as of the Liberty Bancorp
Record Date, and is accompanied by a form of proxy which the Liberty Bancorp
Board requests that stockholders execute and return to Liberty Bancorp for use
at the Liberty Bancorp Special Meeting and at any and all adjournments or
postponements thereof.
Matters to Be Considered. At the Liberty Bancorp Special Meeting, holders of
Liberty Bancorp Common Stock as of the Liberty Bancorp Record Date will vote
upon a proposal (the "Liberty Bancorp Proposal") to approve the Merger
Agreement and the transactions contemplated thereby. Holders of Liberty
Bancorp Common Stock also may consider and vote upon such other matters as are
properly brought before the Liberty Bancorp Special Meeting, including
proposals to adjourn the Liberty Bancorp Special Meeting to permit further
solicitation of proxies by Liberty Bancorp's Board of Directors in the event
that there are not sufficient votes to approve any proposal at the time of the
Liberty Bancorp Special Meeting; provided, however, that any proxy which is
voted against the Liberty Bancorp Proposal will not be voted in favor of
adjournment to solicit further proxies. As of the date hereof, the Liberty
Bancorp Board knows of no business that will be presented for consideration at
the Liberty Bancorp Special Meeting, other than the matters described in this
Joint Proxy Statement/Prospectus.
Liberty Bancorp Record Date; Vote Required. The Liberty Bancorp Board has
fixed the close of business on October 14, 1996 (the "Liberty Bancorp Record
Date") as the date for determining holders of Liberty Bancorp Common Stock who
are entitled to notice of and to vote at the Liberty Bancorp Special Meeting.
Only holders of record of Liberty Bancorp Common Stock on the Liberty Bancorp
Record Date will be entitled to notice of and to vote at the Liberty Bancorp
Special Meeting. As of the Liberty Bancorp Record Date, there were outstanding
and entitled to vote at the Liberty Bancorp Special Meeting 2,477,022 shares
of Liberty Bancorp Common Stock.
Except as indicated below, each holder of record of shares of Liberty
Bancorp Common Stock on the Liberty Bancorp Record Date will be entitled to
cast one vote per share on the Liberty Bancorp Proposal at the Liberty Bancorp
Special Meeting. Such vote may be exercised in person or by properly executed
proxy.
In accordance with the provisions of the Liberty Bancorp Certificate, record
holders of Liberty Bancorp Common Stock who beneficially own in excess of 10%
of the outstanding shares of Common Stock (the "Limit") are not entitled to
any vote with respect to the shares held in excess of the Limit. The Liberty
Bancorp Certificate authorizes the Board of Directors (i) to make all
determinations necessary to implement and apply the Limit, including
determining whether persons or entities are acting in concert, and (ii) to
demand that any person who is reasonably believed to beneficially own stock in
excess of the Limit supply information to Liberty Bancorp to enable the Board
to implement and apply the Limit.
24
<PAGE>
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Liberty Bancorp Common Stock entitled to
vote at the Liberty Bancorp Special Meeting is necessary to constitute a
quorum. Abstentions and broker non-votes (i.e., proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owners or other persons as to certain proposals on which such
beneficial owners or persons are entitled to vote their shares but with
respect to which the brokers or nominees have no discretionary power to vote
without such instructions) will be treated as shares present at the Liberty
Bancorp Special Meeting for purposes of determining the presence of a quorum.
With a quorum, or in the absence of such, the affirmative vote of a majority
of the shares represented at the Liberty Bancorp Special Meeting may authorize
the adjournment of the meeting.
Approval of the Liberty Bancorp Proposal at the Liberty Bancorp Special
Meeting will require the affirmative vote of the holders of a majority of the
outstanding shares of Liberty Bancorp Common Stock entitled to vote at the
Liberty Bancorp Special Meeting. As a result, abstentions and broker non-votes
will have the same effect as votes against the Liberty Bancorp Proposal.
As of the Liberty Bancorp Record Date, the directors and executive officers
of Liberty Bancorp and their affiliates beneficially owned in the aggregate
401,894 shares (excluding shares underlying stock options), or 16.22% of the
then outstanding shares, of Liberty Bancorp Common Stock entitled to vote at
the Liberty Bancorp Special Meeting. The directors of Liberty Bancorp have
entered into the Hinsdale Financial Voting Agreements whereby such directors
have agreed to vote all shares of Liberty Bancorp Common Stock owned by them
(344,173 shares in the aggregate) for approval of the Merger Agreement. As of
the Liberty Bancorp Record Date, the directors and executive officers of
Hinsdale Financial and their affiliates did not beneficially own any shares of
Liberty Bancorp Common Stock.
Proxies. Shares of Liberty Bancorp Common Stock represented by properly
executed proxies received prior to or at the Liberty Bancorp Special Meeting
will, unless such proxies have been revoked, be voted at the Liberty Bancorp
Special Meeting and any adjournments or postponements thereof in accordance
with the instructions indicated in the proxies. If no instructions are
indicated on a properly executed proxy, the shares will be voted FOR the
Liberty Bancorp Proposal.
Any proxy given pursuant to this solicitation or otherwise may be revoked by
the person giving it at any time before it is voted by delivering to the
Secretary of Liberty Bancorp at 5700 N. Lincoln Avenue, Chicago, Illinois
60659 on or before the taking of the vote at the Liberty Bancorp Special
Meeting, a written notice of revocation bearing a later date than the proxy or
a later dated proxy relating to the same shares of Liberty Bancorp Common
Stock, or by attending the Liberty Bancorp Special Meeting and voting in
person. Attendance at the Liberty Bancorp Special Meeting will not in itself
constitute the revocation of a proxy. Moreover, 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 Special
Meeting.
If any other matters are properly presented at the Liberty Bancorp Special
Meeting for consideration, the persons named in the proxy or acting thereunder
will have discretion to vote on such matters in accordance with their best
judgment. As of the date hereof, the Liberty Bancorp Board knows of no such
other matters.
In addition to solicitation by mail, directors, officers and employees of
Liberty Bancorp, who will not be specifically compensated for such services,
may solicit proxies from the stockholders of Liberty Bancorp, personally or by
telephone, telegram or other forms of communication. Brokerage houses,
nominees, fiduciaries and other custodians will be requested to forward
soliciting materials to beneficial owners and will be reimbursed for their
reasonable expenses incurred in sending proxy material to beneficial owners.
In addition, Liberty Bancorp and Hinsdale Financial have engaged Morrow to
assist Liberty Bancorp and Hinsdale Financial in distributing proxy materials
and contacting record and beneficial owners of Liberty Bancorp and Hinsdale
Financial Common Stock. Liberty Bancorp and Hinsdale Financial have agreed to
pay Morrow approximately $10,000, plus out-of-pocket expenses, for its
services to be rendered on behalf of Liberty Bancorp and Hinsdale
25
<PAGE>
Financial. Except as to the expense of Morrow and printing and mailing
expenses associated with the Joint Proxy Statement/Prospectus (which Liberty
Bancorp and Hinsdale Financial shall bear equally), Liberty Bancorp will bear
its own expenses in connection with the solicitation of proxies for the
Liberty Bancorp Special Meeting.
HOLDERS OF LIBERTY BANCORP COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND
SIGN THE ACCOMPANYING WHITE PROXY CARD AND TO RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
HOLDERS OF LIBERTY BANCORP COMMON STOCK SHOULD NOT FORWARD STOCK
CERTIFICATES WITH THEIR WHITE PROXY CARDS.
26
<PAGE>
THE MERGER
The information in this Joint Proxy Statement/Prospectus concerning the
terms of the Merger is qualified in its entirety by reference to the full text
of the Merger Agreement, which is attached hereto in Appendix I and
incorporated by reference herein. All stockholders are urged to read the
Merger Agreement in its entirety.
GENERAL
Pursuant to the Merger Agreement, Liberty Bancorp will be merged with and
into Hinsdale Financial, with Hinsdale Financial being the surviving entity
operating under the name "Alliance Bancorp" (the "Company Merger") and,
pursuant to the Bank Merger Agreement, concurrently with or immediately
thereafter, Liberty Federal Savings will be merged with and into Hinsdale
Federal, with Hinsdale Federal as the surviving institution operating under
the name "Liberty Federal Bank" (the "Bank Merger" and, together with the
Company Merger, the "Merger"), in a "Merger of Equals." Pursuant to the Merger
Agreement, each share of Liberty Bancorp Common Stock issued and outstanding
immediately prior to the Merger will be converted into the right to receive
1.054 shares of Alliance Bancorp Common Stock and Hinsdale Financial
stockholders will maintain one share of Alliance Bancorp Common Stock for each
share of Hinsdale Financial Common Stock they own. Following the Effective
Time of the Merger, the former stockholders of Liberty Bancorp would own
approximately 2,610,781 shares, or 49.2%, of the shares of Alliance Bancorp
Common Stock to be outstanding, and the former stockholders of Hinsdale
Financial would own 50.8% of the shares of Alliance Bancorp Common Stock
outstanding. Members of Hinsdale Financial's and Liberty Bancorp's respective
Boards of Directors would each represent 50% of the Board of Directors of
Alliance Bancorp. As soon as possible after the conditions to consummation of
the Merger described below have been satisfied or waived, and unless the
Merger Agreement has been terminated as provided below, Hinsdale Financial and
Liberty Bancorp will file a certificate of merger with the Secretary of State
of Delaware for the Company Merger, and Articles of Combination with the OTS
for the Bank Merger. The Company Merger will become effective upon the filing
of the certificate of merger with the Secretary of State of Delaware, while
the Bank Merger will become effective at the time the Articles of Combination
are endorsed by the OTS pursuant to Section 552.13(k) of the regulations
promulgated by the OTS. The time at which the Company Merger becomes effective
is referred to herein as the "Effective Time." See "--Effective Time and
Closing Date." The parties have agreed to effect the Bank Merger immediately
following the Company Merger.
Upon consummation of the Merger, each outstanding share of Liberty Bancorp
Common Stock shall be converted into 1.054 shares of Alliance Bancorp Common
Stock, each stockholder of Liberty Bancorp shall be entitled to exchange
Liberty Bancorp Common Stock certificates for Alliance Bancorp Common Stock
certificates and thereupon shall cease to be a stockholder of Liberty Bancorp,
and the separate existence and corporate organization of Liberty Bancorp shall
cease.
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger. From time to time, both Hinsdale Financial and
Liberty Bancorp have reviewed their strategic alternatives for enhancing
profitability and maximizing stockholder value. The changing competitive
situation in banking and financial services has been evidenced by considerable
consolidation activity in recent years. The increasing size of competitors and
the benefits that an increased scale of operation contribute to supporting
product innovations and technological improvements has led both Hinsdale
Financial and Liberty Bancorp to recognize that a combination or consolidation
with proper characteristics would be beneficial to both institutions'
financial performance and strategic value.
In July of 1995, Fredric Novy, President and Chief Executive Officer of
Liberty Bancorp had discussions with Kenne Bristol, President and Chief
Executive Officer of Hinsdale Financial regarding the possible purchase by
Liberty Federal Savings of mortgage loans originated by Hinsdale Financial's
subsidiary, Preferred Mortgage. Messrs. Novy and Bristol were known to each
other as executive officers of thrift institutions in the Chicago area and
through their involvement in various industry trade organizations. During the
course of their discussions
27
<PAGE>
regarding the purchase of loans from Preferred Mortgage, Messrs. Novy and
Bristol also discussed their outlooks for the thrift industry in the Chicago
metropolitan area as well as their strategic views as to the future direction
of the banking industry and their respective institutions. Messrs. Novy and
Bristol discussed the consolidation trend in banking and financial services,
the potential advantages in general of affiliations among savings institutions
to enhance operational and strategic franchise value, and the possibilities of
and advantages to a combination between Hinsdale Financial and Liberty
Bancorp. In December 1995, and as a result of ongoing discussions, Messrs.
Novy and Bristol agreed to engage a third party financial advisor for the
purpose of reviewing a possible combination between Hinsdale Financial and
Liberty Bancorp in a merger of equals, such review to be based on the publicly
available information regarding each company. A.T. Kearney, Inc. ("Kearney")
was engaged in December of 1995 for this purpose.
Messrs. Novy and Bristol met in the offices of Kearney during December to
review a financial presentation prepared by Kearney as to a possible merger of
equals between Hinsdale Financial and Liberty Bancorp. The parties also
discussed various non-financial aspects of a possible merger of equals,
including board composition, the respective corporate cultures and business
philosophies of the companies, as well as the markets served and the products
offered by the two companies and the synergies that could be accomplished by a
combination. Kearney was directed to prepare a business plan for a merger of
equals. In January of 1996, Messrs. Novy and Bristol again met at the offices
of Kearney to review and refine a business plan for a possible merger of
equals between Hinsdale Financial and Liberty Bancorp. The Boards of Directors
of Hinsdale Financial and Liberty Bancorp were fully apprised of these
meetings and discussions.
Given the progress made by Messrs. Novy and Bristol with Kearney, the
directors of Hinsdale Financial and Liberty Bancorp attended a dinner held in
mid-February for the specific purpose of introducing the Boards to each other.
Kearney attended the dinner and made a general presentation to the Boards of
Directors, and responded to questions from the Boards. No discussion of
pricing terms or an exchange ratio took place, although the Boards understood
that a merger of equals was contemplated by both parties, and that a "premium"
would not be paid by either party in such a transaction.
On March 19, 1996, the Board of Directors of Hinsdale Financial met to
discuss the developments regarding Liberty Bancorp. Kearney was in attendance
at this meeting, as was counsel to Hinsdale Financial. The directors were
advised of their fiduciary duties in general and in particular with respect to
mergers, and a determination was made to retain Baird as the financial advisor
to Hinsdale Financial with respect to any possible merger of equals with
Liberty Bancorp. On March 21 Baird met with the Hinsdale Financial Board of
Directors to have a discussion as to mergers of equals in general and in
particular as to the possible merger of equals between Hinsdale Financial and
Liberty Bancorp, including a discussion of the methodologies utilized in
determining the exchange ratio in a merger of equals transaction. At a meeting
of the Board of Directors of Liberty Bancorp held in March, a determination
was made to retain Chicago Capital and Morgan Keegan as financial advisors to
Liberty Bancorp in connection with any possible merger of equals with Hinsdale
Financial. On April 8, 1996, a meeting was held at the Union League Club in
Chicago which was attended by the chief executive and chief financial officers
of both Hinsdale Financial and Liberty Bancorp, Kearney, Baird and Chicago
Capital. At the meeting there was further discussion regarding a possible
combination of the two parties; there was also discussion as to the goodwill
lawsuit initiated by Hinsdale Financial (through Hinsdale Federal) against the
United States Government (the "Goodwill Claim") relating to the "goodwill"
acquired by Hinsdale Federal in 1982 in connection with its acquisition of
North America Federal Savings and the elimination of goodwill as regulatory
capital through the enactment of the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 ("FIRREA"). As a result of FIRREA, Hinsdale
Federal took a charge to earnings in each of the fiscal years ended September
30, 1991 and 1992 relating to its write-off of the remaining goodwill relating
to the North America Federal Savings acquisition. The parties discussed, among
other things, whether the Goodwill Claim should be left in any possible merger
or, if possible, carved out for the exclusive benefit of Hinsdale Financial
stockholders. The parties decided to review a possible distribution to
Hinsdale Financial stockholders of rights to receive the net proceeds of any
recovery relating to the Goodwill Claim, which distribution would take place
immediately prior to the effective date of any merger between Hinsdale
Financial and Liberty Bancorp.
28
<PAGE>
On May 1, 1996, a committee of Board members from Hinsdale Financial and
Liberty Bancorp met to further explore the possible combination of the two
entities. Only Board members were present. The Board members discussed the
existing operations of the companies and the possible synergies of a combined
entity, including a discussion of the compatibility of the companies'
operations and conservative operating philosophies and the opportunities to
enhance each other's operational and strategic value through a combination.
The Board committees reported to the full Boards, at which time it was
determined to proceed with a due diligence investigation of the other.
Confidentiality agreements were executed and the parties began exchanging
documents and other information (including corporate minutes, asset quality
reports, business plans, policy statements and internal financial statements)
and conducting on-site due diligence. Further meetings were held in May among
the companies' respective executive officers, financial advisors (other than
Morgan Keegan) and legal counsel regarding the structure and terms of a
business combination. After consultations with legal counsel and tax advisors,
it was determined during this time period that a goodwill "carve-out" by means
of a distribution to stockholders of Hinsdale Financial of rights to receive
the net proceeds of any recovery in the Goodwill Claim could be taxable to
both stockholders and the company and therefore would not be economical.
During this time period it was also determined that given the intent of the
parties to re-align various stock benefit plans, particularly the employee
stock ownership plans, and in light of Liberty Bancorp's history of stock
repurchases, the transaction would be required to be accounted for under the
purchase method of accounting and that a merger of Liberty Bancorp into
Hinsdale Financial would be most advantageous from an accounting and tax
standpoint.
The terms of a merger agreement between Hinsdale Financial and Liberty
Bancorp were presented to each of the Boards of Directors at special meetings
of directors held on June 17, 1996. At the Hinsdale Financial Board of
Directors meeting, the Board was informed of the favorable results of the due
diligence review of Liberty Bancorp, and the discussion then focussed on the
Goodwill Claim and the fact that a U.S. Supreme Court decision on whether the
federal government could be held liable for damages for breach of contract
relating to the passage of the FIRREA was expected by the end of the month.
The Board again was informed of the potential adverse tax consequences to
stockholders and the company of any separate distribution to Hinsdale
Financial stockholders of rights to any damages to be recovered by Hinsdale
Financial relating to the Goodwill Claim, and the Board, in consultation with
its financial advisors and legal counsel, discussed numerous factors relating
to the Goodwill Claim, including without limitation, the market's perceived
value of the claim, the fact that several years could possibly elapse before
any recovery was likely to be realized, and the fact that the government would
likely raise numerous defenses and offsets to the Goodwill Claim. However, in
light of the then-imminent Supreme Court decision as to the fundamental issue
of whether the federal government could be held liable for breach of contract,
the Board determined to await the outcome of the Supreme Court ruling before
proceeding with any decision on the merger agreement. The Liberty Bancorp
Board of Directors was informed of the Hinsdale Financial decision to postpone
any decision on the merger agreement, a general discussion followed, and a
determination was made to continue negotiations with Hinsdale Financial at a
later date following the Supreme Court's decision.
On July 1, 1996, the Supreme Court announced its decision that the U.S.
Government was liable, in the cases before it, for breach of contract relating
to the passage of FIRREA and the elimination of supervisory goodwill as a
component of regulatory capital. On July 3, the Hinsdale Financial Board of
Directors met to discuss the Supreme Court decision and its impact on the
proposed merger with Liberty Bancorp. The Board concluded that it still
believed that a merger of equals with Liberty Bancorp could be in the best
interests of the company and its stockholders and determined that the parties
should proceed further and attempt to negotiate an appropriate exchange ratio.
On July 5, the chief executive officers of Hinsdale Financial and Liberty
Bancorp met to discuss the goodwill decision and its impact on the proposed
merger and they decided that a committee of Board members from Hinsdale
Financial and Liberty Bancorp should again meet to attempt to arrive at an
acceptable exchange ratio, on the basis that the Goodwill Claim could not be
separately distributed to Hinsdale Financial stockholders. The financial
advisor to Hinsdale Financial was directed to prepare an analysis as to
appropriate exchange ratios for a merger of equals. On July 30, 1996, the
Board committees met and discussed the appropriate methodologies for arriving
at an exchange ratio for a merger of equals between the parties. The directors
considered and reviewed the relative market values of the shares outstanding
of each of the companies,
29
<PAGE>
and the contribution each company would make to the combined company's assets,
liabilities, equity and earnings (as to earnings, on both an historical and
projected basis). The Board members also reviewed an analysis of various
exchange ratios prepared by Baird, and determined that an exchange ratio of
1.054 shares of Alliance Bancorp Common Stock for each share of Liberty
Bancorp Common Stock, which reflected numerous factors, including each
company's historical and projected earnings, the relative book values of the
companies and the relative market values of the companies' equity securities,
would be used. This exchange ratio would have resulted in the former
stockholders of Liberty Bancorp owning approximately 49.3% of the shares of
Alliance Bancorp Common Stock to be outstanding, and the former stockholders
of Hinsdale Financial owning 50.7% of the shares of Alliance Bancorp Common
Stock to be outstanding.
At separate meetings held on August 2, 1996, the Boards of Directors of
Hinsdale Financial and Liberty Bancorp reviewed with their respective senior
management officials, financial advisors and legal counsel, the terms of the
Merger, the Merger Agreement and the Stock Option Agreements and the
transactions contemplated thereby, as well as the background of the
transactions, the potential financial and strategic benefits of the
transactions, the results of due diligence reviews, financial and valuation
analyses of the transactions and the terms of the proposed transaction
agreements, including the Exchange Ratio. Each of the Boards of Directors
discussed with counsel their fiduciary duties in connection with merger
transactions. At the meeting of the Hinsdale Financial Board of Directors,
Baird rendered its opinion that, as of August 2, 1996, the Exchange Ratio in
the Merger was fair to Hinsdale Financial stockholders from a financial point
of view. At such meeting, the Hinsdale Financial Board of Directors
unanimously adopted and approved the Merger, the Merger Agreement, the Stock
Option Agreements and the transactions contemplated thereby. At the meeting of
the Liberty Bancorp Board of Directors, Chicago Capital and Morgan Keegan
rendered their oral opinions that, as of August 2, 1996, the Exchange Ratio
was fair, from a financial point of view, to Liberty Bancorp stockholders. At
such meeting, the Liberty Bancorp Board of Directors unanimously adopted and
approved the Merger, the Merger Agreement, the Stock Option Agreements and the
transactions contemplated thereby.
Reasons for the Merger. The Hinsdale Financial Board and the Liberty Bancorp
Board have each determined that the Merger and the Merger Agreement are fair
to, and in the best interests of, their respective company and stockholders.
In reaching their determinations, the Hinsdale Financial Board and the Liberty
Bancorp Board consulted with their respective financial advisors with respect
to the financial aspects and fairness of the transaction. In arriving at their
determinations, the Hinsdale Financial Board and the Liberty Bancorp Board
also considered a number of factors which indicated that the Merger should
produce an institution that is well capitalized, and one which will enjoy an
enhanced operational and strategic value and that should foster the potential
for earnings growth. The factors considered by the Hinsdale Financial Board
and the Liberty Bancorp Board included, but were not limited to, the
following:
(i) Information concerning the businesses, earnings, operations,
financial condition, prospects, capital levels and asset quality of
Hinsdale Financial and Liberty Bancorp, both individually and as combined.
(ii) The financial advice rendered by the respective financial advisors
to Hinsdale Financial and Liberty Bancorp that, with respect to Hinsdale
Financial, the Exchange Ratio in the Merger is fair, from a financial point
of view, to Hinsdale Financial and its stockholders and, with respect to
Liberty Bancorp, that the Exchange Ratio is fair, from a financial point of
view, to Liberty Bancorp and its stockholders. See "--Opinion of Financial
Advisor to Hinsdale Financial" and "--Opinions of Liberty Bancorp's
Financial Advisors."
(iii) The terms of the Merger Agreement, the Stock Option Agreements and
the other documents executed in connection with the Merger, all of which
were reciprocal.
(iv) The anticipated cost savings and efficiencies available to the
combined company as a result of the Merger.
(v) The current and prospective economic, competitive and regulatory
environment facing each institution and other financial institutions.
30
<PAGE>
(vi) The fact that the Board of Directors of the combined company would
consist of equal numbers of members selected by Hinsdale Financial and
Liberty Bancorp, respectively, and the current management of each company
would have a significant influence in the management of the combined
company. See "Management and Operations After the Merger."
(vii) The results of the due diligence investigations conducted by the
managements of Hinsdale Financial and Liberty Bancorp, including assessment
of credit policies, asset quality, interest rate risk, litigation and
adequacy of loan loss reserves.
(viii) The expectation that the Merger would be tax free to Hinsdale
Financial and Liberty Bancorp, and their respective stockholders, for
federal income tax purposes. See "--Federal Income Tax Consequences of the
Merger".
(ix) The nature and compatibility of the respective management and
business philosophies of Hinsdale Financial and Liberty Bancorp.
(x) The prospects for growth and expanded products and services, and
other anticipated impacts on depositors, employees, customers and
communities served by Hinsdale Financial and Liberty Bancorp, respectively.
(xi) The pro forma ownership of the combined company by stockholders of
Hinsdale Financial and Liberty Bancorp.
In addition, the Hinsdale Financial Board of Directors considered various
issues relating to the Goodwill Claim, including the fact numerous defenses
and offsets to Hinsdale Federal's claim would likely be raised by the federal
government, that Hinsdale Federal might not realize any recovery for several
years, and that unlike most claims for breach of contract, interest is not
paid on the claims against the government. The Board also considered the
advice it had received that any separate distribution to its stockholders of
rights to receive the net proceeds of any recovery relating to the Goodwill
Claim might be taxable to both Hinsdale Financial and its stockholders and
therefore did not appear to be an economical alternative for the company or
its stockholders. The Hinsdale Financial Board of Directors also discussed the
fact that a month had passed since the Supreme Court announced its decision
regarding goodwill and that it believed that the market price of the Hinsdale
Financial Common Stock took into account the market's perception of the value
of the Goodwill Claim. The Hinsdale Financial Board also considered that
Liberty Bancorp's total stockholders' equity as of June 30, 1996 was
approximately $10 million greater than Hinsdale Financial's stockholders'
equity at such date, and that the stockholders of Hinsdale Financial would
have owned 50.7% of the combined entity. The Liberty Bancorp Board also
considered and discussed the Goodwill Claim. In reaching their determinations
to approve and recommend the Merger, the Hinsdale Financial Board and the
Liberty Bancorp Board did not assign any specific or relative weights to any
of the foregoing factors, and individual directors may have given differing
weights to different factors.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Hinsdale Financial. The Hinsdale Financial Board of Directors has
unanimously adopted and approved the Merger Agreement and the transactions
contemplated thereby and has determined that the Merger and the issuance of
the shares of Hinsdale Financial/Alliance Bancorp Common Stock pursuant
thereto are fair to and in the best interests of Hinsdale Financial and its
stockholders. THE HINSDALE FINANCIAL BOARD OF DIRECTORS THEREFORE UNANIMOUSLY
RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
For a discussion of factors considered by the Hinsdale Financial Board of
Directors in reaching its decision to approve the Merger Agreement, see "--
Background of and Reasons for the Merger."
Liberty Bancorp. The Liberty Bancorp Board of Directors has unanimously
adopted and approved the Merger Agreement and the transactions contemplated
thereby and has determined that the Merger is fair to, and in the best
interests of, Liberty Bancorp and its stockholders. THE LIBERTY BANCORP BOARD
OF
31
<PAGE>
DIRECTORS THEREFORE UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL
OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
For a discussion of factors considered by the Liberty Bancorp Board in
reaching its decision to approve the Merger Agreement, see "--Background of
and Reasons for the Merger."
MERGER CONSIDERATION
Subject to the terms, conditions and procedures set forth in the Merger
Agreement, each share of Liberty Bancorp Common Stock issued and outstanding
immediately prior to the Merger will be converted into 1.054 (the "Exchange
Ratio") shares of Alliance Bancorp Common Stock (the "Merger Consideration").
The Exchange Ratio was determined through arm's-length negotiations between
Hinsdale Financial and Liberty Bancorp, each of which was advised during such
negotiations by its financial advisors. See "--Background of and Reasons for
the Merger." Based upon the outstanding shares of Hinsdale Financial Common
Stock and Liberty Bancorp Common Stock as of October 16, 1996, the
stockholders of Liberty Bancorp would own approximately 49.2% of the Alliance
Bancorp Common Stock to be outstanding immediately following the Effective
Time, and the stockholders of Hinsdale Financial would own approximately 50.8%
of the Alliance Bancorp Common Stock to be outstanding immediately following
the Effective Time.
Each share of Hinsdale Financial Common Stock issued and outstanding at the
Effective Time will remain outstanding and unchanged as a share of Alliance
Bancorp as a result of the Merger, and without any action on their part. No
fractional shares of Alliance Common Stock will be issued in the Merger, and
Liberty Bancorp stockholders who otherwise would be entitled to receive a
fractional share of Alliance Bancorp Common Stock will receive a cash payment
in lieu thereof. See "--Fractional Shares."
The number of shares of Alliance Bancorp Common Stock to be received for
each share of Liberty Bancorp Common Stock has been fixed at 1.054. Based on
the last reported sale price for Hinsdale Financial Common Stock on the Nasdaq
National Market on October 16, 1996 ($23.375 per share), the value of 1.054
shares of Hinsdale Financial Common Stock as of that date would have been
approximately $24.64 per share. The last reported sale price for Liberty
Bancorp Common Stock on the Nasdaq National Market on that date was $23.875
per share. The market value of Hinsdale Financial/Alliance Bancorp Common
Stock to be received in the Merger, however, is subject to fluctuation.
Fluctuations in the market price of Hinsdale Financial Common Stock would
result in an increase or decrease in the value of the Merger Consideration to
be received by Liberty Bancorp stockholders in the Merger. An increase in the
market value of Hinsdale Financial Common Stock would increase the market
value of the Merger Consideration to be received in the Merger. A decrease in
the market value of Hinsdale Financial Common Stock would have the opposite
effect. See "--Merger Consideration."
TREATMENT OF LIBERTY BANCORP STOCK OPTIONS
At the Liberty Bancorp Record Date, there were Liberty Bancorp Stock Options
outstanding with respect to 396,774 shares of Liberty Bancorp Common Stock.
Except as described below, at the Effective Time, each Liberty Bancorp Stock
Option shall become an option to purchase the number of shares of Alliance
Bancorp Common Stock that would have been received by the holder of such
option in the Merger had the option been exercised in full for shares of
Liberty Bancorp Common Stock immediately prior to the Effective Time, upon the
same terms and conditions under the relevant option as were applicable
immediately prior to the Effective Time, except the exercise price per share
will be proratably adjusted by the Exchange Ratio and any fractional shares.
Hinsdale Financial has agreed to make all filings under federal and state
securities laws necessary to permit the exercise of such options for Alliance
Bancorp Common Stock and the sale of the shares of Alliance Bancorp Common
Stock received by the optionees upon such exercise, and to continue to make
such filings thereafter as may be necessary to permit the continued exercise
of options and sale of shares.
32
<PAGE>
OPINION OF FINANCIAL ADVISOR TO HINSDALE FINANCIAL
General. The Board of Hinsdale Financial retained Baird to act as financial
advisor and to render its opinion as to whether the Exchange Ratio is fair,
from a financial point of view, to the holders of the outstanding shares of
Hinsdale Financial Common Stock. On August 2, 1996, Baird delivered its oral
opinion to the Board of Directors that, as of such date, the Exchange Ratio
was fair from a financial point of view, to the holders of the outstanding
shares of Hinsdale Financial Common Stock. This oral opinion was confirmed by
a written opinion dated October 17, 1996, the date of this prospectus.
THE FULL TEXT OF BAIRD'S OPINION, DATED OCTOBER 17, 1996, WHICH SETS FORTH
THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED, MATTERS CONSIDERED AND
LIMITATIONS ON THE SCOPE OF REVIEW UNDERTAKEN BY BAIRD IN RENDERING ITS
OPINION, IS ATTACHED AS APPENDIX III TO THIS JOINT PROXY STATEMENT/PROSPECTUS
AND IS INCORPORATED HEREIN BY REFERENCE. BAIRD'S OPINION IS DIRECTED ONLY TO
THE FAIRNESS, AS OF THE DATE OF THE OPINION AND FROM A FINANCIAL POINT OF
VIEW, OF THE EXCHANGE RATIO TO THE HOLDERS OF THE OUTSTANDING SHARES OF
HINSDALE FINANCIAL COMMON STOCK AND DOES NOT CONSTITUTE A RECOMMENDATION TO
ANY HINSDALE FINANCIAL STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE WITH
RESPECT TO THE MERGER AGREEMENT. BAIRD DID NOT MAKE RECOMMENDATIONS TO
HINSDALE FINANCIAL CONCERNING THE AMOUNT OF CONSIDERATION TO BE PAID. THE
SUMMARY OF BAIRD'S OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION. HINSDALE FINANCIAL STOCKHOLDERS
ARE URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY.
In conducting its investigation and analysis in arriving at its opinion,
Baird reviewed such information and took into account such financial and
economic factors as it deemed relevant under the circumstances. In that
connection, Baird among other things: (i) reviewed certain internal
information, primarily financial in nature, including projections concerning
the business and operations of Liberty Bancorp furnished to it for purposes of
its analysis, as well as publicly available information including but not
limited to Liberty Bancorp's consolidated financial statements for recent
years and interim periods and other filings with the SEC; (ii) reviewed
certain internal information, primarily financial in nature, concerning the
business and operations of Hinsdale Financial furnished to it by or on behalf
of Hinsdale Financial for purposes or its analysis, as well as publicly
available information including but not limited to Hinsdale Financial's
consolidated financial statements for recent years and interim periods and
other filings with the SEC; (iii) reviewed the draft of the Merger Agreement
in the form presented to Hinsdale Financial's Board of Directors; (iv)
compared the historical market prices and trading activity of the Hinsdale
Financial Common Stock and Liberty Bancorp Common Stock with such price and
trading histories of certain other publicly traded companies Baird deemed
relevant; (v) compared the financial position and operating results of
Hinsdale Financial and Liberty Bancorp with those of other publicly traded
companies Baird deemed relevant; (vi) compared the proposed financial terms of
the Merger with the financial terms of certain other business combinations
including transactions which Baird deemed to be mergers of equals; and (vii)
reviewed the potential pro-forma effects of the Merger on Hinsdale Financial.
Baird held discussions with certain members of Hinsdale Financial's and
Liberty Bancorp's senior management concerning Hinsdale Financial's and
Liberty Bancorp's respective historical and current financial condition and
operating results, as well as the future prospects of Hinsdale Financial and
Liberty Bancorp, respectively and have consulted with Hinsdale Financial's
counsel and special counsel concerning Hinsdale Financial's supervisory
goodwill lawsuit (the "Lawsuit"). Baird has also considered such other
information, financial studies, analysis and investigations and financial,
economic and market criteria which Baird deemed relevant for the preparation
of this opinion. The Exchange Ratio was determined by Hinsdale Financial and
Liberty Bancorp in arms-length negotiations. Hinsdale Financial did not place
any limitation upon Baird with respect to the procedures followed or factors
considered by Baird in rendering its opinion.
In arriving at its opinion, Baird has assumed and relied upon the accuracy
and completeness of all of the financial and other information provided by or
on behalf of Hinsdale Financial and Liberty Bancorp, or publicly available,
and did not attempt independently to verify any such information. Baird also
assumed that (i) all material assets and liabilities (contingent or otherwise,
known or unknown) of Hinsdale Financial and Liberty
33
<PAGE>
Bancorp were as set forth in the financial statements of Hinsdale Financial
and Liberty Bancorp, respectively and (ii) the strategic and operating
benefits and synergies currently contemplated by senior management of Hinsdale
Financial and Liberty Bancorp to result from the Merger would be realized.
Baird assumed that the projections provided to it had been reasonably prepared
and represented the best available estimates and good faith judgments of the
senior managements of Hinsdale Financial and Liberty Bancorp, respectively, as
to future performance of their respective companies. In conducting its review,
Baird did not make or obtain an independent evaluation or appraisal of any of
the assets or liabilities (contingent or otherwise) of Hinsdale Financial or
Liberty Bancorp, nor did Baird make a physical inspection of the properties or
facilities of Hinsdale Financial or Liberty Bancorp. Baird expresses no
opinion concerning the merits of, or ultimate recovery from, the Lawsuit.
Baird's opinion, necessarily, is based upon economic, monetary and market
conditions as they exist and can be evaluated on the date hereof, and does not
predict or take into account any changes which may occur, or information which
may become available, after the date hereof.
In connection with its opinion on the consideration to be received pursuant
to the Merger Agreement and the presentation of that opinion to the Board of
Directors, Baird performed several analyses with respect to Hinsdale Financial
and Liberty Bancorp. They included:
Comparable Group Comparison and Trading History. Baird reviewed the trading
prices and volume of Hinsdale Financial's and Liberty Bancorp's stock.
Particular attention was given to the one-year period leading up to the date
of the fairness opinion. Baird evaluated Hinsdale Financial and Liberty
Bancorp against a group of nine savings institutions and savings institution
holding companies believed to have characteristics similar to that of Hinsdale
Financial and Liberty Bancorp. Comparable financial statistics were reviewed
and relative stock price movements were analyzed for one month, three month,
six month and twelve month intervals.
Analysis of the Market's Valuation of Hinsdale's Supervisory Goodwill
Lawsuit. In assessing the relative public market valuation of the Hinsdale
Financial Common Stock, Baird analyzed the possible effect on such public
market price of Hinsdale Financial's Lawsuit. In connection with such
analysis, Baird reviewed the trading history of the Hinsdale Financial Common
Stock in relation to public announcements concerning the Lawsuit as well as
the trading histories of other institutions involved in similar pending
litigation in relation to such public announcements. In addition, Baird
reviewed the public market valuation of Contingent Litigation Participation
Certificates issued by California Federal Bank. Baird also reviewed its
analysis regarding the Lawsuit with Hinsdale Financial's counsel and special
counsel. Based on the foregoing review and analysis, Baird estimated that the
public market valuation of the Lawsuit to be approximately $8.1 million to
$13.5 million or $3.00 to $5.00 per share of Hinsdale Financial Common Stock.
Baird noted that the price of Hinsdale Financial Common Stock, adjusted for
such estimated market valuation of the Lawsuit, is slightly above the Hinsdale
Financial comparable group median price to earnings multiples (12.4x for
Hinsdale Financial versus 12.3x for the comparable group) and is below such
comparable group's average price to book ratio (93.4% for Hinsdale Financial
versus 108.1% for the comparable group).
Comparable Transaction Analysis. Baird performed four analyses of premiums
paid for selected savings institutions with comparable characteristics to
Liberty Bancorp. The comparable transactions were grouped into two categories.
They are:
. Thrift Merger of Equals Comparable Group--All Merger of Equals
transactions involving thrift "targets" announced since 1/1/90 (12
transactions).
. Merger of Equals Comparable Group--All Merger of Equals transactions
announced since 1/1/95, bank and thrift (18 transactions).
Baird used price to book, price to tangible book, price to earnings and
tangible premium to core deposit multiples from these comparable groups to
analyze pricing ranges for Liberty Bancorp.
The following briefly summarizes the general trends of each comparable group
of transactions.
Thrift Merger of Equals Comparable Group. For this group of transactions,
the median transaction value was 88.4% of book value and the average was
83.5% of book value. The transaction values ranged
34
<PAGE>
from a high of 118.8% of book value to a low of 30.8% of book value. Price
to tangible book multiples ranged from 31.7% to 136.3% with a median of
88.4% and an average of 86.6%. The median price to earnings multiple was
11.1x trailing-12-month earnings and the average was 10.7x trailing-12-
month earnings. The high price-earnings multiple was 14.1x trailing-12-
month earnings and the low was 7.0x. As a tangible premium to core
deposits, the median premium was -1.2% and the average was -2.4%. Premium
to deposits values ranged from a high of 3.1% to a low of -13.0%.
Merger of Equals Comparable Group. The median price to book ratio of the
consideration paid in all Merger of Equals (bank and thrift) announced
since 1/1/95 was 136.8% and the average was 130.5%. Price-book ratios
ranged from a high of 183.1% to a low of 93.0%. Price to tangible book
multiples ranged from 95.6% to 257.1% with a median of 143.0% and an
average of 144.9%. The median price to earnings multiple was 11.3x
trailing-12-month earnings and the average was 15.0x. Pricing ranged from a
high price to earnings multiple of 52.9x to a low of 5.4x. Deposit premium
ratios ranged from -0.7% to 15.1% with a median value of 5.3% and an
average of 4.7%.
By comparison, the consideration paid for Liberty Bancorp in the Merger of
Equals represented 94.8% of book value, 95.1% of tangible book value, 17.9x
trailing-12-month earnings, and a -0.7% tangible premium to core deposits.
As no comparable group or transaction from any comparable group is identical
to the Merger, Baird indicated to the Hinsdale Financial Board of Directors
that the analyses described above are not mathematical, but rather involve
complex considerations and judgments concerning differences in operating and
financial characteristics including, among other things, differences in
revenue composition and earnings performance among Liberty Bancorp and
Hinsdale Financial and the selected companies and transactions reviewed.
Pro-Forma Merger Analysis. Baird prepared a pro-forma analysis of the
financial impact of the Merger. Using earnings estimates for Hinsdale
Financial (prepared by Hinsdale Financial management) and Liberty Bancorp
(prepared by Liberty Bancorp management), Baird compared the earnings per
share of each company, on a stand alone basis, to the earnings per share of
the Alliance Bancorp Common Stock on a pro-forma basis assuming an Exchange
Ratio of 1.054. Estimated merger synergies and other adjustments were made
based on discussions with management of Liberty Bancorp and Hinsdale
Financial. Assumptions and analysis regarding the economic environment and
assumptions regarding identifiable trends, including regulatory trends, in the
financial services business were also made to assess the pro-forma combined
institution. Baird noted earnings per share accretion for both Hinsdale
Financial and Liberty Bancorp as a consequence of the Merger. Baird also noted
book value and tangible book value accretion to Hinsdale Financial and book
value and tangible book value dilution to Liberty Bancorp as a consequence of
this transaction. As Baird's analysis is dependent on certain economic
assumptions and on estimates provided by management of Hinsdale Financial and
Liberty Bancorp and on assumptions regarding trends in the financial services
business, actual results may vary from Baird's analysis due to actual
deviation from these assumptions.
Contribution Analysis. Baird analyzed Hinsdale Financial's and Liberty
Bancorp's relative contribution to the combined company resulting from the
Merger with respect to assets, deposits, historical income, market
capitalization and tangible equity. As a result of the Merger, and assuming an
Exchange Ratio of 1.054, Hinsdale Financial stockholders will own
approximately 50.7% of the outstanding Alliance Bancorp Common Stock, which
compares to Hinsdale Financial's contribution of 50.4% of assets, 47.8% of
deposits, 54.3% of historical income, 51.1% of market capitalization and 45.7%
of tangible equity.
Discounted Dividend Analysis. Using financial estimates for Hinsdale
Financial provided by management of Hinsdale Financial and using financial
estimates for Alliance Bancorp, Baird estimated the future dividend payments
which could be made to holders of Hinsdale Financial stock and Alliance
Bancorp stock assuming the maintenance of certain capital levels over a 10-
year period. Baird calculated terminal values as a perpetuity with a growth
rate ranging from 4.0% to 6.0%. Baird used a range of discount rates based on
cost of equity calculations involving Hinsdale Financial's beta as calculated
by Bloomberg Financial and on cost of equity
35
<PAGE>
calculations involving an estimated beta for Alliance Bancorp. Over the range
of resulting terminal annuity values and discount rates, Baird calculated
present values for Hinsdale Financial ranging from $17.08 per share to $20.77
per share and present value for Alliance Bancorp ranging from $19.77 to $26.91
per share.
The foregoing summary does not purport to be a complete description of the
analyses performed by Baird or of its presentations to the Hinsdale Financial
Board. The preparation of financial analyses and a fairness opinion is a
complex process and is not necessarily susceptible to partial analyses or
summary description. Baird believes that its analyses (and the summary set
forth above) must be considered as a whole, and that selecting portions of
such analyses and the factors considered by Baird, without considering all of
such analyses and factors, could create an incomplete view of the processes
underlying the analyses conducted by Baird and its opinion. Baird did not
attempt to assign specific weights to particular analyses. In performing its
analyses, Baird made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many
of which are beyond the control of Hinsdale Financial. The analyses do not
purport to be appraisals or to reflect the prices at which a company might
actually be sold or the prices at which any securities may trade at the
present time or at any time in the future. Any estimates contained in Baird's
analyses are not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Such analyses were prepared solely as part of Baird's analysis
of the fairness to the holders of the outstanding shares of Hinsdale Financial
Common Stock of the Exchange Ratio from a financial point of view and are
provided to Hinsdale Financial's Board in connection with the delivery of the
Opinion. Because such estimates are inherently subject to uncertainty, Baird
does not assume responsibility for their accuracy.
Baird, as part of its investment banking business, is continually engaged in
the evaluation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements, and
valuations for estate, corporate and other purposes. Hinsdale Financial
retained Baird because of its experience and expertise in the valuation of
businesses and their securities in connection with mergers and acquisitions.
In the ordinary course of business, Baird may from time to time trade equity
securities of Hinsdale Financial and Liberty Bancorp for its own account and
for accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities.
Compensation. Hinsdale Financial has agreed to pay Baird $100,000 as a
Fairness Opinion Fee. If the Merger is consummated, Hinsdale Financial will
pay Baird a Transaction Fee of $200,000. Baird also is to receive
reimbursement for its out of pocket expenses related to this transaction.
Additionally, Hinsdale Financial has agreed to indemnify Baird against certain
liabilities, including liabilities under the federal securities laws, incurred
in connection with the engagement of Baird by Hinsdale Financial. Baird makes
a market in Hinsdale Financial Common Stock.
OPINIONS OF LIBERTY BANCORP'S FINANCIAL ADVISORS
On August 2, 1996, Chicago Capital and Morgan Keegan delivered to the Board
of Directors of Liberty Bancorp their oral opinions, confirmed by their
written opinions as of the date of this Joint Proxy Statement/Prospectus, that
as of the dates of such opinion and based on the matters stated therein, the
Exchange Ratio is fair, from a financial point of view, to the holders of
Liberty Bancorp Common Stock. THE FULL TEXT OF THE OPINIONS OF CHICAGO CAPITAL
AND MORGAN KEEGAN DATED THE DATE HEREOF, WHICH SET FORTH ASSUMPTIONS MADE,
MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN BY CHICAGO CAPITAL AND
MORGAN KEEGAN, ARE ATTACHED HERETO AS APPENDIX IV AND APPENDIX V,
RESPECTIVELY. THESE OPINIONS ARE SUBSTANTIALLY IDENTICAL TO THE OPINIONS
RENDERED ON AUGUST 2, 1996, AND STOCKHOLDERS OF LIBERTY BANCORP ARE URGED TO
READ THESE OPINIONS IN THEIR ENTIRETY. THE OPINIONS OF CHICAGO CAPITAL AND
MORGAN KEEGAN ARE DIRECTED ONLY TO THE EXCHANGE RATIO IN THE MERGER AND DO NOT
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF LIBERTY BANCORP AS TO HOW
SUCH STOCKHOLDER SHOULD VOTE AT THE LIBERTY BANCORP SPECIAL MEETING. THE
SUMMARY OF THE OPINIONS OF CHICAGO CAPITAL AND
36
<PAGE>
MORGAN KEEGAN SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS ARE QUALIFIED
IN THEIR ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINIONS AND
STOCKHOLDERS ARE URGED TO READ SUCH OPINIONS IN THEIR ENTIRETY.
Chicago Capital Opinion
In connection with its opinion dated the date hereof, Chicago Capital
reviewed, among other things: (i) a draft of the Merger Agreement that was
subsequently signed on August 2, 1996 in substantially similar form to the
draft with no material changes; (ii) Annual Report on Form 10-K and related
financial information for the three fiscal years ended December 31, 1995 of
Liberty Bancorp and those for the three fiscal years ended September 30, 1995
of Hinsdale Financial; (iii) certain Quarterly Reports on Form 10-Q and
certain interim financial data of Liberty Bancorp and Hinsdale Financial; (iv)
certain other financial and operating data concerning Liberty Bancorp and
Hinsdale Financial provided by their managements, including certain internal
financial analyses and forecasts of future prospects for Liberty Bancorp and
Hinsdale Financial, as furnished to Chicago Capital by the senior managements
of or representatives for the companies; (v) certain publicly available
information concerning historical market price and trading data for Liberty
Bancorp and Hinsdale Financial Common Stock; (vi) the financial performance
and conditions of Liberty Bancorp and Hinsdale Financial and similar data for
other financial institutions which Chicago Capital believed to be relevant;
(vii) the nature and financial terms of the Merger contemplated by the Merger
Agreement and, to the extent publicly available, the nature and financial
terms of other similar transactions, which Chicago Capital considered to be
relevant; (viii) the anticipated pro forma effects of the Merger on Liberty
Bancorp's earnings, book value per share, and dividends; (ix) the relative
contributions of Liberty Bancorp and Hinsdale Financial to the combined
company, including market capitalization, last 12 months earnings, estimated
1996 and 1997 calendar year earnings, shareholders' equity, tangible
shareholders' equity, deposits, and assets; and (x) such other matters as
Chicago Capital deemed appropriate. Chicago Capital also met with certain
senior officers of Liberty Bancorp and Hinsdale Financial, separately and on a
combined basis to discuss the foregoing as well as other matters relevant to
Chicago Capital's opinion including the past and current business operations,
financial conditions and future prospects of Liberty Bancorp and Hinsdale
Financial. Chicago Capital also considered such additional financial and other
factors as it deemed relevant, including its assessment of economic, market
and financial conditions, its experience in similar transactions, its
experience in securities valuations and its knowledge of the commercial
banking and thrift industries in general.
In conducting its review and preparing its opinions, in accordance with its
engagement with Liberty Bancorp, Chicago Capital relied upon the accuracy and
completeness of the financial and other information provided to it or as
publicly available and did not independently verify any such information.
Chicago Capital relied upon the managements of Liberty Bancorp and Hinsdale
Financial and their representatives as to the reasonableness and achievability
of the financial and operating forecasts (and their assumptions and bases)
provided to Chicago Capital and assumed that such forecasts, including,
without limitation, projected cost savings and operating synergies anticipated
to result from the Merger, reflected the best currently available estimates
and judgments of Liberty Bancorp and Hinsdale Financial. In accordance with
its engagement with Liberty Bancorp, Chicago Capital assumed, without
independent verification, that the aggregate allowances for loan losses at
Liberty Bancorp and Hinsdale Financial were adequate to cover such losses.
Chicago Capital did not inspect any properties, assets or liabilities of
Liberty Bancorp or Hinsdale Financial and did not make or obtain any
evaluations or appraisals of any properties, assets or liabilities of Liberty
Bancorp or Hinsdale Financial.
Chicago Capital's opinions relate solely to the fairness of the Exchange
Ratio from a financial point of view and do not constitute a recommendation to
any Liberty Bancorp stockholder as to how such stockholder should vote at the
Liberty Bancorp Special Meeting.
The following is a brief summary of the analyses performed by Chicago
Capital in connection with its opinions and does not purport to be a complete
explanation of all analyses undertaken. The description summarizes the
material analyses and factors considered by Chicago Capital in rendering its
opinions.
37
<PAGE>
Historical Stock Data Analysis. Chicago Capital analyzed the stock price and
volume data for Liberty Bancorp and Hinsdale Financial to determine the degree
of liquidity in each stock, and the reliability of the stock prices used as a
basis for analyzing the market-to-market exchange ratio. Chicago Capital
reviewed stock price and trading volume data for Liberty Bancorp and Hinsdale
Financial since December 31, 1993. Chicago Capital also analyzed certain
trading volume data for Liberty Bancorp and Hinsdale Financial for such
periods, showing certain trading characteristics for both companies.
Contribution Analysis. Chicago Capital analyzed the relative contributions
of Liberty Bancorp and Hinsdale Financial to Alliance Bancorp as well as
contributions based upon certain projected 1996 and 1997 income data to
determine the relevant percentage of the combined company contributed by each
of the combining companies in order to assist in determining the
appropriateness of the combination as a merger-of-equals and to serve as a
basis of analyzing an exchange ratio that would recognize and balance the
contributions. Chicago Capital analyzed certain historical balance sheet,
income statement and ratio data for Liberty Bancorp for the fiscal year ended
December 31, 1995 and six months ended June 30, 1996, and for Hinsdale
Financial for the fiscal year ended September 30, 1995 and nine months ended
June 30, 1996, respectively. Chicago Capital also analyzed the projected 1996
and 1997 calendar year net income data prepared by the managements of Liberty
Bancorp and Hinsdale Financial, as well as fiscal year 1996 and 1997 earnings
estimates for Liberty Bancorp and Hinsdale Financial published by certain
brokerage firms. In addition, Chicago Capital took into consideration the
market value contributions of Liberty Bancorp and Hinsdale Financial to the
combined entity. The analysis showed that, among other things, for the twelve
months ended June 30, 1996, Liberty Bancorp and Hinsdale Financial would have
contributed approximately 45.7% and 54.3%, respectively, of pro forma combined
net income to common stockholders (as reported); for calendar 1996, Liberty
Bancorp was projected to contribute 48.2% of pro forma combined net income; at
August 1, 1996, Liberty Bancorp would have contributed 48.5% of pro forma
market capitalization; and at June 30, 1996, Liberty Bancorp would have
contributed 54.3% of pro forma tangible net worth, 53.6% of pro forma net
worth, 52.2% of pro forma deposits, and 49.6% of pro forma total assets,
respectively. At the Exchange Ratio of one share of Liberty Bancorp Common
Stock for 1.054 shares of Alliance Bancorp Common Stock, the holders of
outstanding Liberty Bancorp Common Stock would own approximately 49.3% of
Alliance Bancorp.
Analysis of Mergers-of-Equals Transactions. Recent mergers-of-equals
transactions were reviewed to determine if the proposed Merger was
commensurate with the patterns of other mergers-of-equals in terms of the
balancing of exchange factors, management factors, merger currencies and
accounting treatment of the combination in order to assist in determining that
the transaction is properly characterized as a merger-of-equals. Further,
price to book value, price to tangible book value, price to earnings and
premium to deposit multiples from these comparative groups were analyzed to
evaluate the Merger. In analyzing mergers-of-equals transactions for bank and
thrift holding companies since January 1, 1994 for which public data is
available, Chicago Capital considered 25 mergers-of-equals transactions to be
relevant comparables and analyzed them based on the factors described above.
Chicago Capital's review indicated that the general pattern of mergers-of-
equals in these transactions was commensurate with that in the Merger and that
the Merger could appropriately be regarded as a merger-of-equals. From this
group of merger-of-equals transactions, the average price to book ratio was
101.23%; price to tangible book value ratio was 110.62%; price to last twelve
months earnings multiple was 9.4x; and premium to core deposits was 3.69%.
Comparable Companies Analysis. The comparable companies analysis was
performed to assist in determining how each of the companies performed with
respect to similar companies in the region and to determine if their operating
philosophy and performance appeared to be consistent with the trends for other
institutions in the region and the region's general economy. The market
performance of the peer group was used to determine certain trading
characteristics for similar companies in the region to assist in determining
how the market valued each of the companies relative to others in the region.
Chicago Capital compared the operating performance of Liberty Bancorp and
Hinsdale Financial to regional publicly traded thrift institutions that
Chicago Capital deemed comparable ("Peer Group"). This group included certain
midwest thrifts with assets between $500 million and $1.25 billion. The Peer
Group consisted of 21 institutions. This analysis showed that, among
38
<PAGE>
other things, based on the latest financial data, using market prices as of
August 1, 1996, the price to book ratio for Liberty Bancorp was 91.9%, for
Hinsdale Financial was 112.75%, and for the Peer Group averaged 115.2% with a
median of 115.8%; the price to tangible book ratio for Liberty Bancorp was
92.16%, for Hinsdale Financial was 116.2% and for the Peer Group averaged
121.3% with a median of 120.9%; and the price to earnings multiple for Liberty
Bancorp was 17.9x, for Hinsdale Financial was 15.0x, and for the Peer Group
averaged 13.6x with a median of 13.1x. Based on the latest financial
information, the tangible equity to tangible asset ratio for Liberty Bancorp
was 9.81%, for Hinsdale Financial was 8.15%, and for the Peer Group averaged
10.59%. The return on average assets for Liberty Bancorp was 0.55%, for
Hinsdale Financial was 0.63%, and for the Peer Group averaged 0.97%; the
return on average equity for Liberty Bancorp was 5.61%, for Hinsdale Financial
was 8.17%, and for the Peer Group averaged 9.50%. Finally, the ratio of non-
performing assets to total assets for Liberty Bancorp was 0.06%, for Hinsdale
Financial was 0.13%, and for the Peer Group averaged 0.74%.
Pro Forma Analysis. The pro forma projections prepared by the management of
Liberty Bancorp and Hinsdale Financial were used to determine the benefits of
the Merger to the combined company's earnings and the changes in the combined
company's book value relative to Liberty Bancorp's projected performance
without the Merger. This analysis served as one of the bases for assisting in
estimating the potential market performance of the combined company relative
to Liberty Bancorp on a stand-alone basis. Chicago Capital analyzed certain
historical balance sheet, income statement and ratio data, as well as certain
projected data prepared by managements of Liberty Bancorp and Hinsdale
Financial, for the companies on a pro forma combined basis at and for the
projected year ending December 31, 1996. The analysis showed, among other
things, using managements' estimates of cost savings and other synergies
anticipated to result from the Merger, the pro forma combined company's
projected 1996 fully-diluted earnings per share (assuming the cost savings
associated with the Merger were in place for the full year) would be accretive
as compared to Liberty Bancorp's stand-alone projected fully-diluted earnings
per share. The analysis further indicated that the Merger would be dilutive to
Liberty Bancorp's stand-alone fully-diluted book value per share. Chicago
Capital further noted that Alliance Bancorp's anticipated dividend per share
would be higher than Liberty Bancorp's stand-alone dividend for the year
ending December 31, 1996.
Discounted Cash Flow Analysis. The discounted cash flow analysis was
performed, within the limitations noted below, to compare the net present
value of projected future performance with the current levels of performance
for Liberty Bancorp. Chicago Capital prepared a discounted cash flow analysis
to estimate the net present value of the estimated future value of Liberty
Bancorp based on a range of terminal price/earnings ratios between 10.0x and
12.5x and discount rates between 10.0% and 15.0%. That range of values was
based upon future dividend estimates and a range of projected earnings for the
next five years. The results of this analysis indicated a range of net present
values of estimated future performance of Liberty Bancorp Common Stock between
$20.34 per share and $27.83 per share.
The ranges of the multiples used in the discounted cash flow analysis were
chosen by Chicago Capital based on certain historical and current market
averages or trading ratios. The discounted cash flow analysis does not purport
to be indicative of actual values or expected values of the shares of Liberty
Bancorp Common Stock before or after the Merger. Chicago Capital noted that
the discount cash flow analysis was included because it is a widely used
methodology to estimate value, but also noted that this methodology
necessarily relies upon numerous assumptions, including earnings growth rates,
dividend payout ratios, terminal values, and discount rates. Changes in any
one of the assumptions could have a significant effect on the results of the
analysis; therefore its usefulness in analyzing a merger-of-equals transaction
is limited.
In connection with rendering its opinions to the Liberty Bancorp Board,
Chicago Capital performed a variety of financial analyses as summarized above.
The summary of Chicago Capital's analyses is not a complete description.
Because the preparation of a fairness opinion is a complex process involving
subjective judgments and quantitative analyses, Chicago Capital believes that
its analyses and the summary set forth herein must be considered as a whole
and that selecting portions of such analyses and the factors considered
therein, without
39
<PAGE>
considering all factors and analyses, creates an incomplete view of the
analyses and processes underlying Chicago Capital's opinion. In its analyses,
Chicago Capital made numerous assumptions with respect to industry
performance, business and economic conditions, and other matters, many of
which are beyond the control of Liberty Bancorp and Hinsdale Financial. Any
estimates used in Chicago Capital's analyses are not necessarily indicative of
actual future values or results, which may be significantly more or less
favorable than that suggested by such estimates. Estimates of values are not
appraisals and may not necessarily reflect the prices at which companies or
their securities may be sold. No company or previous transaction used in
Chicago Capital's analyses was identical to Liberty Bancorp or Hinsdale
Financial or the Merger. Accordingly, such analyses are not based solely upon
arithmetic calculations, but involve complex considerations and judgments
concerning the differences in financial operating characteristics of the
companies and transactions, and other factors that could affect the companies
concerned. None of the analyses performed by Chicago Capital was assigned a
greater significance by Chicago Capital than any other.
In connection with its opinion dated as of the date of this Joint Proxy
Statement/Prospectus, Chicago Capital confirmed the appropriateness of its
reliance on the analysis done in connection with its oral opinion rendered on
August 2, 1996 by performing procedures to update certain of such analyses and
by reviewing the assumptions on which such analyses were based and the factors
considered in connection therewith. In addition, Chicago Capital reviewed
Liberty Bancorp's and Hinsdale Financial's quarterly financial reports for the
quarter ended June 30, 1996.
Chicago Capital and Liberty Bancorp executed a letter of engagement dated
May 28, 1996 relating to the financial advisory services to be provided by
Chicago Capital in connection with the Merger. Pursuant to the terms of such
engagement, Liberty Bancorp agreed to pay Chicago Capital fees as follows:
$55,000 upon the signing of the letter of engagement and $55,000 upon the
delivery of its opinion, all of which fees have been paid. Liberty Bancorp
also agreed to reimburse Chicago Capital for its reasonable and necessary out-
of-pocket expenses and to indemnify Chicago Capital against certain
liabilities, including liabilities under the federal securities laws.
Morgan Keegan Opinion
In arriving at its opinion, Morgan Keegan reviewed a draft of the Merger
Agreement that was subsequently signed on August 2, 1996 in substantially
similar form to the draft and without material changes and held discussions
with certain senior officers, directors and other representatives and advisors
of Liberty Bancorp and certain senior officers and other representatives and
advisors of Hinsdale Financial concerning the businesses, operations and
prospects of Liberty Bancorp and Hinsdale Financial. Morgan Keegan examined
certain publicly available business and financial information relating to
Liberty Bancorp and Hinsdale Financial as well as certain financial forecasts
and other data for Liberty Bancorp and Hinsdale Financial which were provided
to Morgan Keegan by or otherwise discussed with the respective managements of
Liberty Bancorp and Hinsdale Financial, including information relating to
certain strategic implications and operational benefits anticipated from the
Merger. Morgan Keegan reviewed the financial terms of the Merger as set forth
in the Merger Agreement in relation to, among other things: current and
historical market prices and trading volumes of Liberty Bancorp Common Stock
and Hinsdale Financial Common Stock; the historical and projected earnings and
operating data of Liberty Bancorp and Hinsdale Financial; and the
capitalization and financial condition of Liberty Bancorp and Hinsdale
Financial. Morgan Keegan considered, to the extent publicly available, the
financial terms of certain other similar transactions recently effected which
Morgan Keegan considered relevant in evaluating the Merger and analyzed
certain financial, stock market and other publicly available information
relating to the businesses of other companies whose businesses Morgan Keegan
considered relevant in evaluating those of Liberty Bancorp and Hinsdale
Financial. Morgan Keegan also considered the potential pro forma financial
impact of the Merger on Liberty Bancorp stockholders and the relative
contributions of Liberty Bancorp and Hinsdale Financial to the combined
company. In addition to the foregoing, Morgan Keegan conducted such other
analyses and examinations and considered such other financial, economic and
market criteria as Morgan Keegan deemed appropriate to arrive at its opinion.
Morgan Keegan noted that its opinion was necessarily based upon information
40
<PAGE>
available, and financial, stock market and other conditions and circumstances
existing and disclosed, to Morgan Keegan as of the date of its opinion.
In conducting its review and rendering its opinion, Morgan Keegan assumed
and relied, without independent verification, upon the accuracy and
completeness of all financial and other information publicly available or
furnished to or otherwise reviewed by or discussed with Morgan Keegan. With
respect to financial forecasts and other information provided to or otherwise
reviewed by or discussed with Morgan Keegan, the managements of Liberty
Bancorp and Hinsdale Financial advised Morgan Keegan that such forecasts and
other information were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the respective managements of
Liberty Bancorp and Hinsdale Financial as to the future financial performance
of Liberty Bancorp and Hinsdale Financial and the strategic implications and
operational benefits anticipated from the Merger. Morgan Keegan assumed, with
the consent of the Board of Directors of Liberty Bancorp, that the Merger will
be treated as a purchase in accordance with generally accepted accounting
principles and as a tax-free reorganization for federal income tax purposes.
Morgan Keegan did not express any opinion as to what the value of the Alliance
Bancorp Common Stock actually will be when issued pursuant to the Merger or
the price at which the Alliance Bancorp Common Stock will trade subsequent to
the Merger. In addition, Morgan Keegan did not make or obtain an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of Liberty Bancorp or Hinsdale Financial nor did Morgan Keegan make any
physical inspection of the properties or assets of Liberty Bancorp or Hinsdale
Financial. Morgan Keegan was not asked to consider, and its opinion does not
address, the relative merits of the Merger as compared to any alternative
business strategies that might exist for Liberty Bancorp or the effect of any
other transaction in which Liberty Bancorp might engage. In addition, although
Morgan Keegan evaluated the Exchange Ratio from a financial point of view,
Morgan Keegan was not asked to and did not recommend the specific
consideration payable in the Merger, which was determined by Liberty Bancorp
and Hinsdale Financial through arms-length negotiations. No other limitations
were imposed by Liberty Bancorp on Morgan Keegan with respect to the
investigations made or procedures followed by Morgan Keegan in rendering its
opinion.
The following is a summary of the financial and comparative analyses
performed by Morgan Keegan in connection with its opinion.
Contribution Analysis. Morgan Keegan reviewed certain historical and
projected future financial and operating information for Liberty Bancorp,
Hinsdale Financial and the pro forma combined entity resulting from the Merger
based on financial forecasts for Liberty Bancorp and Hinsdale Financial.
Morgan Keegan analyzed the relative balance sheet contribution of Liberty
Bancorp and Hinsdale Financial for certain data to the combined company on a
pro forma basis. This analysis indicated that Liberty Bancorp would have
contributed 49.6% of combined total assets as of June 30, 1996, an estimated
48.8% as of December 31, 1996 and an estimated 49.8% as of December 31, 1997;
44.2% of combined loans (net of allowances for losses) as of June 30, 1996, an
estimated 43.9% as of December 31, 1996 and an estimated 45.2% as of December
31, 1997; 52.2% of deposits as of June 30, 1996, an estimated 51.2% as of
December 31, 1996 and an estimated 51.3% as of December 31, 1997; 54.3% of
tangible equity as of June 30, 1996, an estimated 54.5% as of December 31,
1996 and an estimated 53.6% as of December 31, 1997. Morgan Keegan also
analyzed the relative income statement contribution of Liberty Bancorp and
Hinsdale Financial for certain data to the combined company on a pro forma
basis. This analysis indicated that Liberty Bancorp would have contributed
50.5% to combined net interest income for the latest twelve months ("LTM")
ended June 30, 1996, an estimated 47.6% for the year ending December 31, 1996
and an estimated 48.1% for the year ending December 31, 1997; 46.7% to
combined pretax income for the LTM ended June 30, 1996, an estimated 47.4% for
the year ending December 31, 1996 and an estimated 48.9% for the year ending
December 31, 1997; 45.7% to combined net income for the LTM ended June 30,
1996, an estimated 48.2% for the year ending December 31, 1996 and an
estimated 49.7% for the year ending December 31, 1997. At the exchange ratio
of one share of Liberty Bancorp Common Stock for 1.054 shares of Alliance
Bancorp Common Stock, the holders of outstanding Liberty Bancorp Common Stock
would own approximately 49.3% of Alliance Bancorp.
41
<PAGE>
Comparable Company Analysis. Morgan Keegan reviewed and compared certain
financial information relating to Liberty Bancorp and Hinsdale Financial to
corresponding financial information, public market multiples and ratios for
seven publicly traded companies that it deemed to be comparable to Liberty
Bancorp and Hinsdale Financial. The companies which Morgan Keegan used for
purposes of this analysis were Avondale Financial Corporation, Calumet
Bancorp, Inc., Fidelity Bancorp, Inc., FirstFed Bancshares, Inc., HomeCorp,
Inc., St. Paul Bancorp, Inc. and Standard Financial, Inc. (collectively, the
"Comparable Companies"). Morgan Keegan calculated a range of market multiples
for the Comparable Companies by dividing market value as of July 31, 1996 by
each such company's LTM earnings per share ("EPS"), calendar 1996 and 1997
("1996" and "1997") estimated EPS, latest reported tangible book value and
premium to core deposits. This analysis indicated that the price per
share/earnings multiples ("P/E") for LTM EPS ranged from 11.9x to 17.7x, with
a mean of 14.7x and a median of 15.1x, estimated 1996 EPS ranged from 11.5x to
20.4x, with a mean of 14.8x and a median of 14.6x, and estimated 1997 EPS
ranged from 10.3x to 22.0x, with a mean of 14.2x and a median of 12.4x,
compared to 17.9x, 15.6x and 14.2x, respectively, for Liberty Bancorp. As of
the latest reported balance sheet, Morgan Keegan's analyses of the Comparable
Companies indicated market value multiples of tangible book value that ranged
from .81x to 1.16x, with a mean of .98x and a median of .96x, compared to .92x
for Liberty Bancorp and premium to core deposits which ranged from (3.9)% to
2.6%, with a mean of (0.4)% and a median of (0.1)%, compared to (0.2)% for
Liberty Bancorp. For the LTM results, Morgan Keegan also compared certain
ratios (including, among other things, return on average assets; return on
average equity; and net interest margin) of the Comparable Companies to
Liberty Bancorp. The analysis indicated a return on average assets range of
0.40% to 1.31%, with a mean of 0.75% and a median of 0.69%, return on average
equity range of 5.68% to 9.81%, with a mean of 7.05% and a median of 6.49% and
net interest margin range of 2.23% to 3.72%, with a mean of 3.01% and a median
of 3.06% compared to 0.55%, 5.61% and 2.63%, respectively, for Liberty
Bancorp.
Analysis of Selected Comparable Mergers and Acquisitions. In order to assess
market pricing for comparable mergers, Morgan Keegan reviewed overall mergers
of equals transactions in the bank and thrift industries, concentrating on the
transactions involving thrifts. Morgan Keegan selected thrift transactions
occurring between January 1990 and August 1996 with publicly available
financial information to analyze on the basis of the purchase prices and
multiples paid. No transaction was considered identical to the Merger;
therefore, the medians of the overall transaction multiples were considered
more relevant than the multiples for the thrift transactions for any specific
transaction. Morgan Keegan calculated market value multiples of LTM net income
ranging from 7.4x to 13.1x, with a mean of 10.6x and a median of 10.5x, latest
reported tangible book value ranging from 0.82x to 1.30x, with a mean of 1.03x
and a median of 1.05x, and premium to core deposits range of (1.5)% to 8.5%,
with a mean of 1.4% and a median of 0.4%.
No company or transaction used in the comparable companies and comparable
transactions analyses for comparative purposes is identical to Liberty
Bancorp, Hinsdale Financial or the Merger. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors. Mathematical analysis (such as determining
the average or median) is not, in itself, a meaningful method of using
comparable company or transaction data.
Discounted Cash Flow Analysis. Morgan Keegan performed a discounted cash
flow analysis of the projected cash flow available for dividends of Liberty
Bancorp for fiscal years 1996 through 2000, based on projections provided by
Liberty Bancorp management. Using this information, Morgan Keegan calculated a
range of equity values for Liberty Bancorp based on the sum of (i) the present
value of the cash flow available for dividends of Liberty Bancorp and (ii) the
present value of the estimated terminal value for Liberty Bancorp assuming
that it was sold at the end of fiscal year 2000. In performing its discounted
cash flow analysis, Morgan Keegan assumed, among other things, discount rates
of 10% to 15% and terminal multiples of net income of 10.0x to 12.0x. Those
discount rates and terminal multiples reflect Morgan Keegan's qualitative
judgments concerning the specific risk associated with such an investment and
the historical and projected operating performance of Liberty Bancorp. This
analysis resulted in a range of equity values for Liberty Bancorp of $54.0
million to $70.3 million, or $20.38 to $26.50 per share.
42
<PAGE>
Pro Forma Merger Analysis. Morgan Keegan prepared pro forma analyses of the
financial impact of the Merger. Using projections for Liberty Bancorp and
Hinsdale Financial for the years 1996 and 1997, Morgan Keegan compared the EPS
of Liberty Bancorp common stock, on a stand alone basis, to the EPS of the
Alliance common stock to be received pursuant to the Merger. Based on this
analysis, the proposed transaction would be accretive to Liberty Bancorp
shareholders in 1996 and 1997 on a per share basis.
The summary set forth above does not purport to be a complete description of
the presentation by Morgan Keegan to Liberty Bancorp's Board of Directors or
of the analyses performed by Morgan Keegan. The preparation of a fairness
opinion is not necessarily susceptible to partial analysis or summary
description. Morgan Keegan believes that its analyses and the summary set
forth above must be considered as a whole and that selecting portions of its
analyses, without considering all analyses, or of the above summary, without
considering all factors and analyses, would create an incomplete view of the
process underlying the analyses set forth in Morgan Keegan's opinion. In
addition, Morgan Keegan may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting
from any particular analysis described above should not be taken to represent
the actual value of Liberty Bancorp or the combined company.
In performing its analyses, Morgan Keegan made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Liberty Bancorp or
Hinsdale Financial. The analyses performed by Morgan Keegan are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of Morgan Keegan's analysis of the
fairness, from a financial point of view, of the Exchange Ratio and were
discussed with Liberty Bancorp's Board of Directors at its August 2, 1996
meeting. The analyses do not purport to be appraisals or to reflect the prices
at which a company might actually be sold or the prices at which any
securities may trade at the present time or at any time in the future. In
addition, as described above, Morgan Keegan's presentation to Liberty
Bancorp's Board of Directors and its opinion was one of many factors taken
into consideration by the Board in making its determination to approve the
Plan of Merger and the Merger Agreement.
In connection with its opinion dated as of the date of this Joint Proxy
Statement/Prospectus, Morgan Keegan confirmed the appropriateness of its
reliance on its analyses prepared in connection with its oral opinion of
August 2, 1996 by updating certain such analyses and reviewing the assumptions
on which such analyses were based and the factors considered in connection
therewith.
Liberty Bancorp has agreed to pay Morgan Keegan a fee of $65,000 for its
services pursuant to an engagement letter. No portion of Morgan Keegan's fee
is contingent upon the closing of the transaction. Liberty Bancorp also has
agreed to reimburse Morgan Keegan for its reasonable out-of-pocket expenses
and to indemnify Morgan Keegan against certain liabilities, including
liabilities under the federal securities laws.
EFFECTIVE TIME AND CLOSING DATE
The Merger shall become effective at the time and on the date of the filing
of a certificate of merger with the Secretary of State of Delaware (the
"Effective Time"). Such filing will occur only after the receipt of all
requisite regulatory approvals, the approval of the Merger Agreement by the
requisite vote of Hinsdale Financial's and Liberty Bancorp's respective
stockholders and the satisfaction or waiver of all other conditions to the
Merger. The closing of the Merger shall occur within 30 days after the
satisfaction or waiver of all conditions and obligations precedent of Hinsdale
Financial and Liberty Bancorp to consummate the Merger, or at another time
agreed to by Hinsdale Financial and Liberty Bancorp (the "Closing Date").
NO APPRAISAL RIGHTS
Stockholders of Hinsdale Financial and Liberty Bancorp will have no
appraisal rights under the DGCL in connection with the Merger.
43
<PAGE>
FRACTIONAL SHARES
No certificates or scrip representing fractional shares of Alliance Bancorp
Common Stock will be issued upon the surrender for exchange of certificates
representing Liberty Bancorp Common Stock, no dividend or distribution of
Alliance Bancorp will relate to any fractional shares, and such fractional
share interests will not entitle the owner thereof to vote or to any rights of
a stockholder of Alliance Bancorp. Each stockholder of Liberty Bancorp who
would be entitled to a fractional share in the Merger will receive a cash
payment (without interest) determined by multiplying (i) the closing price of
one share of Hinsdale Financial Common Stock as reported on the Nasdaq
National Market on the trading day immediately preceding the Effective Time by
(ii) the fractional share interest to which the holder would otherwise be
entitled pursuant to the terms of the Merger Agreement.
EXCHANGE OF CERTIFICATES
As soon as practicable after the Effective Time, an exchange agent
designated by Hinsdale Financial and Liberty Bancorp (the "Exchange Agent")
will deliver to each Liberty Bancorp holder of record of a certificate or
certificates, which immediately prior to the Effective Time represented
outstanding shares of Liberty Bancorp Common Stock (the "Certificates"), a
transmittal letter and instructions to be used in surrendering Certificates in
exchange for (i) certificates representing the number of shares of Alliance
Bancorp Common Stock into which their shares of Liberty Bancorp Common Stock
were converted pursuant to the Merger Agreement, and (ii) a check representing
the amount of cash in lieu of fractional shares, if any, which such
stockholder has the right to receive in respect of the Certificates
surrendered in connection with the Merger. No interest will be paid or accrued
on the cash in lieu of fractional shares payable to holders of Liberty Bancorp
Common Stock.
LIBERTY BANCORP STOCKHOLDERS SHOULD NOT FORWARD THEIR LIBERTY BANCORP STOCK
CERTIFICATES UNTIL THEY RECEIVE THE TRANSMITTAL LETTER AND INSTRUCTIONS.
Until such surrender and subject to the effect, if any, of applicable law,
the Certificates will as of the Effective Time represent ownership of the
number of shares of Alliance Bancorp Common Stock into which such shares were
converted in the Merger, and the holders will be entitled to all rights and
privileges of holders of Alliance Bancorp Common Stock, except that holders of
Certificates will not be entitled to receive dividends or any other
distributions declared by Alliance Bancorp until the Certificates are so
surrendered. Following surrender of the Certificates in accordance with the
terms of the Merger Agreement, the holders of newly issued Alliance Bancorp
Certificates will be paid, without interest, any dividends or other
distributions with respect to the shares of Alliance Bancorp Common Stock the
record date for which is after the Effective Time (less any taxes that may
have been imposed thereon).
Any Certificate representing shares of Alliance Bancorp Common Stock to be
issued in a name other than that in which the Certificate is registered must
be properly endorsed and otherwise in proper form for transfer, and the holder
requesting such exchange must pay to the Exchange Agent in advance any
transfer or other taxes in connection therewith.
In the event any Certificate has been lost, stolen or destroyed, upon the
mailing of an affidavit of that fact by the holder of such Certificate and the
posting of any bond required by Alliance Bancorp or the Exchange Agent,
Alliance Bancorp or the Exchange Agent will issue for such lost, stolen or
destroyed Certificate, the shares of Alliance Bancorp Common Stock and deliver
cash due to the holder of such Certificate under the terms of the Merger
Agreement.
After the Effective Time, there will be no further transfers on the records
of Liberty Bancorp of the Certificates, and, if such Certificates are
presented to Alliance Bancorp for transfer, they will be canceled against
delivery of certificates for Alliance Bancorp Common Stock.
44
<PAGE>
After the Effective Time, holders of unsurrendered Certificates shall be
entitled to vote at any meeting of Alliance Bancorp stockholders at which
holders of Alliance Bancorp Common Stock are eligible to vote, regardless of
whether such holders have exchanged their Certificates.
CERTIFICATES FOR SHARES OF HINSDALE FINANCIAL COMMON STOCK WILL
AUTOMATICALLY, AND WITHOUT ANY ACTION ON THE PART OF ANY HINSDALE FINANCIAL
STOCKHOLDER, REPRESENT AN EQUAL NUMBER OF SHARES OF ALLIANCE BANCORP.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Set forth below are descriptions of interests of directors and executive
officers of Liberty Bancorp and Hinsdale Financial in the Merger in addition
to their interests as stockholders of Liberty Bancorp and Hinsdale Financial
generally. The respective Liberty Bancorp and Hinsdale Financial Boards were
aware of these interests and considered them in approving the Merger Agreement
and the transactions contemplated thereby.
Upon the consummation of the Merger, Fredric G. Novy is to serve as Chairman
of the Board of Directors of Alliance Bancorp and Liberty Federal Bank, Kenne
P. Bristol is to serve as President and Chief Executive Officer of Alliance
Bancorp and Liberty Federal Bank, William R. Rybak, currently Chairman of the
Board of Hinsdale Financial, will serve as Chairman of the Executive Committee
of Alliance Bancorp, and Edward J. Burns, currently Chairman of the Board of
Liberty Bancorp, will serve as Vice-Chairman of the Executive Committee of
Alliance Bancorp.
The existing employment agreements and/or special termination agreements
(the "Employment Agreements") that Hinsdale Financial and Liberty Bancorp have
entered into with their officers and employees will be honored by Alliance
Bancorp and Liberty Federal Bank, subject to any adjustment in title as
contemplated in the Merger Agreement. It is a condition to Closing that
officers covered by Employment Agreements will enter into supplemental
agreements stipulating that neither the execution of the Merger Agreement, nor
the consummation of the transactions contemplated thereby (including any
adjustments to title as contemplated by the Merger Agreement), shall
constitute a change of control thereunder. Accordingly, no officer of Hinsdale
Financial or Liberty Bancorp is expected to receive payments or other benefits
as a result of the Merger. The Merger Agreement also provides that following
the Merger, Alliance Bancorp will adopt an option plan allowing for the grant
of options for up to 300,000 shares of Alliance Bancorp Common Stock.
For additional information, see below and Sections 3.10, 6.4 and 6.5 of the
Merger Agreement attached hereto in Appendix I.
Indemnification; Insurance. Pursuant to the Merger Agreement, Hinsdale
Financial has agreed that from and after the Effective Time, it will
indemnify, defend and hold harmless each person who is, has been or becomes
prior to the Effective Time, an officer, director or employee of Liberty
Bancorp or any of their respective Subsidiaries (as defined in the Merger
Agreement) (the "Indemnified Parties") against all losses, claims, damages,
liabilities, costs, expenses (including attorney's fees and expenses in
advance of the final disposition of any such claim to each Indemnified Party
to the fullest extent permitted by applicable law upon receipt of any
undertaking required by applicable law), judgments and amounts that are paid
in settlement of or in connection with any threatened or actual claim, action,
suit, proceeding or investigation (each a "Claim"), based in whole or in part
on, or arising in whole or in part out of, or pertaining to (i) the fact that
such person is or was a director, officer or employee of Hinsdale Financial or
Liberty Bancorp or any of their Subsidiaries or (ii) the Merger Agreement or
any of the transactions contemplated thereby, regardless of whether such Claim
is asserted or arises before or after the Effective Time; provided, however,
that from and after the Effective Time, the Indemnified Parties who become
directors, officers or employees of Alliance Bancorp as the surviving
corporation in the Merger shall have indemnification rights only on a
prospective basis (other than with respect to the indemnification rights
provided by the Indemnification Agreements and in the Merger Agreement).
45
<PAGE>
Hinsdale Financial has further agreed, for a period of three years after the
Effective Time, to cause the persons serving as officers and directors of
Liberty Bancorp immediately prior to the Effective Time to continue to be
covered by Liberty Bancorp's current directors' and officers' liability
insurance policy (provided that Hinsdale Financial may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are substantially no less advantageous or, if such coverage
is provided through Hinsdale Financial's insurer, policies on terms and
conditions, other than coverage and amount, consistent with Hinsdale
Financial's coverage) with respect to claims arising from facts or events
occurring prior to the Effective Time which were committed by such officers
and directors in their capacity as such. Following consummation of the Merger,
directors and officers of Alliance Bancorp as the surviving corporation will
be covered by liability insurance maintained by Hinsdale Financial.
Directors and Executive Officers. For information regarding the directors
and executive officers of Alliance Bancorp after the Effective Time, see
"Management and Operations After the Merger."
EFFECT ON EMPLOYEES AND EMPLOYEE BENEFIT PLANS OF LIBERTY BANCORP AND HINSDALE
FINANCIAL
Employee Benefit Plans. To the extent permitted by applicable law, from and
after the Company Merger Effective Time the former employees of Liberty
Bancorp and its subsidiaries who are continuing employees of Alliance Bancorp
or its subsidiaries (the "Continuing Employees") shall be entitled to
participate in the Alliance Bancorp employee benefit and welfare plans and
programs (except to the extent that coverage is provided under a continuing
Liberty Bancorp plan or program) on the same basis that similarly-situated
employees of Alliance Bancorp (formerly, Hinsdale Financial) and its
subsidiaries are entitled to participate in such plans and programs including,
but not limited to tax-qualified retirement plans. For purposes of
eligibility, participation and vesting in such Alliance Bancorp plans and
programs, but not for purposes of benefit accrual, the Continuing Employees
shall receive past service credit for their full-time employment with Liberty
Bancorp and its subsidiaries. The Continuing Employees will not be subject to
any exclusion or penalty for pre-existing conditions that were covered under
the Liberty Bancorp medical plan immediately prior to the Effective Time or
any waiting period relating to coverage under the Hinsdale Financial medical
plan and they will receive full credit for prior service and payment of
current and past premiums, co-payments and deductibles. If, on or after the
date hereof, Hinsdale Financial or its subsidiaries adopts a new "employee
benefit plan" within the meaning of Employee Retirement Income Security Act of
1974, as amended ("ERISA") for the benefit of its employees generally, then to
the extent participants receive a credit for past service with Hinsdale
Financial or its subsidiaries, equivalent credit shall be given to Continuing
Employees for past service with Liberty Bancorp or its subsidiaries.
Liberty Bancorp presently maintains a post-employment medical program for
the benefit of certain of its employees who have attained age 55 and have 10
years of service with Liberty Bancorp or a Liberty Bancorp subsidiary. Liberty
Bancorp will discontinue the availability of said post-retirement medical
program for all employees or former employees who are not currently eligible
for or receiving benefits under said program, except that any employee who
would satisfy the eligibility requirements if 5 years are added to his age or
service or a combination of the two (i.e., 2 years to age and 3 years to
service) will continue to be eligible for the post-retirement medical program
upon termination of employment with Liberty Bancorp or Alliance Bancorp.
Employee Stock Ownership Plans. In connection with the Merger, the employee
stock ownership plans ("ESOPs") maintained by Hinsdale Financial and Liberty
Bancorp shall be terminated. In connection with said ESOP terminations, a
number of the unallocated shares held by each ESOP shall be sold by each ESOP,
in a manner which is intended to comply with the Internal Revenue Code and
ERISA, in order to provide sufficient proceeds to repay the outstanding ESOP
loans (which are exempt loans under Internal Revenue Code Section 4975) and
such outstanding ESOP loans shall be repaid in full as soon as reasonably
practicable. Also in connection with the termination of each ESOP, each ESOP
shall be amended in order to maximize the allocation of unallocated shares to
the existing participants in the ESOPs in a manner consistent with the
Internal Revenue Code and ERISA.
46
<PAGE>
Pension Plans. Immediately prior to or after the Merger Effective Time, the
pension plans maintained by Hinsdale Financial or Hinsdale Federal and Liberty
Bancorp or Liberty Federal Savings (the "Pension Plans") shall be terminated.
The timing of the termination of the Pension Plans shall be determined after
taking into consideration (i) the necessity of making additional contributions
to the Pension Plans in order that the Pension Plans shall have assets
sufficient to satisfy their liabilities in connection with the termination and
(ii) the annual limitations on contributions established under the Internal
Revenue Code. It is the intention of the parties that Alliance Bancorp will
implement a 401(k) profit sharing plan in place of the Pension Plans to be
terminated. At the time of termination of the Liberty Federal Savings pension
plan, the supplemental executive retirement plan maintained by Liberty Federal
Savings for the benefit of certain executives shall be frozen and shall accrue
no additional benefits.
Immediately prior to or, upon mutual consent of the parties, after the
Effective Time, the executive deferred compensation plan and deferred
compensation plan for directors (collectively, the "Deferred Compensation
Plans") maintained by Liberty Bancorp shall be frozen and no further
contributions shall be made to such Deferred Compensation Plans. The assets of
the Deferred Compensation Plans shall continue to earn interest, at the
interest rate set forth in the Deferred Compensation Plans, until paid to
participants. All employer discretionary contributions under the executive
deferred compensation plan shall be and become immediately 100% vested at the
time that said plan is frozen. The account balances attributable to the
participants in the Deferred Compensation Plans shall be amortized over a
period of one hundred twenty (120) months and shall be paid in equal monthly
installments over such period, commencing not later than sixty (60) days after
the Merger Effective Time.
REPRESENTATIONS AND WARRANTIES
In the Merger Agreement each of Liberty Bancorp and Hinsdale Financial has
made representations and warranties relating to, among other things, the
parties' respective organization, capitalization, ownership of subsidiaries,
accuracy of financial statements, the absence of material adverse changes in
its business, financial condition, operations or properties, the truth and
accuracy of information prepared and provided by them in connection with this
Joint Proxy Statement/Prospectus, the absence of certain legal proceedings,
compliance with laws, regulations and other requirements, corporate actions in
connection with the approval and execution of the Merger Agreement, the Bank
Merger Agreement and related documents, authority relative to the merger
agreements, employment arrangements, employee benefit plans, the accuracy of
information furnished to other party, their respective property and assets,
material agreements and contracts, tax matters, environmental matters, loan
portfolio, real estate loans and investments and financial derivative
contracts. For detailed information on such representations and warranties,
see the Merger Agreement attached hereto in Appendix I.
CONDITIONS TO THE MERGER
The respective obligations of Liberty Bancorp and Hinsdale Financial to
consummate the Merger are subject to the satisfaction or mutual waiver at or
prior to the Effective Time of the following conditions: (i) the Merger
Agreement shall have been approved by the requisite vote of the respective
stockholders of Hinsdale Financial and Liberty Bancorp; (ii) the shares of
Alliance Bancorp Common Stock to be issued to Liberty Bancorp stockholders
upon consummation of the Merger shall have been authorized for inclusion on
the Nasdaq National Market subject to official notice of issuance; (iii) all
requisite governmental approvals of the Merger shall have been obtained and
shall remain in full force and effect without the imposition of any condition
or restriction which would have a Material Adverse Effect (as defined in the
Merger Agreement and described below) on Hinsdale Financial as the surviving
corporation, and all applicable waiting periods shall have expired; (iv) the
Registration Statement relating to the shares of Hinsdale Financial Common
Stock to be issued in the Merger shall have been declared effective and shall
not be subject to a stop order or any threatened stop order; (v) neither
Hinsdale Financial nor Liberty Bancorp shall be subject to any order of a
court or agency of competent jurisdiction which restrains or prohibits the
consummation of the Merger; (vi) each party shall have received from its
respective counsel an opinion to the effect that, among other things, the
Company Merger and the Bank
47
<PAGE>
Merger will each constitute a reorganization within the meaning of Section
368(a) of the Code and, accordingly, for federal income tax purposes no gain
or loss will be recognized by Hinsdale Financial, Hinsdale Federal, Liberty
Bancorp or Liberty Federal Savings as a result of the Merger; (vii) each party
shall have obtained all consents and approvals required to be obtained in
connection with the Merger other than those which, individually or in the
aggregate, would not have a material adverse effect on Hinsdale Financial as
the surviving corporation; (viii) there shall be no impediment or restriction
upon the ability of the parties to implement the arrangements as to employee
benefit matters set forth in the Merger Agreement; and (ix) each party shall
have received from the "affiliates" of the other party certain letters with
respect to the resale of shares of Hinsdale Financial Common Stock received by
them in the Merger. For additional information, see Section 4.1 of the Merger
Agreement attached hereto in Appendix I.
The obligation of Hinsdale Financial to consummate the Merger is subject to
the satisfaction by Liberty Bancorp or waiver by Hinsdale Financial of the
following conditions: (i) the receipt from counsel to Liberty Bancorp of
opinions with respect to certain matters set forth in the Merger Agreement;
(ii) the receipt from the independent auditors of Liberty Bancorp of a letter
regarding certain financial information included in this Joint Proxy
Statement/Prospectus; (iii) between the date of the Merger Agreement and the
Closing Date, Liberty Bancorp shall not have experienced a Material Adverse
Effect; (iv) the representations and warranties of Liberty Bancorp contained
in the Merger Agreement shall be true as of the Effective Time (or on the date
when made in the case of any representation or warranty which specifically
relates to an earlier date), and Liberty Bancorp shall have performed all
obligations and complied with each covenant, in all material respects, and
satisfied all conditions under the Merger Agreement to be performed or
complied with by it prior to the Effective Time; and (v) neither Liberty
Bancorp nor any of its subsidiaries shall be subject to any pending litigation
which, if determined adversely, would have a Material Adverse Effect on
Liberty Bancorp and its subsidiaries, taken as a whole. For additional
information, see Section 4.2 of the Merger Agreement attached hereto in
Appendix I.
The obligation of Liberty Bancorp to consummate the Merger is subject to the
satisfaction by Hinsdale Financial or waiver by Liberty Bancorp of the
following conditions: (i) the receipt from counsel to Hinsdale Financial of
opinions with respect to certain matters set forth in the Merger Agreement;
(ii) the receipt from the independent auditors of Hinsdale Financial of a
letter regarding certain financial information included in this Joint Proxy
Statement/Prospectus; (iii) between the date of the Merger Agreement and the
Closing Date, Hinsdale Financial shall not have experienced a Material Adverse
Effect; (iv) the representations and warranties of Hinsdale Financial
contained in the Merger Agreement shall be true as of the Effective Time (or
on the date when made in the case of any representation or warranty which
specifically relates to an earlier date), and Hinsdale Financial shall have
performed all obligations and complied with each covenant, in all material
respects, and satisfied all conditions under the Merger Agreement to be
performed or complied with by it prior to the Effective Time; (v) a
certificate for the number of shares of Alliance Bancorp Common Stock and cash
for fractional share interests necessary to effectuate the exchange of Liberty
Bancorp Common Stock for the Merger Consideration shall have been delivered to
the Exchange Agent; and (vi) neither Hinsdale Financial nor any of its
subsidiaries shall be subject to any pending litigation which, if determined
adversely, would have a Material Adverse Effect on Hinsdale Financial and its
subsidiaries, taken as a whole. For additional information, see Section 4.3 of
the Merger Agreement attached hereto in Appendix I.
For purposes of the Merger Agreement, a "Material Adverse Effect" means an
effect which (i) is materially adverse to the business, financial condition,
results of operations or prospects of Hinsdale Financial or Liberty Bancorp
and its respective subsidiaries taken as a whole or (ii) enables any person to
prevent the Merger and the transactions contemplated thereby; provided,
however, that a Material Adverse Effect shall not include any effect resulting
from (A) actions or omissions of Hinsdale Financial or Liberty Bancorp taken
with the prior consent of the other in contemplation of the transactions
provided for in the Merger Agreement or (B) circumstances affecting the
savings institution industry generally (including changes in laws or
regulations, accounting principles or general levels of interest rates
including, without limitation, the effects of changes in interest rates on
earnings, portfolio market value and interest rate risk exposure).
48
<PAGE>
There can be no assurance that the conditions to consummation of the Merger
will be satisfied or waived. In the event the conditions to either party's
obligations become impossible of satisfaction in any material respect, the
other party may elect to terminate the Merger Agreement. See "--Waiver and
Amendment; Termination."
REGULATORY APPROVALS
The Merger is subject to the approval of the OTS. On September 27, 1996,
Hinsdale Financial filed an application for approval of the Merger with the
OTS. Hinsdale Financial expects OTS approval of the Merger in late December,
1996 or January, 1997.
Under federal law, a period of 15 days must expire following approval by the
OTS within which period the Department of Justice may file objections to the
Merger under the federal antitrust laws. The parties do not expect that the
Department of Justice will object to the Merger.
It is a condition to the consummation of the Merger that all requisite
regulatory approvals be obtained without any condition or restriction that
would have or result in a material adverse effect on Hinsdale Financial as the
surviving corporation, as Hinsdale Financial and Liberty Bancorp may
reasonably and in good faith agree. Although not expected, no assurance can be
given that OTS approval will not contain any such condition or restriction.
See "--Conditions to the Merger."
WAIVER AND AMENDMENT; TERMINATION
Prior to the Effective Time, the Boards of Directors of Hinsdale Financial
and Liberty Bancorp may by written action: (i) extend the time for performance
of any obligations or other acts required by the Merger Agreement; (ii) waive
any inaccuracies in the representations and warranties contained in the Merger
Agreement or in any document delivered pursuant to the Merger Agreement; and
(iii) waive compliance with any agreements or conditions contained in the
Merger Agreement. Subject to applicable law, the Merger Agreement may be
amended or modified by action of the Boards of Directors of Hinsdale Financial
and Liberty Bancorp at any time before or after approval of the Merger
Agreement by Hinsdale Financial and Liberty Bancorp stockholders; provided,
however, that after approval of the Merger Agreement by Hinsdale Financial and
Liberty Bancorp stockholders, no amendment may change the amount or form of
the Merger Consideration without the further approval of Hinsdale Financial
and Liberty Bancorp stockholders.
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the stockholders of Hinsdale
Financial or Liberty Bancorp, (i) by mutual written consent of the parties;
(ii) by either party if (A) the Merger has not been consummated on or before
June 30, 1997 or such later date as may be agreed to by the parties (provided
that the failure to consummate the Merger was not a result of the terminating
party's nonobservance of the terms of the Merger Agreement), (B) any
regulatory authority has denied, or indicated an intent to deny, approval or
authorization of the Merger, requested the withdrawal of an application for
approval of the Merger, or indicated an intent to impose a condition on its
approval or authorization of the Merger which would have a Material Adverse
Effect on Hinsdale Financial as the surviving corporation in the Merger, or
(C) approval of the stockholders of Liberty Bancorp or Hinsdale Financial, as
the case may be, required for consummation of the Merger has not been obtained
(provided that the electing party is not then in breach of its obligations
under the Merger Agreement with respect thereto); (iii) by Hinsdale Financial
upon delivery of written notice of termination to Liberty Bancorp if any event
occurs which renders impossible of satisfaction in any material respect one or
more of the conditions to the obligations of Hinsdale Financial to effect the
Merger as set forth in the Merger Agreement and noncompliance is not waived by
Hinsdale Financial; (iv) by Liberty Bancorp upon delivery of written notice of
termination to Hinsdale Financial if any event occurs which renders impossible
of satisfaction in any material respect one or more of the conditions to the
obligations of Liberty Bancorp to effect the Merger as set forth in the Merger
Agreement and noncompliance is not waived by Liberty Bancorp; (v) by either
party if there has been a material breach of the other party's
representations, warranties, covenants or agreements set forth in the Merger
Agreement which has not been fully cured or cannot be fully cured within the
earlier of (A) 30 days after written notice of such breach has been received
by the
49
<PAGE>
breaching party or (B) five days prior to the Closing Date, and which breach
would have, or be reasonably likely to have, a Material Adverse Effect on the
breaching party and its subsidiaries, taken as a whole, or upon consummation
of the transactions contemplated by the Merger Agreement; (vi) by Hinsdale
Financial if (A) the Liberty Bancorp Board has withdrawn, modified or changed
its approval or recommendation of the Merger Agreement in a manner adverse to
Hinsdale Financial, (B) the Liberty Bancorp Board has authorized Liberty
Bancorp to enter into any agreement, letter of intent or agreement in
principle with the intent to pursue or effect a Takeover Proposal (as defined
below) or (C) as a result of an unsolicited Takeover Proposal, the Hinsdale
Financial Board has withdrawn, modified or changed its recommendation of the
Merger Agreement upon its determination in good faith after consultation with
legal counsel and an investment banking firm that such recommendation would
constitute a breach of its fiduciary duties; and (vii) by Liberty Bancorp if
(A) the Hinsdale Financial Board has withdrawn, modified or changed its
approval or recommendation of the Merger Agreement in a manner adverse to
Liberty Bancorp, (B) the Hinsdale Financial Board has authorized Hinsdale
Financial to enter into any agreement, letter of intent or agreement in
principle with the intent to pursue or effect a Takeover Proposal (as defined
below) or (C) as a result of an unsolicited Takeover Proposal, the Liberty
Bancorp Board has withdrawn, modified or changed its recommendation of the
Merger Agreement upon its determination in good faith after consultation with
legal counsel and an investment banking firm that such recommendation would
constitute a breach of its fiduciary duties. For additional information, see
Section 4.4 of the Merger Agreement attached hereto in Appendix I. For
purposes of the Merger Agreement, a "Takeover Proposal" shall mean any
proposal, other than as contemplated by the Merger Agreement, for a merger or
other business combination involving Hinsdale Financial, Hinsdale Federal,
Liberty Bancorp or Liberty Federal Savings or for the acquisition of a 25% or
greater equity interest in Hinsdale Financial, Hinsdale Federal, Liberty
Bancorp or Liberty Federal Savings, or for the acquisition of a substantial
portion of the assets of Hinsdale Financial, Hinsdale Federal, Liberty Bancorp
or Liberty Federal Savings.
The representations, warranties and agreements of the parties set forth in
the Merger Agreement shall not survive the Effective Time, and shall be
terminated and extinguished at such time. From and after the Effective Time,
neither of the parties shall have any liability to the other on account of any
breach or failure of any of the representations, warranties and agreements in
the Merger Agreement, except as otherwise provided in the Merger Agreement.
COVENANTS PENDING CLOSING
Hinsdale Financial and Liberty Bancorp have agreed to use their best
efforts, and to take all actions necessary or appropriate, to consummate the
Merger and the other transactions contemplated by the Merger Agreement at the
earliest practicable date.
Pursuant to the Merger Agreement, each of Hinsdale Financial and Liberty
Bancorp has agreed, with respect to it and its subsidiaries, to conduct its
business only in the ordinary course consistent with past practices except as
otherwise contemplated by the Merger Agreement, to maintain its books and
records in accordance with past practices, to use reasonable efforts to
preserve intact its existing businesses and business relationships and to take
no action that would adversely affect its ability to receive the necessary
governmental approvals of the Merger or perform its obligations under the
Merger Agreement, the Bank Merger Agreement and the Stock Option Agreements.
Each of Hinsdale Financial and Liberty Bancorp has further agreed that it and
its subsidiaries shall not, without the prior written approval of the other
party: (i) declare, set aside or pay any dividend or make any other
distribution with respect to its capital stock (except that Liberty Bancorp
may pay its regular quarterly cash dividend); (ii) reacquire or buy any of its
outstanding shares of common stock; (iii) issue, sell or buy any shares of its
capital stock (other than pursuant to the applicable Stock Option Agreement or
upon the exercise of stock options previously disclosed to the other party);
(iv) effect any stock split, stock dividend or other reclassification of its
common stock; (v) grant any options or issue any warrants exercisable for, or
securities convertible or exchangeable into, capital stock of it or any of its
subsidiaries, or grant any stock appreciation or other rights with respect to
shares of it or any of its subsidiaries (other than with respect to the
applicable Stock Option Agreement); or (vi) purchase or acquire any of the
outstanding shares of capital stock
50
<PAGE>
of the other party or any subsidiary thereof (other than as contemplated by
the applicable Stock Option Agreement or the Merger Agreement).
In addition, pursuant to the Merger Agreement, each of Hinsdale Financial
and Liberty Bancorp, has agreed that it and its subsidiaries shall not,
without the prior written approval of the other party: (i) sell, dispose of or
pledge any significant assets other than in the ordinary course of business
consistent with past practice, or in connection with the borrowing of funds
(subject to certain limitations set forth below and in the Merger Agreement);
(ii) merge or consolidate with or into another entity or otherwise acquire any
other entity or acquire any significant assets; (iii) sell or pledge, or agree
to sell or pledge, or permit any lien to exist on any stock of its
subsidiaries; (iv) change the governing instruments of it or its subsidiaries,
except as contemplated in the Merger Agreement; (v) engage in any lending
activities other than in the ordinary course of business consistent with past
practices and subject to certain limitations set forth in the Merger
Agreement; (vi) form any new subsidiary or cause or permit a material change
in the activities presently conducted by any subsidiary; (vii) engage in any
off-balance sheet interest rate swap, cap or floor agreement; (viii) engage in
any activity not contemplated by its written business plan; (ix) purchase any
equity securities other than FHLB stock; (x) make any investment which would
cause Hinsdale Federal or Liberty Federal Savings, as appropriate, not to be a
qualified thrift lender under Section 10(m) of the Home Owners' Loan Act
("HOLA") or a domestic building and loan association under Section 7701(a)(19)
of the Code; (xi) authorize capital expenditures other than in the ordinary
course of business; (xii) implement or adopt any change in its accounting
principles, practices or methods (other than as required by generally accepted
accounting principles); (xiii) engage any independent auditors other than such
auditors engaged as of the date of the Merger Agreement; (xiv) incur any debt
obligation (excluding deposits) or other obligation for borrowed money with
terms in excess of one year; (xv) grant any general increase in compensation
or benefits to its employees or officers or pay any bonuses to its employees
or officers except for normal year-end bonuses; (xvi) enter into, amend or
otherwise change any employment or severance agreements with any of its
directors, officers or employees (except as contemplated by the Merger
Agreement); (xvii) grant any increase in fees or other increases in
compensation or other benefits to any of its present or former directors in
such capacity; (xviii) except as contemplated by the Merger Agreement,
establish any new or change any existing employee benefit plan or benefit
arrangement (unless such change is required by applicable law or necessary to
maintain continued qualification of any tax-qualified plan that provides for
retirement benefits); (xix) conduct its lending activities other than in
accordance with the limitations set forth in the Merger Agreement; (xx)
authorize or permit any officer, director, employee, investment banker,
financial consultant, attorney, accountant or other representative of its or
its subsidiaries, directly or indirectly, to initiate contact with any person
or entity in an effort to solicit, initiate or encourage any "Takeover
Proposal" (as such term is defined in the Merger Agreement and described
above) except as the fiduciary duties of the Board of Directors may require;
or (xxi) make a commitment to do any of the above.
For additional information, see Article III of the Merger Agreement attached
hereto in Appendix I.
EXPENSES
All expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby are to be paid by the party incurring such
expenses, except that Hinsdale Financial and Liberty Bancorp shall bear
equally all printing and mailing expenses associated with this Joint Proxy
Statement/Prospectus and certain proxy solicitation expenses.
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for under the purchase
method of accounting in accordance with generally accepted accounting
principles. Under purchase accounting, the assets and liabilities of Liberty
Bancorp as of the Effective Date would be recorded at their respective fair
market values, to the extent of the purchase price, and added to those of
Alliance Bancorp. Consolidated financial statements of Alliance Bancorp issued
after consummation of the Merger would reflect such values. Goodwill (the
excess of the purchase price over the fair value of the net assets acquired),
if any, which arises from the Merger will be amortized to operations over the
period estimated to be benefitted.
51
<PAGE>
RESALES OF HINSDALE FINANCIAL COMMON STOCK BY AFFILIATES
The shares of Alliance Bancorp Common Stock to be issued in the Merger will
be registered under the Securities Act and will be freely transferable under
the Securities Act, except for shares issued to any stockholder who may be
deemed to be an "affiliate" of Hinsdale Financial or Liberty Bancorp for
purposes of Rule 145 under the Securities Act as of the date of the Special
Meetings. Affiliates of Hinsdale Financial or Liberty Bancorp may not sell
their shares of Hinsdale Financial Common Stock acquired in connection with
the Merger except pursuant to an effective registration statement under the
Securities Act covering such shares or in compliance with Rule 145 or another
applicable exemption from the registration requirements of the Securities Act.
Persons who may be deemed to be affiliates of Hinsdale Financial or Liberty
Bancorp generally include individuals or entities that control, are controlled
by or are under common control with Hinsdale Financial or Liberty Bancorp, and
may include certain officers and directors of Hinsdale Financial and Liberty
Bancorp as well as certain principal stockholders of Hinsdale Financial and
Liberty Bancorp.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Set forth below is a discussion of federal income tax consequences of the
Merger to Hinsdale Financial, Hinsdale Financial stockholders, Liberty Bancorp
and Liberty Bancorp stockholders who are citizens or residents of the United
States. THE FOLLOWING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
LISTING OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A DECISION WHETHER TO VOTE IN
FAVOR OF APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY. FURTHER, THE DISCUSSION DOES NOT ADDRESS THE TAX CONSEQUENCES THAT
MAY BE RELEVANT TO A PARTICULAR HINSDALE FINANCIAL OR LIBERTY BANCORP
STOCKHOLDER SUBJECT TO SPECIAL TREATMENT UNDER CERTAIN FEDERAL INCOME TAX
LAWS, SUCH AS DEALERS IN SECURITIES, BANKS, INSURANCE COMPANIES, TAX-EXEMPT
ORGANIZATIONS, NON-UNITED STATES PERSONS AND STOCKHOLDERS WHO ACQUIRED THEIR
SHARES AS COMPENSATION, NOR ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY
STATE, LOCALITY OR FOREIGN JURISDICTION. THE DISCUSSION IS BASED UPON THE
CODE, TREASURY REGULATIONS THEREUNDER AND ADMINISTRATIVE RULINGS AND COURT
DECISIONS AS OF THE DATE HEREOF. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE,
AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION.
HOLDERS OF LIBERTY BANCORP COMMON STOCK ARE URGED TO CONSULT THEIR TAX
ADVISERS AS TO THE PARTICULAR EFFECT OF THEIR OWN PARTICULAR FACTS AND
CIRCUMSTANCES ON THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO THEM,
AND ALSO AS TO THE EFFECT OF ANY STATE, LOCAL, FOREIGN AND OTHER FEDERAL TAX
LAWS. Under current federal income tax law, and based upon assumptions and
representations to be made by Hinsdale Financial and Liberty Bancorp, and
assuming that the Company Merger and the Bank Merger are each consummated in
the manner set forth in the Merger Agreement, it is anticipated that the
following federal income tax consequences would result:
(i) the Company Merger and the Bank Merger will each qualify as a
reorganization under Section 368(a) of the Code;
(ii) no gain or loss will be recognized by Hinsdale Financial, Hinsdale
Federal, Hinsdale Financial stockholders, Liberty Bancorp or Liberty
Federal Savings as a result of the Company Merger or the Bank Merger;
(iii) no gain or loss will be recognized by any Liberty Bancorp
stockholder upon the exchange of Liberty Bancorp Common Stock solely for
Alliance Bancorp Common Stock pursuant to the Merger (except with respect
to cash received in lieu of a fractional share interest in Alliance Bancorp
Common Stock, if any, as discussed below);
(iv) the aggregate tax basis of the Alliance Bancorp Common Stock
received by each stockholder of Liberty Bancorp who exchanges Liberty
Bancorp Common Stock for Alliance Bancorp Common Stock in
52
<PAGE>
the Merger will be the same as the aggregate tax basis of the Liberty
Bancorp Common Stock surrendered in exchange therefor (subject to any
adjustments required as the result of receipt of cash in lieu of a
fractional share interest in Alliance Bancorp Common Stock);
(v) the holding period of the shares of Alliance Bancorp Common Stock
received by a Liberty Bancorp stockholder in the Merger will include the
holding period of the Liberty Bancorp Common Stock surrendered in exchange
therefor, provided that such shares of Liberty Bancorp Common Stock were
held as a capital asset by such stockholder at the Effective Time; and
(vi) cash received in the Merger by a Liberty Bancorp stockholder in lieu
of a fractional share interest of Alliance Bancorp Common Stock will be
treated as having been received as a distribution in full payment in
exchange for the fractional share interest of Alliance Bancorp Common Stock
which such stockholder would otherwise be entitled to receive, and will
qualify as capital gain or loss (assuming the Liberty Bancorp Common Stock
surrendered in exchange therefor was held as a capital asset by such
stockholder at the Effective Time).
Based upon representations to be made by Hinsdale Financial and Liberty
Bancorp as of the Effective Time, Luse Lehman Gorman Pomerenk & Schick, P.C.
will render an opinion, dated as of the Effective Time, to both Hinsdale
Financial and Liberty Bancorp that the Company Merger and the Bank Merger will
each qualify as a reorganization under the Code with the consequences set
forth above. The opinion also would be subject to the assumptions that the
Company Merger and the Bank Merger are consummated in the manner and in
accordance with the terms of the Merger Agreement, that the Company Merger
will qualify as a merger under the applicable laws of Delaware and that the
Bank Merger will qualify as a merger under applicable federal law. The opinion
would be based entirely upon the Code, regulations then in effect or proposed
thereunder, then-current administrative rulings and practice and judicial
authority, all of which would be subject to change, possibly with retroactive
effect. Subject to waiver by both Hinsdale Financial and Liberty Bancorp,
which waiver is not expected to be made, consummation of the Merger is
conditioned upon the receipt by Hinsdale Financial and Liberty Bancorp of the
opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. See "--Conditions to the
Merger."
No ruling has been or will be requested from the Internal Revenue Service
("IRS"), including any ruling as to federal income tax consequences of the
Merger to Hinsdale Financial, Liberty Bancorp or Liberty Bancorp stockholders.
Unlike a ruling from the IRS, the opinions of counsel are not binding on the
IRS. There can be no assurance that the IRS will not take a position contrary
to the positions reflected in such opinions or that such opinions would be
upheld by the courts if challenged.
NASDAQ LISTING
Both Hinsdale Financial Common Stock and Liberty Bancorp Common Stock
currently are quoted on the Nasdaq National Market. It is a condition to
consummation of the Merger that the Alliance Bancorp Common Stock to be issued
to the stockholders of Liberty Bancorp pursuant to the Merger Agreement will
be quoted on the Nasdaq National Market. See "--Conditions to the Merger."
CHANGE OF FISCAL YEAR
The Merger Agreement provides that the fiscal year end of Alliance Bancorp
shall be December 31. Currently, Hinsdale Financial's fiscal year end is
September 30.
53
<PAGE>
MANAGEMENT AND OPERATIONS AFTER THE MERGER
As provided in the Merger Agreement, the Board of Directors of Alliance
Bancorp as of the Effective Time will consist of 14 members, one-half of whom
will be former members of the Hinsdale Financial Board and one-half of whom
will be former members of the Liberty Bancorp Board, in each case prior to the
Effective Time. The class and term of each of the directors has not been
determined.
In addition, as of the Effective Time: (i) Fredric G. Novy will serve as the
Chairman of the Board of Directors of Alliance Bancorp and Liberty Federal
Bank; (ii) Kenne P. Bristol will serve as President and Chief Executive
Officer of Alliance Bancorp and Liberty Federal Bank; (iii) the Executive
Committee of the Board of Directors of Alliance Bancorp will consist of nine
persons, five of whom will be former members of the Hinsdale Financial Board
and four of whom will be former members of the Liberty Bancorp Board; (iv)
William R. Rybak will serve as Chairman of the Executive Committee; and (v)
Edward J. Burns will serve as Vice-Chairman of the Executive Committee. Other
senior management positions of Alliance Bancorp and Liberty Federal Bank
generally are expected to be filled by persons currently employed by Hinsdale
Federal or Liberty Federal Savings.
Set forth below is certain information, as of October 14, 1996, with respect
to each individual who currently is expected to become a member of the
Alliance Bancorp Board of Directors as of the Effective Time. In addition to
those six persons identified below who currently serve as directors of
Hinsdale Financial, Hinsdale Financial is entitled to appoint one additional
person to the Board of Directors of Alliance Bancorp, so that there shall be
seven members from the Liberty Bancorp Board and seven members from, or
designated by, the Hinsdale Financial Board.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED TO
HINSDALE FEDERAL
(HF) OR
LIBERTY FEDERAL PRINCIPAL OCCUPATION
NAME (LB) BOARD AGE DURING PAST FIVE YEARS
---- ---------------- --- ----------------------
<S> <C> <C> <C>
Kenne P. Bristol........ 1986 (HF) 54 President and Chief Executive
Officer of Hinsdale Financial and
Hinsdale Federal.
Edward J. Burns......... 1963 (LB) 66 Chairman of the Board of Liberty
Bancorp since 1991 and Liberty
Federal Savings since 1982.
President and Chief Executive
Officer of Liberty Bancorp and
Liberty Federal Savings until 1994.
Howard A. Davis......... 1995 (HF) 49 President and Chief Executive
Officer of Preferred Mortgage
Associates, Ltd.
Whit G. Hughes.......... 1982 (LB) 69 Chairman and former Chief Executive
Officer of Hughes Enterprises, Inc.,
a distributor of appliances and
parts and a developer and operator
of self-service laundry stores.
Howard R. Jones......... 1991 (HF) 61 President of Packaging Design
Corporation, a manufacturer of
corrugated containers and
specialties.
H. Verne Loeppert....... 1964 (LB) 74 President and Chief Executive
Officer of CDV Corporation, a
holding company whose subsidiaries
are engaged in metal working tool
manufacturing.
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED TO
HINSDALE FEDERAL
(HF) OR
LIBERTY FEDERAL PRINCIPAL OCCUPATION
NAME (LB) BOARD AGE DURING PAST FIVE YEARS
---- ---------------- --- ----------------------
<S> <C> <C> <C>
David D. Mill........... 1967 (LB) 67 Dentist; Dr. Mill has owned his own
general dental practice since 1957.
Fredric G. Novy......... 1994 (LB) 57 President and Chief Executive
Officer of Liberty Bancorp and
Liberty Federal Savings since 1994.
President of Cragin Financial
Corporation and Cragin Federal Bank
for Savings from 1990 through 1994.
William C. O'Donnell.... 1979 (LB) 73 President of ODON Communications
Group, a radio broadcasting company.
William R. Rybak........ 1986 (HF) 45 Chairman of the Board of Directors
of Hinsdale Federal since 1990, and
Chairman of the Board of Hinsdale
Financial since its formation in
1992. Executive Vice President and
Chief Financial Officer of Van
Kampen/American Capital, Inc., a
financial services company
specializing in money management and
the distribution of mutual funds.
Russell F. Stephens, 1971 (HF) 64 President of Insurance Concepts &
Jr..................... Design Inc., an insurance agency.
Donald E. Sveen......... 1971 (HF) 64 Retired; prior to July, 1996,
President, Chief Operating Officer
and Director of The John Nuveen
Company and Subsidiaries and
Chairman, Chief Executive Officer
and Director of the Nuveen Select
Tax-Free Income Portfolio Funds.
Nuveen is a financial services
company specializing in tax-exempt
investments and money management.
Vernon B. Thomas, Jr.... 1969 (LB) 61 Attorney whose practice concentrates
in corporate, banking, real estate
and estate planning.
</TABLE>
POST-MERGER DIVIDEND POLICY
Hinsdale Financial/Alliance Bancorp is a legal entity, separate and distinct
from Hinsdale Federal and its subsidiaries. As a holding company with no
significant operations of its own, Hinsdale Financial/Alliance Bancorp's
principal sources of funds are its net earnings and any dividends paid to it
by Hinsdale Federal (to be known as Liberty Federal Bank following the Bank
Merger), which are subject to certain federal regulatory limitations. The
Alliance Bancorp Board after the Effective Time will consider the payment and
level of dividends on Alliance Bancorp Common Stock as it deems appropriate to
do so, taking into account federal regulatory restrictions, Liberty Federal
Bank's level of net income and financial condition, its future prospects,
economic conditions, industry practices and other factors. After the Effective
Time, Alliance Bancorp intends to pay a regular quarterly cash dividend at an
annual rate of at least $0.65 per share; provided, however, that any dividend
declared by the Alliance Bancorp Board of Directors will be consistent with
its analysis of the factors detailed above, and there can be no assurance as
to any future dividends. See also "Comparative Stock Prices and Dividend
Information."
55
<PAGE>
CERTAIN RELATED TRANSACTIONS
STOCK OPTION AGREEMENTS
The information in this Joint Proxy Statement/Prospectus concerning the
terms of the Stock Option Agreements is qualified in its entirety by reference
to the full text of the Stock Option Agreements which are attached hereto in
Appendix I and incorporated by reference herein.
General. As an inducement and a condition to entering into the Merger
Agreement, each of Hinsdale Financial and Liberty Bancorp received a stock
option to purchase shares of the other party's common stock representing up to
19.9% of the issued and outstanding shares of such common stock. The options
may be exercised only upon the occurrence of an "Initial Triggering Event,"
such as a person commencing a tender offer for 25% or more of either issuer's
outstanding common stock, followed by a "Subsequent Triggering Event," such as
a person acquiring 25% or more of the issuer's common stock or the issuer,
without the grantee's consent, entering into an agreement with another person
to enter into various forms of acquisition transactions. No triggering event
has occurred as of the date hereof. Pursuant to the Hinsdale Financial Stock
Option Agreement, Hinsdale Financial granted to Liberty Bancorp an option to
purchase up to 535,340 shares of Hinsdale Financial Common Stock at an
exercise price of $23.25 per share, subject to the terms and conditions set
forth therein. Pursuant to the Liberty Bancorp Stock Option Agreement, Liberty
Bancorp granted to Hinsdale Financial an option to purchase up to 492,927
shares of Liberty Bancorp Common Stock at an exercise price of $24.125 per
share, subject to the terms and conditions set forth therein. In addition,
each Stock Option Agreement grants the holder of the option, upon the
occurrence of a "Repurchase Event," the right to require the other party to
repurchase for cash the option and any shares that may have been acquired
thereunder.
Effect of Stock Option Agreements. The Stock Option Agreements are intended
to increase the likelihood that the Merger will be consummated in accordance
with the terms of the Merger Agreement. Consequently, certain aspects of the
Stock Option Agreements may have the effect of discouraging persons who might
now or prior to the consummation of the Merger be interested in acquiring all
of or a significant interest in either Liberty Bancorp or Hinsdale Financial
from considering or proposing such an acquisition, even if such persons were
prepared to pay a higher price per share for the Liberty Bancorp Common Stock
than the value per share contemplated by the Merger Agreement or a higher
price per share for Hinsdale Financial Common Stock than the then-current
market price of such shares. The acquisition of the issuer or of a significant
interest in the issuer, or an agreement to do either, could cause the Option
to become exercisable. The existence of such Option could significantly
increase the cost to a potential acquiror of acquiring the issuer compared to
its cost had the Stock Option Agreement not been entered into. Such increased
costs might discourage a potential acquiror from considering or proposing an
acquisition or might result in a potential acquiror proposing to pay a lower
per share price to acquire the issuer than it might otherwise have proposed to
pay. The exercise of either Option or the Repurchase Right may prohibit any
acquiror of the issuer from accounting for an acquisition of the issuer using
the pooling of interests accounting method for a period of two years. This
could discourage or preclude an acquisition of Liberty Bancorp or Hinsdale
Financial.
Terms of Stock Option Agreements. The following is a brief summary of
certain provisions of the Stock Option Agreements, which are attached hereto
in Appendix I. The terms of the Stock Option Agreements are identical in all
material respects other than with respect to the number and kind of shares
which may be purchased pursuant thereto and the exercise prices. The following
summary is qualified in its entirety by reference to the Stock Option
Agreements. For purposes of this summary, the term "Issuer" refers to Hinsdale
Financial with respect to the Hinsdale Financial Stock Option Agreement and
Liberty Bancorp with respect to the Liberty Bancorp Stock Option Agreement,
and the term "Grantee" refers to Liberty Bancorp with respect to the Hinsdale
Financial Stock Option Agreement and Hinsdale Financial with respect to the
Liberty Bancorp Stock Option Agreement.
Pursuant to the Stock Option Agreements, each Option becomes exercisable in
whole or in part at any time after the occurrence of both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering
56
<PAGE>
Event (as hereinafter defined). An "Initial Triggering Event" will occur if
(i) the Issuer, without receiving Grantee's prior consent, enters into an
agreement with any person (other than Grantee) to effect (A) a merger,
consolidation or similar transaction involving Issuer or any of its
Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X
promulgated by the SEC), (B) the purchase, lease or other acquisition of all
or substantially all of the assets of Issuer or any of its Significant
Subsidiaries, or (C) the purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of beneficial ownership of
securities representing 25% or more of the voting power of Issuer or its
Significant Subsidiaries (any of the foregoing being hereinafter referred to
as an "Acquisition Transaction"; provided, however, that any internal merger
or consolidation involving only Issuer and/or its subsidiaries will not be
considered an Acquisition Transaction); (ii) any person (other than Grantee, a
subsidiary of Grantee or a subsidiary of Issuer acting in a fiduciary capacity
(each, an "Excluded Person")), alone or together with affiliates and
associates, acquires beneficial ownership of, or the right to acquire
beneficial ownership of, or any group is formed (other than a group of which
an Excluded Person is a member) that beneficially owns, 25% or more of the
then outstanding shares of Issuer Common Stock; (iii) any person (other than
Grantee or a subsidiary of Grantee) makes a proposal to Issuer or its
stockholders to (A) engage in an Acquisition Transaction or (B) commences a
tender or exchange offer, the consummation of which would result in such
person acquiring beneficial ownership of securities representing 25% or more
of Issuer's voting power; (iv) the Board of Directors of Issuer fails to
recommend to its stockholders the adoption of the Merger Agreement or
withdraws, modifies or changes its recommendation in a manner adverse to
Grantee; (v) the Issuer, following a proposal by a third party (other than an
Excluded Person) to engage in an Acquisition Transaction, intentionally and
knowingly breaches any representation, warranty, covenant or agreement
contained in the Merger Agreement which entitles Grantee to terminate the
Merger Agreement in accordance with its terms and which has not been cured
prior to written notice to Issuer by Grantee of its intention to exercise the
Option; or (vi) any person (other than Grantee or a subsidiary of Grantee),
without the prior consent of Grantee, files an application or notice with the
OTS or other federal or state bank regulatory authority for approval to engage
in an Acquisition Transaction, which application or notice has been accepted
for processing.
A "Subsequent Triggering Event" will occur if (i) any person, other than an
Excluded Person, acquires beneficial ownership of 25% or more of the then
outstanding shares of Issuer Common Stock or (ii) the Issuer, without
receiving Grantee's prior consent, enters into an agreement with any person
(other than Grantee) to effect an Acquisition Transaction.
Each Option expires upon the earliest to occur of (i) the Effective Time,
(ii) the termination of the Merger Agreement in accordance with its terms
prior to the occurrence of an Initial Triggering Event or (iii) 12 months
after termination of the Merger Agreement, if such termination follows or
occurs at the same time as an Initial Triggering Event. Any purchase of shares
pursuant to a Stock Option Agreement is subject to compliance with applicable
law.
The number and type of securities subject to the Options and the purchase
price of such securities will be appropriately adjusted for any change in
Issuer Common Stock by reason of a stock dividend, split-up, merger,
recapitalization, combination, exchange of shares or similar transaction. The
number of shares of Issuer Common Stock subject to each Option will also be
adjusted in the event Issuer issues additional shares of its common stock such
that the number of shares of Issuer Common Stock subject to the Option,
together with shares previously purchased pursuant thereto, represents 19.9%
of Issuer Common Stock then issued and outstanding, without giving effect to
shares subject to or issued pursuant to the Option.
In the event Issuer enters into any agreement to (i) consolidate with or
merge into any person other than Grantee or one of its subsidiaries, such that
the Issuer is not the surviving corporation, (ii) permit any person, other
than Grantee or one of its subsidiaries, to merge into Issuer and Issuer is
the surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock are changed into or exchanged for
stock or other securities of any other person or cash or any other property,
or the outstanding shares of Issuer Common Stock immediately prior to such
merger shall after such merger represent less than 50% of the outstanding
shares and share equivalents of the merged company, or (iii) sell or otherwise
transfer all
57
<PAGE>
or substantially all of its assets to any person other than Grantee or one of
its subsidiaries, then, and in each such case, the agreement governing the
transaction must provide that, upon consummation of the transaction, the
Option will be converted into or exchanged for an option (the "Substitute
Option") to purchase securities (the "Substitute Common Stock") of either the
acquiring person, a person that controls the acquiring person, Issuer (if
Issuer is the surviving entity) or the transferee of all or substantially all
of Issuer's assets, in all cases at the election of Grantee. In no event will
the Substitute Option be exercisable for more than 19.9% of the Substitute
Common Stock outstanding prior to the exercise of the Substitute Option.
The Stock Option Agreements also provide each respective Grantee with
certain registration rights with respect to shares of Issuer Common Stock
acquired by Grantee upon exercise of the Option. These rights require that
Issuer file up to two registration statements under the Securities Act if
requested by Grantee at the time of and together with the written notice of
exercise required under the Stock Option Agreements. The first of such
registration statements will be at Issuer's expense, while the second will be
at Grantee's expense.
Repurchase Right. At the request of Grantee at any time commencing upon the
first occurrence of a "Repurchase Event" and ending 12 months immediately
thereafter, Issuer shall repurchase from Grantee (i) the Option and (ii) all
shares of Issuer Common Stock purchased by Grantee pursuant hereto with
respect to which Grantee then has beneficial ownership. Such repurchase shall
be at an aggregate price equal to the sum of:
(i) the aggregate Option Price paid by Grantee for any shares of Issuer
Common Stock acquired pursuant to the Option with respect to which Grantee
then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined below)
for each share of Common Stock over (y) the Option Price (subject to
adjustment), multiplied by the number of shares of Common Stock with
respect to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the Option Price
(subject to adjustment) paid (or payable) by Grantee for each share of
Common Stock with respect to which the Option has been exercised and with
respect to which Grantee then has beneficial ownership, multiplied by the
number of such shares.
The term "Applicable Price" means the highest of (i) the highest price per
share of Common Stock paid for any such share by the person or groups, (ii)
the price per share of Common Stock received by Grantees of Common Stock in
connection with any merger or other business combination transaction described
in the Agreement, or (iii) the highest closing sales price per share of Issuer
Common Stock quoted on the Nasdaq National Market System (or if Issuer Common
Stock is not quoted on the Nasdaq National Market System, the highest bid
price per share as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a recognized source
chosen by Grantee) during the 40 business days preceding the Request Date;
provided, however, that in the event of a sale of less than all of Issuer's
assets, the Applicable Price shall be the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment banking firm selected by
Grantee, divided by the number of shares of Common Stock outstanding at the
time of such sale.
As a general matter, a "Repurchase Event" shall occur if any person (other
than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of, or the right to acquire beneficial ownership of, or any "group"
shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of, 50% or more of the then outstanding shares of Issuer
Common Stock.
THE BANK MERGER AGREEMENT
In connection with the Merger, Hinsdale Federal and Liberty Federal Savings
executed the Bank Merger Agreement on August 2, 1996. Pursuant to the Bank
Merger Agreement, Liberty Federal Savings will be merged with and into
Hinsdale Federal following the Company Merger, and the resulting institution
will operate under the name Liberty Federal Bank. The respective obligations
of Hinsdale Federal and Liberty Federal Savings to consummate the Bank Merger
are conditioned upon the satisfaction or waiver by Hinsdale Financial and
Liberty Bancorp of all conditions to consummation of the Merger set forth in
the Merger Agreement and approval by
58
<PAGE>
the OTS. The Bank Merger Agreement will terminate automatically upon any
termination of the Merger Agreement.
This information is qualified in its entirety by reference to the full text
of the Bank Merger Agreement which is included as Exhibit 1.1 to the Merger
Agreement attached hereto in Appendix I.
DESCRIPTION OF HINSDALE FINANCIAL/
ALLIANCE BANCORP CAPITAL STOCK
The following description contains a summary of all of the material features
of the capital stock of Hinsdale Financial/Alliance Bancorp but does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Hinsdale Financial Certificate which is filed as an exhibit
to the Registration Statement of which this Joint Proxy Statement/Prospectus
is a part.
GENERAL
The Hinsdale Financial Certificate authorizes the issuance by Hinsdale
Financial of up to 7,500,000 shares of its capital stock consisting of
6,000,000 shares of Hinsdale Financial Common Stock (par value $.01 per share)
and 1,500,000 shares of Hinsdale Financial Preferred Stock (par value $.01 per
share). As of October 14, 1996, 2,695,085 shares of Hinsdale Financial Common
Stock and no shares of Hinsdale Financial Preferred Stock were issued and
outstanding. The Hinsdale Financial Common Stock is quoted on the Nasdaq
National Market under the symbol "HNFC." See "Comparative Stock Prices and
Dividend Information." The stock transfer agent and registrar for the Hinsdale
Financial Common Stock is Harris Trust and Savings Bank.
The Hinsdale Financial Board of Directors has approved a proposed amendment
to the Hinsdale Financial Certificate which would increase the number of
authorized shares of Hinsdale Financial Common Stock from 6,000,000 to
11,000,000. Upon consummation of the Merger, Hinsdale Financial anticipates
that approximately 5,305,866 shares of Alliance Bancorp Common Stock and no
shares of Alliance Bancorp Preferred Stock will be outstanding. The Hinsdale
Financial Board believes that the authorization of additional shares of
Hinsdale Financial/Alliance Bancorp Common Stock and Alliance Bancorp
Preferred Stock is advisable to provide Alliance Bancorp with the flexibility
to take advantage of opportunities to issue such stock in order to obtain
capital, as consideration for possible acquisitions, and for other purposes
(including, without limitation, stock splits and stock dividends in
appropriate circumstances). See "Amendments to Certificate of Incorporation of
Hinsdale Financial Corporation."
COMMON STOCK
Each share of the Hinsdale Financial Common Stock has the same relative
rights and is identical in all respects with each other share of the Hinsdale
Financial Common Stock. The Hinsdale Financial Common Stock represents non-
withdrawable capital, is not of an insurable type and is not insured by the
FDIC or any other government agency.
Subject to any prior rights of the holders of any Hinsdale Financial
Preferred Stock then outstanding, holders of the Hinsdale Financial Common
Stock are entitled to receive such dividends as are declared by the Hinsdale
Financial Board out of funds legally available therefor. Full voting rights
are vested in the holders of Hinsdale Financial Common Stock, and except as
indicated below, each share being entitled to one vote, subject to the rights
of the holders of any Hinsdale Financial Preferred Stock then outstanding. In
accordance with the provisions of the Hinsdale Financial Certificate, record
holders of Hinsdale Financial Common Stock who beneficially own in excess of
10% of the outstanding shares of Common Stock (the "Limit") are not entitled
to any vote with respect to the shares held in excess of the Limit. The
Hinsdale Financial Certificate authorizes the Board of Directors (i) to make
all determinations necessary to implement and apply the Limit, including
determining whether persons or entities are acting in concert, and (ii) to
demand that any person who is
59
<PAGE>
reasonably believed to beneficially own stock in excess of the Limit supply
information to the Company to enable the Board to implement and apply the
Limit.
The Hinsdale Financial Certificate authorizes the Hinsdale Financial Board
to issue authorized shares of Hinsdale Financial Common Stock without
stockholder approval. However, Hinsdale Financial Common Stock is included for
quotation on the Nasdaq National Market which requires stockholder approval of
the issuance of additional shares of Hinsdale Financial Common Stock under
certain circumstances, including the issuance of Hinsdale Financial Common
Stock pursuant to the Merger Agreement. Subject to any prior rights of the
holders of any Hinsdale Financial Preferred Stock then outstanding, in the
event of liquidation, dissolution or winding up of Hinsdale Financial, holders
of shares of Hinsdale Financial Common Stock are entitled to receive pro rata,
any assets distributable to stockholders in respect of shares held by them.
Holders of shares of Hinsdale Financial Common Stock do not have any
preemptive rights to subscribe for any additional securities which may be
issued by Hinsdale Financial or cumulative voting rights. The outstanding
shares of Hinsdale Financial Common Stock are fully paid and non-assessable.
Certain provisions of the Hinsdale Financial Certificate may have the effect
of delaying, deferring or preventing a change in control of Hinsdale Financial
pursuant to an extraordinary corporate transaction involving Hinsdale
Financial, including a merger, reorganization, tender offer, transfer of
substantially all of its assets or a liquidation. See "--Certain Provisions of
Delaware Corporate Law and Hinsdale Financial/Alliance Bancorp's Certificate
of Incorporation."
PREFERRED STOCK
The Hinsdale Financial Certificate authorizes the issuance by Hinsdale
Financial of up to 1,500,000 shares of Hinsdale Financial Preferred Stock (par
value $.01 per share), none of which was issued and outstanding as of October
14, 1996.
The Hinsdale Financial Preferred Stock may be issued in one or more series
at such time or times and for such consideration or considerations as the
Hinsdale Financial Board may determine. The Hinsdale Financial Board is
expressly authorized at any time, and from time to time, to provide for the
issuance of Hinsdale Financial Preferred Stock with such voting and other
powers, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the Hinsdale Financial Board resolution providing for
the issuance thereof. The Hinsdale Financial Board is authorized to designate
the series and the number of shares comprising such series, the dividend rate
on the shares of such series, the redemption rights, if any, any purchase,
retirement or sinking fund provisions, any conversion rights and any special
voting rights. The ability of the Hinsdale Financial Board to issue Hinsdale
Financial Preferred Stock without stockholder approval could make an
acquisition by an unwanted suitor of a controlling interest in Hinsdale
Financial more difficult, time-consuming or costly, or otherwise discourage an
attempt to acquire control of Hinsdale Financial.
Shares of Hinsdale Financial Preferred Stock redeemed or acquired by
Hinsdale Financial may return to the status of authorized but unissued shares,
without designation as to series, and may be reissued by the Hinsdale
Financial Board.
CERTAIN PROVISIONS OF DELAWARE CORPORATE LAW AND HINSDALE FINANCIAL/ALLIANCE
BANCORP'S CERTIFICATE OF INCORPORATION
Hinsdale Financial/Alliance Bancorp's Certificate of Incorporation and
Bylaws contain certain provisions which may have the effect of deterring or
discouraging, among other things, a non-negotiated tender or exchange offer
for Hinsdale Financial/Alliance Bancorp stock, a proxy contest for control of
Hinsdale Financial/Alliance Bancorp, the assumption of control of Hinsdale
Financial/Alliance Bancorp by a holder of a large block of Hinsdale
Financial/Alliance Bancorp's stock and the removal of Hinsdale
Financial/Alliance Bancorp's management. These provisions: (1) eliminate
voting rights for Common Stock owned by any person in an amount
60
<PAGE>
in excess of 10% of the shares of Common Stock outstanding; (2) empower the
Hinsdale Financial/Alliance Bancorp Board of Directors, without shareholder
approval, to issue preferred stock the terms of which, including voting power,
are set by the Hinsdale Financial/Alliance Bancorp Board of Directors; (3)
divide the Hinsdale Financial/Alliance Bancorp Board of Directors into three
classes serving staggered three-year terms; (4) restrict the ability of
shareholders to call special meetings or remove directors; (5) require that
shares with at least 80% of total voting power approve mergers and other
similar transactions with a person or entity holding stock with more than 10%
of Hinsdale Financial/Alliance Bancorp's voting power, if the transaction is
not approved, in advance, by the Hinsdale Financial/Alliance Bancorp Board of
Directors; (6) prohibit shareholders' actions without a meeting; (7) require
that shares with at least 80%, or in certain instances a majority, of total
voting power approve the repeal or amendment of Hinsdale Financial/Alliance
Bancorp's certificate of incorporation; (8) eliminate cumulative voting in
elections of directors; (9) require that shares with at least 80% of total
voting power approve, repeal or amend Hinsdale Financial/Alliance Bancorp's
bylaws; and (10) require advance notice of both nominations for the election
of directors and the presentation of shareholder proposals at meetings of
shareholders. The Certificate of Incorporation and Bylaws of Liberty Bancorp
include substantially similar provisions.
In addition, Section 203 of the Delaware General Corporation Law ("Section
203") generally provides that a "Person" (as defined therein) who owns 15% or
more of the outstanding voting stock of a Delaware corporation (an "Interested
Stockholder") may not consummate a merger or other business combination
transaction with such corporation at any time during the three-year period
following the date such "Person" became an Interested Stockholder. The term
"business combination" is defined broadly to cover a wide range of corporate
transactions including mergers, sales of assets, issuances of stock,
transactions with subsidiaries and the receipt of disproportionate financial
benefits.
The statute exempts the following transactions from the requirements of
Section 203: (i) any business combination if, prior to the date a person
became an Interested Stockholder, the Board of Directors approved either the
business combination or the transaction which resulted in the shareholder
becoming an Interested Stockholder; (ii) any business combination involving a
person who acquired at least 85% of the outstanding voting stock in the
transaction in which he or she became an Interested Stockholder, calculated
without regard to those shares owned by the corporation's directors who are
also officers or certain employee stock plans; (iii) any business combination
with an Interested Stockholder that is approved by the Board of Directors and
by a two-thirds vote of the outstanding voting stock not owned by the
Interested Stockholder; and (iv) certain business combinations that are
proposed after the corporation had received other acquisition proposals and
which are approved or not opposed by a majority of certain continuing members
of the Board of Directors. A corporation may exempt itself from the
requirements of the statute by adopting an amendment to its Certificate of
Incorporation or Bylaws electing not to be governed by Section 203. At the
present time, the Board of Directors of the Company does not intend to propose
any such amendment.
COMPARISON OF RIGHTS OF STOCKHOLDERS OF HINSDALE FINANCIAL
CORPORATION AND LIBERTY BANCORP, INC.
Upon the consummation of the Merger, holders of Liberty Bancorp Common
Stock, whose rights are presently governed by Delaware law and Liberty
Bancorp's Certificate of Incorporation and Bylaws (the "Liberty Bancorp
Certificate" and "Liberty Bancorp Bylaws," respectively) and, indirectly,
Liberty Federal Savings's charter and bylaws, will become stockholders of
Alliance Bancorp, also a Delaware corporation. The Hinsdale Financial/Alliance
Bancorp Certificate of Incorporation and Bylaws are substantially identical to
the Liberty Bancorp Certificate of Incorporation and Bylaws. Accordingly,
there are no material differences in the rights of shareholders of Liberty
Bancorp compared to the rights of stockholders of Hinsdale Financial/Alliance
Bancorp.
61
<PAGE>
AMENDMENTS TO CERTIFICATE OF INCORPORATION OF HINSDALE
FINANCIAL CORPORATION
GENERAL
The Hinsdale Financial Board has approved certain proposed amendments to the
Hinsdale Financial Certificate to (i) increase the numbers of authorized
shares of Hinsdale Financial Common Stock, par value $.01 per share, from
6,000,000 to 11,000,000 (the "Shares Amendment"), and (ii) amend the Hinsdale
Financial Certificate to change the name of the corporation, effective upon
consummation of the Merger, to "Alliance Bancorp" (the "Change of Name
Amendment" and together with the Shares Amendment, the "Certificate
Amendments"). The affirmative vote of the holders of a majority of the
outstanding shares of Hinsdale Financial Common Stock is required for approval
and adoption of the Certificate Amendments. The adoption of the Merger
Agreement is conditioned upon approval of the Certificate Amendments and the
adoption of the Certificate Amendments is conditioned upon approval of the
Merger Agreement.
The following description of the Certificate Amendments is qualified in its
entirety by reference to the full text thereof, which are attached as Appendix
II to this Joint Proxy Statement/Prospectus and incorporated by reference
herein. Stockholders are urged to read carefully the full text of the
Certificate Amendments.
INCREASE IN AUTHORIZED SHARES OF CAPITAL STOCK
General. Hinsdale Financial is currently authorized to issue 6,000,000
shares of Hinsdale Financial Common Stock. As of October 14, 1996, 2,695,085
shares of Hinsdale Financial Common Stock were issued and outstanding and
339,206 shares were reserved for issuance pursuant to the Hinsdale Financial
stock option plans. Hinsdale Financial is also currently authorized to issue
1,500,000 shares of Hinsdale Financial Preferred Stock, none of which were
outstanding as of October 14, 1996. The Hinsdale Financial Board has
unanimously approved the proposed Shares Amendment to the Hinsdale Financial
Certificate which would increase the number of authorized shares of Hinsdale
Financial/Alliance Bancorp Common Stock from 6,000,000 to 11,000,000.
Purpose and Effects. The primary purpose of the Shares Amendment is to allow
for a sufficient number of authorized shares of Hinsdale Financial/Alliance
Bancorp Common Stock to consummate the Merger and satisfy Hinsdale
Financial/Alliance Bancorp's other obligations under the Merger Agreement. In
addition, the Hinsdale Financial Board of Directors believes that the
authorization of additional shares of Hinsdale Financial/Alliance Bancorp
Common Stock is advisable to provide Alliance Bancorp with the flexibility to
take advantage of opportunities to issue such stock in order to obtain
capital, as consideration for possible acquisitions or for other purposes
(including, without limitation, stock splits and stock dividends in
appropriate circumstances). There are, at present, no plans, understandings,
agreements or arrangements concerning the issuance of additional shares of
Hinsdale Financial/Alliance Bancorp Common Stock or Hinsdale
Financial/Alliance Bancorp Preferred Stock, except for the shares of Hinsdale
Financial/Alliance Bancorp Common Stock to be issued (i) pursuant to the
Merger, (ii) upon the exercise of Hinsdale Financial/Alliance Bancorp stock
options into which Liberty Bancorp Stock Options will be converted, and (iii)
upon the exercise of Hinsdale Financial stock options currently outstanding or
to be granted in the future. Assuming the issuance of the maximum number of
shares Alliance Bancorp Common Stock pursuant to the obligations of Hinsdale
Financial described in clauses (i) through (iii) above as of October 14, 1996,
there would be 5,951,886 shares of Alliance Bancorp Common Stock issued and
outstanding.
Uncommitted authorized but unissued shares of Hinsdale Financial/Alliance
Bancorp Common Stock and Hinsdale Financial/Alliance Bancorp Preferred Stock
may be issued from time to time to such persons and for such consideration as
the Hinsdale Financial/Alliance Bancorp Board may determine, and holders of
the then-outstanding shares of Hinsdale Financial/Alliance Bancorp Common
Stock or Hinsdale Financial/Alliance Bancorp Preferred Stock may or may not be
given the opportunity to vote thereon, depending upon the nature of any such
transactions, applicable law, the rules and policies of the Nasdaq National
Market and the judgment of the Hinsdale Financial/Alliance Bancorp Board
regarding the submission of such issuance to a vote of the
62
<PAGE>
Hinsdale Financial/Alliance Bancorp stockholders. Hinsdale Financial/Alliance
Bancorp stockholders have no preemptive rights to subscribe to newly issued
shares.
Moreover, it is possible that additional shares of Hinsdale
Financial/Alliance Bancorp Common Stock or Hinsdale Financial/Alliance Bancorp
Preferred Stock would be issued for the purpose of making an acquisition by an
unwanted suitor of a controlling interest in Hinsdale Financial/Alliance
Bancorp more difficult, time-consuming or costly or to otherwise discourage an
attempt to acquire control of Hinsdale Financial/Alliance Bancorp. Under such
circumstances the availability of authorized and unissued shares of Hinsdale
Financial/Alliance Bancorp Common Stock and Hinsdale Financial/Alliance
Bancorp Preferred Stock may make it more difficult for stockholders to obtain
a premium for their shares. Such authorized and unissued shares could be used
to create voting or other impediments or to frustrate a person seeking to
obtain control of Hinsdale Financial/Alliance Bancorp by means of a merger,
tender offer, proxy contest or other means. Such shares could be privately
placed with purchasers who might cooperate with the Hinsdale
Financial/Alliance Bancorp Board in opposing such an attempt by a third party
to gain control of Hinsdale Financial/Alliance Bancorp or could also be used
to dilute ownership of a person or entity seeking to obtain control of
Hinsdale Financial/Alliance Bancorp. Although Hinsdale Financial does not
currently contemplate taking such action, shares of Hinsdale
Financial/Alliance Bancorp Common Stock or one or more series of Hinsdale
Financial/Alliance Bancorp Preferred Stock could be issued for the purposes
and effects described above and the Hinsdale Financial/Alliance Bancorp Board
reserves its rights (if consistent with its fiduciary responsibilities) to
issue such stock for such purposes.
Although approval of the Shares Amendment is not a condition to the Merger,
as described above, the Hinsdale Financial Board believes that the proposed
increase in the number of authorized shares of Hinsdale Financial/Alliance
Bancorp Common Stock and Hinsdale Financial/Alliance Bancorp Preferred Stock
will provide flexibility needed to meet corporate objectives and is in the
best interests of Hinsdale Financial and its stockholders.
THE HINSDALE FINANCIAL BOARD RECOMMENDS THAT HINSDALE
FINANCIAL STOCKHOLDERS VOTE FOR THE SHARES AMENDMENT.
CHANGE OF NAME TO ALLIANCE BANCORP
Pursuant to the Merger Agreement, the Board of Directors has agreed to amend
the Hinsdale Financial Certificate to change the name of the Corporation to
"Alliance Bancorp," effective upon consummation of the Merger. The name of
Hinsdale Financial will not be changed unless the Hinsdale Financial
stockholders approve the Merger Agreement and the Shares Amendment.
THE HINSDALE FINANCIAL BOARD RECOMMENDS THAT HINSDALE FINANCIAL STOCKHOLDERS
VOTE FOR THE CHANGE IN NAME AMENDMENT.
LEGAL MATTERS
The validity of the shares of Hinsdale Financial/Alliance Bancorp Common
Stock offered hereby will be passed upon for Hinsdale Financial by Luse Lehman
Gorman Pomerenk & Schick, A Professional Corporation, Washington, D.C. Certain
other legal matters in connection with the Merger will be passed upon for
Hinsdale Financial by Gomberg, Sharfman, Gold and Ostler, P.C., Chicago,
Illinois, and for Liberty Bancorp by Rock, Fusco, Reynolds, Crowe & Garvey,
LTD. Luse Lehman Gorman Pomerenk & Schick, P.C. will also pass upon certain
tax matters for both Hinsdale Financial and Liberty Bancorp.
63
<PAGE>
EXPERTS
The consolidated financial statements incorporated in this Joint Proxy
Statement/Prospectus by reference from Hinsdale Financial's Annual Report on
Form 10-K for the year ended September 30, 1995 have been audited by KPMG Peat
Marwick LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of Liberty Bancorp and subsidiaries
incorporated in this Joint Proxy Statement/Prospectus by reference from
Liberty Bancorp's Annual Report on Form 10-K for the year ended December 31,
1995 have been audited by KPMG Peat Marwick LLP, independent certified public
accountants, as stated in their report incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
STOCKHOLDER PROPOSALS
As disclosed in the proxy materials for Hinsdale Financial's 1996 Annual
Meeting of Stockholders, in order to be eligible for inclusion in Hinsdale
Financial's proxy materials for the 1997 Annual Meeting of Stockholders, any
stockholder proposal to take action at such meeting must be received at the
main office of Hinsdale Financial, One Grant Square, Hinsdale, Illinois 60521,
no later than August 30, 1996. Any such proposal shall be subject to the
requirements of the proxy rules adopted under the Exchange Act. However, if
such 1997 Annual Meeting is held after mid-April 1997, any stockholder
proposal must be received by Alliance Bancorp a reasonable time before the
solicitation of proxies for such Annual Meeting is made. Any such proposal
shall be subject to the requirements of the proxy rules adopted under the
Exchange Act.
Liberty Bancorp will hold a 1997 Annual Meeting of Stockholders only if the
Merger is not consummated before the time of such meeting, which it is
presently expected would be held in mid-May 1997. In such event, as disclosed
in the proxy materials for Liberty Bancorp's 1996 Annual Meeting of
Stockholders, in order to be eligible for inclusion in Liberty Bancorp's proxy
materials for the 1997 Annual Meeting of Stockholders, any stockholder
proposal to take action at such meeting must be received at the main office of
Liberty Bancorp, 5700 N. Lincoln Avenue, Chicago, Illinois 60659, no later
than November 21, 1996.
INDEPENDENT ACCOUNTANTS
Representatives of KPMG Peat Marwick LLP, Liberty Bancorp's and Hinsdale
Financial's independent accountants, are expected to be present at the Liberty
Bancorp and Hinsdale Financial Special Meetings. They will be afforded the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
64
<PAGE>
OTHER MATTERS
The Boards of Directors of Hinsdale Financial and Liberty Bancorp are not
aware of any business to come before the Special Meetings other than those
matters described above in this Joint Proxy Statement/Prospectus. However, if
any other matter should properly come before the Special Meetings, including
proposals to adjourn a Special Meeting to permit further solicitation of
proxies in the event that there are not sufficient votes to approve any
proposal at the time of the Special Meeting, it is intended that holders of
the proxies will act in accordance with their best judgment.
BY ORDER OF THE BY ORDER OF THE
BOARD OF DIRECTORS BOARD OF DIRECTORS
OF HINSDALE FINANCIAL OF LIBERTY BANCORP, INC.
CORPORATION
/s/ Kenne P. Bristol /s/ Edward J. Burns
President and Chief Chairman of the Board
Executive Officer
65
<PAGE>
APPENDIX I
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
HINSDALE FINANCIAL CORPORATION
AND
LIBERTY BANCORP, INC.
DATED AS OF AUGUST 2, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I.................................................................. I-2
THE MERGER AND RELATED MATTERS........................................... I-2
1.1 Merger, Surviving Corporation and Institution....................... I-2
1.2 Effective Time of the Merger........................................ I-2
1.3 Conversion of Shares................................................ I-3
1.4 Surviving Corporation in the Company Merger......................... I-3
1.5 Authorization for Issuance of Alliance Bancorp Common Stock; Exchange
of Certificates..................................................... I-4
1.6 No Fractional Shares................................................ I-5
1.7 Stockholders' Meetings.............................................. I-5
1.8 LBI Stock Options................................................... I-6
1.9 Registration Statement; Prospectus/Joint Proxy Statement............ I-6
1.10 Cooperation; Regulatory Approvals................................... I-7
1.11 Closing............................................................. I-8
1.12 Closing of Transfer Books........................................... I-8
1.13 Fiscal Year of Alliance Bancorp..................................... I-8
1.14 Bank Merger......................................................... I-8
ARTICLE II................................................................. I-9
REPRESENTATIONS AND WARRANTIES........................................... I-9
2.1 Organization, Good Standing, Authority, Insurance, Etc. ............ I-9
2.2 Capitalization...................................................... I-9
2.3 Ownership of Subsidiaries........................................... I-10
2.4 Financial Statements and Reports.................................... I-10
2.5 Absence of Changes.................................................. I-11
2.6 Prospectus/Joint Proxy Statement.................................... I-11
2.7 No Broker's or Finder's Fees........................................ I-11
2.8 Litigation and Other Proceedings.................................... I-11
2.9 Compliance with Law................................................. I-11
2.10 Corporate Actions................................................... I-12
2.11 Authority........................................................... I-12
2.12 Employment Arrangements............................................. I-13
2.13 Employee Benefits................................................... I-13
2.14 Information Furnished............................................... I-14
2.15 Property and Assets................................................. I-14
2.16 Agreements and Instruments.......................................... I-14
2.17 Material Contract Defaults.......................................... I-15
2.18 Tax Matters......................................................... I-15
2.19 Environmental Matters............................................... I-15
2.20 Loan Portfolio; Portfolio Management................................ I-15
2.21 Real Estate Loans and Investments................................... I-16
2.22 Derivatives Contracts............................................... I-16
2.23 Exceptions to Representations and Warranties........................ I-16
ARTICLE III................................................................ I-17
COVENANTS................................................................ I-17
3.1 Investigations; Access and Copies................................... I-17
3.2 Conduct of Business................................................. I-17
3.3 No Solicitation..................................................... I-19
3.4 Stockholder Approvals............................................... I-19
3.5 Accountants' Letters................................................ I-20
3.6 Publicity........................................................... I-20
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
3.7 Cooperation Generally............................................... I-20
3.8 Additional Financial Statements and Reports......................... I-20
3.9 Stock Exchange Listing.............................................. I-20
3.10 Employee Benefits and Agreements.................................... I-20
3.11 Conforming Adjustments.............................................. I-23
3.12 Fairness Opinion.................................................... I-23
ARTICLE IV................................................................. I-23
CONDITIONS OF THE MERGER; TERMINATION OF AGREEMENT....................... I-23
4.1 General Conditions.................................................. I-23
4.2 Conditions to Obligations of HFC.................................... I-24
4.3 Conditions to Obligations of LBI.................................... I-25
4.4 Termination of Agreement and Abandonment of Merger.................. I-25
ARTICLE V.................................................................. I-27
TERMINATION OF OBLIGATIONS; PAYMENT OF EXPENSES.......................... I-27
5.1 Termination, Lack of Survival of Representations and Warranties..... I-27
5.2 Payment of Expenses................................................. I-27
ARTICLE VI................................................................. I-27
CERTAIN POST-MERGER AGREEMENTS........................................... I-27
6.1 Registration of Stock Underlying Stock Options...................... I-27
6.2 Reports to the SEC.................................................. I-27
6.3 Indemnification..................................................... I-27
6.4 Directors, Executive Officers and Committees of Surviving
Corporation......................................................... I-28
6.5 Directors and Executive Officers of Liberty Federal Bank............ I-29
ARTICLE VII................................................................ I-30
GENERAL.................................................................. I-30
7.1 Amendments.......................................................... I-30
7.2 Confidentiality..................................................... I-30
7.3 Governing Law....................................................... I-30
7.4 Notices............................................................. I-30
7.5 No Assignment....................................................... I-31
7.6 Headings............................................................ I-31
7.7 Counterparts........................................................ I-31
7.8 Construction and Interpretation..................................... I-31
7.9 Entire Agreement.................................................... I-31
7.10 Severability........................................................ I-31
7.11 No Third Party Beneficiaries........................................ I-31
7.12 No Employment Solicitation.......................................... I-31
</TABLE>
<TABLE>
<C> <S> <C>
SCHEDULES:
Schedule I Disclosure Schedule for HFC............................... N/A
Schedule II Disclosure Schedule for LBI............................... N/A
EXHIBITS:
Exhibit A HFC Stock Option Agreement................................ I-33
Exhibit B LBI Stock Option Agreement................................ I-42
Exhibit C Form of HFC Voting Agreement.............................. N/A
Exhibit D Form of LBI Voting Agreement.............................. N/A
Exhibit 1.1 Bank Plan of Merger....................................... I-51
Exhibit 4.2 Form of Opinion of Counsel for LBI........................ N/A
Exhibit 4.3 Form of Opinion of Counsel for HFC........................ N/A
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is dated as of August 2,
1996, by and among Hinsdale Financial Corporation, a Delaware corporation
("HFC") and Liberty Bancorp, Inc., a Delaware corporation ("LBI"). Each of HFC
and LBI is sometimes individually referred to herein as a "party," and HFC and
LBI are sometimes collectively referred to herein as the "parties."
RECITALS
Whereas, HFC, a non-diversified, unitary savings and loan holding company,
with principal offices in Hinsdale, Illinois, owns all of the issued and
outstanding capital stock of Hinsdale Federal Bank for Savings, a federally
chartered savings bank ("Hinsdale Federal Bank"), with principal offices in
Hinsdale, Illinois. As of the date hereof, HFC has 6.0 million authorized
shares of common stock, par value $0.01 per share ("HFC Common Stock"), of
which 2,690,155 shares are outstanding, and 1.5 million authorized shares of
preferred stock, none of which is outstanding.
Whereas, LBI, a non-diversified, unitary savings and loan holding company,
with principal offices in Chicago, Illinois, owns all of the issued and
outstanding capital stock of Liberty Federal Savings Bank, a federally
chartered savings bank ("Liberty Federal"), with principal offices in Chicago,
Illinois. As of the date hereof, LBI has 5.0 million authorized shares of
common stock, par value $0.01 per share ("LBI Common Stock"), of which
2,477,022 shares are outstanding, and 1.0 million authorized shares of
preferred stock, none of which is outstanding.
Whereas, HFC and LBI desire to combine their respective holding companies
through a tax-free, stock-for-stock merger so that the respective stockholders
of HFC and LBI will have an equity ownership in the combined holding company.
Whereas, neither the Board of Directors of HFC nor the Board of Directors of
LBI seeks to sell its respective holding company at this time but both Boards
desire to merge their respective holding companies in a transaction structured
as a merger of equals.
Whereas, it is intended that to accomplish this result, LBI will be merged
with and into HFC, with HFC as the surviving corporation, which effective upon
consummation of the transactions contemplated hereby, will amend its
certificate of incorporation to, among other things, operate under the name
"Alliance Bancorp." The merger of LBI with and into HFC is referred to herein
as the "Company Merger." The surviving corporation after the Company Merger is
referred to herein as "Alliance Bancorp."
Whereas, immediately following consummation of the Company Merger, Liberty
Federal will be merged with and into Hinsdale Federal Bank, with Hinsdale
Federal Bank as the surviving savings institution, which effective upon
consummation of the transactions contemplated hereby, will operate under the
name "Liberty Federal Bank." Such merger is referred to herein as the "Bank
Merger." The Company Merger and the Bank Merger are sometimes collectively
referred to herein as the "Merger." Upon effectiveness of the Bank Merger, the
charter of Hinsdale Federal Bank shall be amended to, among other things,
change the name of the bank to "Liberty Federal Bank." The resulting/surviving
institution in the Bank Merger is herein referred to as "Liberty Federal Bank"
or the "Surviving Institution."
Whereas, it is intended that for federal income tax purposes the Merger
shall qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code") and
this Agreement shall constitute a plan of reorganization pursuant to Section
368 of the Internal Revenue Code.
Whereas, as an inducement to and condition of HFC's willingness to enter
into this Agreement and the HFC Stock Option Agreement, LBI will grant to HFC
an option pursuant to the LBI Stock Option Agreement,
I-1
<PAGE>
and as an inducement to and condition of LBI's willingness to enter into this
Agreement and the LBI Stock Option Agreement, HFC will grant to LBI an option
pursuant to the HFC Stock Option Agreement. The LBI Stock Option Agreement and
the HFC Stock Option Agreement are attached hereto as Exhibits A and B,
respectively. References herein to the "Stock Option Agreement" shall refer in
the case of HFC to the HFC Stock Option Agreement and in the case of LBI to
the LBI Stock Option Agreement.
Whereas, concurrently with the execution and delivery of this Agreement, and
as a condition and inducement to the parties' willingness to enter into this
Agreement, HFC and each of the directors of HFC, and LBI and each of the
directors of LBI, have entered into voting agreements in the forms attached
hereto as Exhibits C and D, respectively (the "Voting Agreements").
Whereas, the Boards of Directors of HFC and LBI (at meetings duly called and
held) have determined that this Agreement and the transactions contemplated
hereby are in the best interests of HFC and LBI, respectively, and their
respective stockholders and have approved this Agreement and the Stock Option
Agreement. Consummation of the Merger is subject to the prior approval of the
Office of Thrift Supervision ("OTS") and the stockholders of HFC and LBI,
among other conditions specified herein.
Now Therefore, in consideration of the premises and the representations,
warranties, covenants and agreements hereinafter set forth, the parties hereby
agree as follows:
ARTICLE I
The Merger and Related Matters
1.1 Merger, Surviving Corporation and Institution. Subject to the terms and
conditions of this Agreement, and pursuant to the provisions of the Delaware
General Corporation Law (the "DGCL"), the Home Owners' Loan Act, as amended
("HOLA"), and the rules and regulations promulgated thereunder (the "Thrift
Regulations"), (a) at the Company Merger Effective Time (as hereinafter
defined), (i) LBI shall be merged with and into HFC pursuant to the terms and
conditions set forth herein, (ii) the separate corporate existence of LBI
shall cease, and (iii) Alliance Bancorp, as the surviving corporation, shall
continue to be governed by the laws of the State of Delaware, and (b)
thereafter, at the Bank Merger Effective Time (as hereinafter defined) Liberty
Federal shall be merged with and into Hinsdale Federal Bank pursuant to the
terms and conditions set forth herein and in the Bank Merger Agreement
substantially in the form attached hereto as Exhibit 1.1. The Company Merger
shall have the effects specified in the DGCL, Section 1.4(e) hereof and the
Company Merger Agreement. Upon consummation of the Bank Merger, the separate
existence of Liberty Federal shall cease, and Hinsdale Federal Bank, operating
under the name "Liberty Federal Bank" shall continue as the surviving
institution of the Bank Merger. From and after the Bank Merger Effective Time,
the Surviving Institution in the Bank Merger shall possess all of the
properties and rights and be subject to all of the liabilities and obligations
of Hinsdale Federal Bank and Liberty Federal, all as more fully set forth in
the Thrift Regulations, Section 1.14 hereof and the Bank Merger Agreement.
1.2 Effective Time of the Merger. As soon as practicable after each of the
conditions set forth in Article IV hereof has been satisfied or waived, HFC
and LBI will file, or cause to be filed, certificates of merger with the
appropriate authorities of Delaware for the Company Merger and articles of
combination with the OTS for the Bank Merger, which certificates of merger and
articles of combination shall in each case be in the form required by and
executed in accordance with the applicable provisions of law and the Thrift
Regulations, respectively. The Company Merger shall become effective at the
time and date which is the later of the time at which (i) the Delaware
certificate of merger is filed with the appropriate authorities of Delaware
("Company Merger Effective Time"), which shall be immediately following the
Closing (as defined in Section 1.11 hereof) and on the same day as the Closing
if practicable, or (ii) at such other date and time as may be agreed to by the
parties and specified in the certificates of merger in accordance with
applicable law. The Bank Merger shall become effective at the time the
articles of combination for such merger are endorsed by the OTS pursuant to
I-2
<PAGE>
Section 552.13(k) of the Thrift Regulations (the "Bank Merger Effective
Time"). The parties shall cause the Company Merger to become effective before
the Bank Merger.
1.3 Conversion of Shares.
(a) At the Company Merger Effective Time, by virtue of the Company Merger
and without any action on the part of HFC or LBI or the holders of shares of
HFC or LBI Common Stock:
(i) Each outstanding share of LBI Common Stock issued and outstanding at
the Company Merger Effective Time, except as provided in clause (a) (ii) of
this Section and Section 1.6 hereof, shall cease to be outstanding, shall
cease to exist and shall be converted into and represent solely 1.054
shares of Common Stock of Alliance Bancorp (the "Conversion Ratio"), and
shall no longer be a share of LBI Common Stock.
(ii) Any shares of LBI Common Stock which are owned or held by either
party hereto or any of their respective Subsidiaries (as defined in Section
2.1 hereof) (other than in a fiduciary capacity) at the Company Merger
Effective Time shall cease to exist, the certificates for such shares shall
as promptly as practicable be canceled, such shares shall not be converted
into or represent any shares of Alliance Bancorp Common Stock, and no
shares of capital stock of Alliance Bancorp shall be issued or exchanged
therefor.
(iii) Each share of HFC Common Stock issued and outstanding immediately
before the Company Merger Effective Time shall remain an outstanding share
of Common Stock of Alliance Bancorp as the surviving corporation.
(iv) The holders of certificates representing shares of LBI Common Stock
shall cease to have any rights as stockholders of LBI, except such rights,
if any, as they may have pursuant to applicable law.
(v) Subject to Section 3.2 herein, if the issued and outstanding shares
of HFC or LBI Common Stock shall, during the period commencing on the date
hereof and ending with the Company Merger Effective Time, through a
reorganization, recapitalization, stock split, reverse stock split, stock
dividend, reclassification, combination of shares or similar corporate
rearrangement in the capitalization of HFC or LBI, as the case may be,
increase or decrease in number or be changed into or exchanged for a
different kind or number of securities, then an appropriate and
proportionate adjustment shall be made to the Conversion Ratio.
1.4 Surviving Corporation in the Company Merger.
(a) HFC shall be the surviving corporation in the Company Merger and shall
operate under the name "Alliance Bancorp." The headquarters of the surviving
corporation shall be located in Hinsdale, Illinois.
(b) The Certificate of Incorporation of HFC as in effect immediately prior
to the Company Merger Effective Time, shall, as of the Company Merger
Effective Time, be amended to change the name of HFC to Alliance Bancorp and
otherwise as contemplated in Section 1.7 (a) herein and the Certificate of
Incorporation, as so amended, shall be the Certificate of Incorporation of
Alliance Bancorp as the surviving corporation until subsequently amended;
provided, however, if the HFC stockholders shall fail to approve any of the
amendments to HFC's Certificate of Incorporation as contemplated in Section
1.7(a) herein, then, the Certificate of Incorporation of Alliance Bancorp as
the surviving corporation shall not include those amendments not so approved.
(c) At the Company Merger Effective Time, the Bylaws of HFC, as then in
effect, shall be amended to reflect the change of the name of the HFC to
Alliance Bancorp and otherwise to conform to the agreements of the parties as
reflected in Section 6.4 herein, and such Bylaws, as so amended shall be the
Bylaws of Alliance Bancorp as the surviving corporation, until subsequently
amended in accordance with the DGCL.
(d) The directors and executive officers of Alliance Bancorp as the
surviving corporation following the Company Merger shall be as provided in
Section 6.4 herein until such directors or officers are replaced or additional
directors or officers are elected or appointed in accordance with the
provisions of Section 6.4 of this Agreement, the Certificate of Incorporation
or the Bylaws of Alliance Bancorp as the surviving corporation.
I-3
<PAGE>
(e) From and after the Company Merger Effective Time:
(i) Alliance Bancorp as the surviving corporation shall possess all
assets and property of every description, and every interest in the assets
and property, wherever located, and the rights, privileges, immunities,
powers, franchises, and authority, of a public as well as of a private
nature, of each of HFC and LBI, and all obligations belonging or due to
each of HFC and LBI, all of which shall vest in Alliance Bancorp as the
surviving corporation without further act or deed. Title to any real estate
or any interest in the real estate vested in HFC or LBI shall not revert or
in any way be impaired by reason of the Company Merger.
(ii) Alliance Bancorp as the surviving corporation will be liable for all
the obligations of each of HFC and LBI. Any claim existing, or action or
proceeding pending, by or against HFC or LBI, may be prosecuted to
judgement, with right of appeal, as if the Company Merger had not taken
place, or Alliance Bancorp as the surviving corporation may be substituted
in its place.
(iii) All the rights of creditors of each of HFC and LBI will be
preserved unimpaired, and all liens upon the property of HFC and LBI will
be preserved unimpaired only on the property affected by such liens
immediately before the Company Merger Effective Time.
1.5 Authorization for Issuance of Alliance Bancorp Common Stock; Exchange of
Certificates
(a) HFC, and subsequent to the Company Merger Effective Time, Alliance
Bancorp, shall reserve for issuance a sufficient number of shares of its
common stock for the purpose of issuing its shares to LBI's stockholders in
accordance with this Article I.
(b) After the Company Merger Effective Time, holders of certificates
theretofore representing outstanding shares of LBI Common Stock (other than as
provided in Section 1.3 (a) (ii) hereof), upon surrender of such certificates
to an exchange agent appointed jointly by HFC and LBI (the "Exchange Agent"),
shall be entitled to receive certificates for the number of whole shares of
Common Stock of Alliance Bancorp ("Alliance Bancorp Common Stock") into which
shares of LBI Common Stock theretofore evidenced by the certificates so
surrendered shall have been converted, as provided in Section 1.3 hereof, and
cash payments in lieu of fractional shares, if any, as provided in Section 1.6
hereof. As soon as practicable after the Company Merger Effective Time, the
Exchange Agent will send a notice and transmittal form to each LBI stockholder
of record at the Company Merger Effective Time whose LBI Common Stock shall
have been converted into Alliance Bancorp Common Stock advising such
stockholder of the effectiveness of the Company Merger and the procedure for
surrendering to the Exchange Agent outstanding certificates formerly
representing LBI Common Stock in exchange for new certificates for Alliance
Bancorp Common Stock. Upon surrender, each certificate representing LBI Common
Stock shall be canceled.
(c) Until surrendered as provided in this Section 1.5 hereof, each
outstanding certificate which, before the Company Merger Effective Time,
represented LBI Common Stock (other than shares canceled at the Company Merger
Effective Time pursuant to Section 1.3 (a) (ii) hereof) will be deemed for all
corporate purposes to represent the number of whole shares of Alliance Bancorp
Common Stock into which the shares of LBI Common Stock formerly represented
thereby were converted and the right to receive cash in lieu of fractional
shares. However, until such outstanding certificates formerly representing LBI
Common Stock are so surrendered, no dividend or distribution payable to
holders of record of Alliance Bancorp Common Stock shall be paid to any holder
of such outstanding certificates, but upon surrender of such outstanding
certificates by such holder there shall be paid to such holder the amount of
any dividends or distributions, without interest, theretofore paid with
respect to such whole shares of Alliance Bancorp Common Stock, but not paid to
such holder, and which dividends or distribution had a record date occurring
on or after the Company Merger Effective Time and the amount of any cash,
without interest, payable to such holder in lieu of fractional shares pursuant
to Section 1.6 hereof. After the Company Merger Effective Time, there shall be
no further registration of transfers on the records of LBI of outstanding
certificates formerly representing shares of LBI Common Stock and, if a
certificate formerly representing such shares is presented to Alliance
Bancorp, it shall be forwarded to the Exchange Agent for cancellation and
exchange for a certificate representing shares of Alliance Bancorp Common
Stock and cash
I-4
<PAGE>
for fractional shares (if any), as herein provided. Following one year after
the Company Merger Effective Time, the Exchange Agent shall return to Alliance
Bancorp as the surviving corporation any certificates for Alliance Bancorp
Common Stock and cash remaining in the possession of the Exchange Agent
(together with any dividends in respect thereof) and thereafter shareholders
of LBI shall look exclusively to Alliance Bancorp for shares of the Alliance
Bancorp Common Stock and cash to which they are entitled hereunder.
(d) All shares of Alliance Bancorp Common Stock and cash in lieu of any
fractional share issued and paid upon the conversion of LBI Common Stock in
accordance with the above terms and conditions shall be deemed to have been
issued and paid in full satisfaction of all rights pertaining to such LBI
Common Stock.
(e) If any new certificate for Alliance Bancorp Common Stock is to be issued
in a name other than that in which the certificate surrendered in exchange
thereof is registered, it shall be a condition of the issuance therefor that
the certificate surrendered in exchange shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
transfer pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of a new certificate representing shares of Alliance
Bancorp Common Stock in any name other than that of the registered holder of
the certificate surrendered, or establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not payable.
(f) In the event any certificate representing LBI Common Stock shall have
been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for
such lost, stolen or destroyed certificate, upon the making of an affidavit of
that fact by the holder thereof, such shares of Alliance Bancorp Common Stock
and cash for fractional shares, if any, as may be required pursuant hereto;
provided, however, that Alliance Bancorp or the Exchange Agent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate to deliver a bond in such
sum as it may direct as indemnity against any claim that may be made against
Alliance Bancorp, HFC, LBI, the Exchange Agent or any other party with respect
to the certificate alleged to have been lost, stolen or destroyed.
1.6 No Fractional Shares. Notwithstanding any term or provision hereof, no
fractional shares of Alliance Bancorp Common Stock, and no certificates or
scrip therefor, or other evidence of ownership thereof, will be issued upon
the conversion of or in exchange for any shares of LBI Common Stock; no
dividend or distribution with respect to Alliance Bancorp Common Stock shall
be payable on or with respect to any fractional share interest; and no such
fractional share interest shall entitle the owner thereof to vote or to any
other rights of a stockholder of Alliance Bancorp as the Surviving
Corporation. In lieu of such fractional share interest, any holder of LBI
Common Stock who would otherwise be entitled to a fractional share of Alliance
Bancorp Common Stock will, upon surrender of his certificate or certificates
representing LBI Common Stock outstanding immediately before the Company
Merger Effective Time, be paid the applicable cash value of such fractional
share interest, which shall be equal to the product of the fraction of the
share to which such holder would otherwise have been entitled and the closing
price of HFC Common Stock on the trading day immediately prior to the Company
Merger Effective Time. For the purposes of determining any such fractional
share interests, all shares of LBI Common Stock owned by a LBI stockholder
shall be combined so as to calculate the maximum number of whole shares of
Alliance Bancorp Common Stock issuable to such LBI stockholder.
1.7 Stockholders' Meetings.
(a) HFC shall, at the earliest practicable date, hold a meeting of its
stockholders (the "HFC Stockholders' Meeting") to submit for stockholder
approval this Agreement and the Merger. The affirmative vote of a majority of
the issued and outstanding shares of HFC Common Stock entitled to vote shall
be required for such approval. At the HFC Stockholders' Meeting HFC shall also
submit for stockholder approval the following amendments to its Certificate of
Incorporation as follows:
(i) an amendment to Article FOURTH, paragraph A, increasing (A) the
number of authorized shares of all classes of stock to 12.5 million shares
and (B) the number of authorized shares of common stock to 11 million
shares.
I-5
<PAGE>
(ii) an amendment to the FIRST Article to rename the corporation
"Alliance Bancorp" at the Company Merger Effective Time.
(b) LBI shall, at the earliest practicable date, hold a meeting of its
stockholders (the "LBI Stockholders' Meeting") to submit for stockholder
approval this Agreement, the Company Merger Agreement and the Merger. The
affirmative vote of a majority of the issued and outstanding shares of LBI
Common Stock entitled to vote shall be required for such approval.
1.8 LBI Stock Options.
(a) At the Company Merger Effective Time, by virtue of the Merger and
without any action on the part of any holder of an option, each outstanding
option under the stock option plans of LBI (the "LBI Option Plans") shall
continue outstanding as an option to purchase, in place of the purchase of
each share of LBI Common Stock, the number of shares (rounded up to the
nearest whole share) of Alliance Bancorp Common Stock that would have been
received by the optionee in the Merger had the option been exercised in full
(without regard to any limitations contained therein on exercise) for shares
of LBI Common Stock immediately before the Company Merger upon the same terms
and conditions under the relevant option as were applicable immediately before
the Company Merger Effective Time, except for appropriate pro rata adjustments
as to the relevant option price for shares of Alliance Bancorp Common Stock
substituted therefor so that the aggregate option exercise price of shares
subject to an option immediately following the assumption and substitution
shall be the same as the aggregate option exercise price for such shares
immediately before such assumption and substitution. Alliance Bancorp shall
take such actions as may be required to effectuate the foregoing. It is
intended that the foregoing assumption shall be undertaken consistent with and
in a manner that will not constitute a "modification" under Section 424 of the
Internal Revenue Code as to any stock option which is an "incentive stock
option".
(b) At all times after the Company Merger Effective Time, Alliance Bancorp
shall reserve for issuance such number of shares of Alliance Bancorp Common
Stock as is necessary so as to permit the exercise of options granted under
the LBI Option Plans in the manner contemplated by this Agreement and the
instruments pursuant to which such options were granted. Alliance Bancorp
shall make all filings required under federal and state securities laws
promptly following the Company Merger Effective Time so as to permit the
exercise of such options and the sale of the shares received by the optionee
upon such exercise at and after the Company Merger Effective Time and Alliance
Bancorp shall continue to make such filings thereafter as may be necessary to
permit the continued exercise of options and sale of such shares. Alliance
Bancorp shall adopt a new stock option plan providing for the grant of options
for up to 300,000 shares of Alliance Bancorp Common Stock and shall undertake
to have such plan voted on by stockholders.
(c) Following the Company Merger Effective Time, in case of any
reclassification, reorganization, recapitalization, stock dividend or
distribution, subdivision, combination or exchange of the outstanding shares
of Alliance Bancorp Common Stock or in case of any consolidation or merger of
Alliance Bancorp with or into any other corporation, or in the case of any
sale or transfer of all or substantially all of Alliance Bancorp assets, then,
the rights of the optionees who then hold outstanding options under the LBI
Option Plans shall be appropriately adjusted so that the optionees will be in
the same position as if their options had been exercised immediately before
such corporate action or transaction. The provisions hereof shall similarly
apply following the Company Merger Effective Time to successive
reclassifications, reorganizations, recapitalizations, stock dividends or
distributions, subdivisions, combinations or exchanges, consolidations,
mergers, sales or transfers.
1.9 Registration Statement; Prospectus/Joint Proxy Statement.
(a) For the purposes (i) of holding the HFC Stockholders' Meeting, (ii) of
registering with the Securities and Exchange Commission ("SEC") and with
applicable state securities authorities the Alliance Bancorp Common Stock to
be issued to holders of LBI Common Stock in connection with the Merger and
(iii) of holding the LBI Stockholders' Meeting, the parties shall cooperate in
the preparation of an appropriate registration statement (such registration
statement, together with all and any amendments and supplements thereto, is
referred to herein as the "Registration Statement"), including the
Prospectus/Joint Proxy Statement
I-6
<PAGE>
satisfying all applicable requirements of applicable state laws, and of the
Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act
of 1934 (the "Exchange Act") and the rules and regulations thereunder (such
Prospectus/Joint Proxy Statement, together with any and all amendments or
supplements thereto, is referred to herein as the "Prospectus/Joint Proxy
Statement").
(b) HFC shall furnish such information concerning HFC and its Subsidiaries
as is necessary in order to cause the Prospectus/Joint Proxy Statement,
insofar as it relates to such entities, to comply with Section l.9(a) hereof.
HFC agrees promptly to advise LBI if at any time before the LBI or HFC
Stockholders' Meeting any information provided by HFC in the Prospectus/Joint
Proxy Statement becomes incorrect or incomplete in any material respect and to
provide the information needed to correct such inaccuracy or omission. HFC
shall furnish LBI with such supplemental information as may be necessary in
order to cause such Prospectus/Joint Proxy Statement, insofar as it relates to
HFC and its Subsidiaries, to comply with Section l.9(a) hereof.
(c) LBI shall furnish HFC with such information concerning LBI and its
Subsidiaries as is necessary in order to cause the Prospectus/Joint Proxy
Statement, insofar as it relates to such entities, to comply with Section
l.9(a) hereof. LBI agrees promptly to advise HFC if at any time before the HFC
or LBI Stockholders' Meeting any information provided by LBI in the
Prospectus/Joint Proxy Statement becomes incorrect or incomplete in any
material respect and to provide HFC with the information needed to correct
such inaccuracy or omission. LBI shall furnish HFC with such supplemental
information as may be necessary in order to cause the Prospectus/Joint Proxy
Statement, insofar as it relates to LBI and its Subsidiaries, to comply with
Section 1.9(a).
(d) HFC shall promptly file the Registration Statement with the SEC and
applicable state securities agencies. HFC and LBI shall use all reasonable
efforts to cause the Registration Statement to become effective under the
Securities Act and applicable state securities laws at the earliest
practicable date. LBI authorizes HFC to utilize in the Registration Statement
the information concerning LBI and its Subsidiaries provided to HFC for the
purpose of inclusion in the Prospectus/Joint Proxy Statement. HFC shall advise
LBI promptly when the Registration Statement has become effective and of any
supplements or amendments thereto, and HFC shall furnish LBI with copies of
all such documents. Before the Company Merger Effective Time or the
termination of this Agreement, each party shall consult with the other with
respect to any material (other than the Prospectus/Joint Proxy Statement) that
might constitute a "prospectus" relating to the Merger within the meaning of
the Securities Act.
(e) HFC and LBI shall consult with each other in order to identify all
persons or entities who are or may be deemed to be "affiliates" of either HFC
or LBI ("Affiliates") within the meaning of Rule 145 under the Securities Act.
Notwithstanding anything contained in this Agreement to the contrary, all
shares of Alliance Bancorp Common Stock issued to such HFC and LBI Affiliates
shall bear a legend upon the face thereof stating that transfer of the
securities is or may be restricted by the provisions of the Securities Act and
notice shall be given to Alliance Bancorp's transfer agent of such restriction
for all Affiliates; provided that such legend shall be removed by delivery of
a substitute certificate without such legend if (i) any such shares of
Alliance Bancorp Common Stock shall have been registered under the Securities
Act for sale, transfer or other disposition and are sold, transferred or
otherwise disposed of thereunder, or (ii) any such shares of stock are sold in
accordance with the applicable provisions of Rule 144 promulgated by the SEC
under the Securities Act, or (iii) such person is not at the time an affiliate
of Alliance Bancorp and has been the beneficial owner of the Alliance Bancorp
Common Stock for at least two years (or such period as may be prescribed by
the Securities Act and the rules and regulations promulgated thereunder), or
(iv) Alliance Bancorp shall have received a letter from the staff of the SEC,
or an opinion of counsel reasonably acceptable to Alliance Bancorp, to the
effect that the stock transfer restrictions and the legend are not required
for purposes of the Securities Act. So long as shares of such Alliance Bancorp
Common Stock are subject to the restrictions set forth in this Section 1.9, no
transfer of such Alliance Bancorp Common Stock shall be allowed unless and
until the transfer agent is provided with such information as may reasonably
be requested by counsel for Alliance Bancorp to ensure that such transfer will
not violate applicable provisions of the Securities Act or rules, regulations
or policies of the SEC.
1.10 Cooperation; Regulatory Approvals. The parties shall cooperate, and
shall cause each of their respective affiliates and Subsidiaries to cooperate,
in the preparation and submission by them, as promptly as
I-7
<PAGE>
reasonably practicable, of such applications, petitions, and other documents
and materials as any of them may reasonably deem necessary or desirable to the
OTS, Federal Trade Commission ("FTC"), Department of Justice ("DOJ"), SEC,
Secretary of State of Delaware, other regulatory authorities, holders of the
voting shares of common stock of HFC and LBI, and any other persons for the
purpose of obtaining any approvals or consents necessary to consummate the
transactions contemplated hereby. Each party will have the right to review and
comment on such applications, petitions and other documents and materials in
advance and shall furnish to the other copies thereof promptly after filing or
submission thereof. Any such materials must be reasonably acceptable to both
HFC and LBI prior to filing with any regulatory authority or transmission to
stockholders or other third parties, except to the extent that HFC or LBI is
legally required to proceed prior to obtaining the acceptance of the other
party hereto. The parties agree to use their best efforts to file applications
with OTS within 30 days of the date of this Agreement. Each party agrees to
consult with the other with respect to obtaining all necessary consents and
approvals, and each will keep the other apprised of the status of matters
relating to such approvals and consents and the consummation of the
transactions contemplated hereby. At the date hereof, no party is aware of any
reason that the regulatory approvals required to be obtained by it would not
be obtained or would be obtained subject to conditions that would have or
result in a material adverse effect on Alliance Bancorp as the surviving
corporation or the Surviving Institution in the Bank Merger.
1.11 Closing. If (i) this Agreement has been duly approved by the
stockholders of HFC and LBI, and (ii) all relevant conditions of this
Agreement have been satisfied or waived, a closing (the "Closing") shall take
place as promptly as practicable thereafter at the principal office of HFC, or
at such other place as the parties agree, at which the parties will exchange
certificates, opinions, letters and other documents as required hereby and
will make the filings described in Section 1.2 hereof. Such Closing will take
place within thirty (30) days after the satisfaction or waiver of all
conditions and/or obligations precedent to Closing contained in Article IV of
this Agreement, or at such other time as the parties agree. The parties shall
use their best efforts to cause the Closing to occur on or before June 30,
1997.
1.12 Closing of Transfer Books. At the Company Merger Effective Time, the
transfer books for LBI Common Stock shall be closed, and no transfer of shares
of LBI Common Stock shall thereafter be made on such books.
1.13 Fiscal Year of Alliance Bancorp. At the Company Merger Effective Time,
Alliance Bancorp's fiscal year end shall be December 31.
1.14 Bank Merger.
(a) At the Bank Merger Effective Time, each share of Liberty Federal common
stock issued and outstanding immediately prior thereto shall, by virtue of the
Bank Merger, be canceled. No new shares of the capital stock or other
securities or obligations of Liberty Federal shall be issued or be deemed
issued with respect to or in exchange for such canceled shares, and such
canceled shares of common stock of Liberty Federal shall not be converted into
any shares or other securities or obligations of any other entity.
(b) At the Bank Merger Effective Time, the Charter and Bylaws of Hinsdale
Federal Bank, as then in effect, shall be amended to conform to the agreements
of the parties as reflected in this Section 1.14 and Section 6.5 herein, and
such Charter and Bylaws, as so amended, shall be the Charter and Bylaws of the
Surviving Institution of the Bank Merger, and may thereafter be amended in
accordance with applicable law. At the Bank Merger Effective Time, Hinsdale
Federal Bank's Charter shall be amended so that the Surviving Bank shall be
named "Liberty Federal Bank".
(c) The directors and executive officers of the Surviving Institution
following the Bank Merger shall be as provided in Section 6.5 hereof until
such directors or officers are replaced or additional directors or officers
are elected or appointed in accordance with the provisions of this Agreement,
the Charter or Bylaws of Liberty Federal Bank.
I-8
<PAGE>
(d) The liquidation account established by Liberty Federal pursuant to the
plan of conversion adopted in connection with its conversion from mutual to
stock form shall continue to be maintained by the Surviving Institution after
the Bank Merger Effective Time for the benefit of those persons and entities
who had interests in the Liberty Federal liquidation account as of the Bank
Merger Effective Time and who continue to have rights therein. If required by
the rules and regulations of the OTS, the Surviving Institution shall amend
its Charter specifically to provide for the continuation of the liquidation
account established by Liberty Federal.
ARTICLE II
Representations and Warranties
HFC represents and warrants to LBI, and LBI represents and warrants to HFC,
except as disclosed in the Disclosure Schedules delivered by each party to the
other pursuant to Section 2.23 herein, as follows:
2.1 Organization, Good Standing, Authority, Insurance, Etc. It is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Section 2.1 of its Disclosure Schedule lists
each "subsidiary" of it within the meaning of Section 10(a)(1)(G) of HOLA
(individually a "Subsidiary" and collectively the "Subsidiaries"). Each of its
Subsidiaries is duly organized, validly existing and in good standing under
the laws of the respective jurisdiction under which it is organized, as set
forth in Section 2.1 of its Disclosure Schedule. It and each of its
Subsidiaries have all requisite power and authority and to the extent required
by applicable law are licensed to own, lease and operate its respective
properties and conduct its respective business as it is now being conducted.
It has delivered to the other party a true, complete and correct copy of the
articles of incorporation, certificate of incorporation or other organizing
document and of the bylaws, as in effect on the date of this Agreement, of it
and each of its Subsidiaries. It and each of its Subsidiaries are qualified to
do business as foreign corporations and are in good standing in each
jurisdiction in which qualification is necessary under applicable law, except
to the extent that any failures to so qualify would not, in the aggregate,
have a material adverse effect on it and its Subsidiaries, taken as a whole.
Each of its Subsidiaries that is a federally insured savings institution
("Bank Subsidiary") is a member in good standing of the Federal Home Loan Bank
of Chicago, and all eligible accounts issued by such institution are insured
by the Federal Deposit Insurance Corporation ("FDIC") through the Savings
Association Insurance Fund ("SAIF") to the maximum extent permitted under
applicable law. Each of its Bank Subsidiaries is a "domestic building and loan
association" as defined in Section 7701(a)(19) of the Internal Revenue Code
and is a "qualified thrift lender" as defined in Section 10(m) of the HOLA and
the rules and regulations thereunder. It is duly registered as a savings and
loan holding company under the HOLA.
Its minute books and those of each of its Subsidiaries contain complete and
accurate records of all meetings and other corporate actions taken by their
respective stockholders and Boards of Directors (including the committees of
such Boards).
2.2 Capitalization. (a) Its authorized capital stock and the number of
issued and outstanding shares of its capital stock are accurately set forth in
the recitals in this Agreement, subject, in the case of HFC to an increase in
the authorized number of shares of its common stock as contemplated in Section
1.7 (a) herein. All outstanding shares of its common stock are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. Except (i) as set forth in Section 2.2 of its Disclosure Schedule or
(ii) with respect to the Stock Option Agreement, as of the date of this
Agreement, there are no options, convertible securities, warrants or other
rights (preemptive or otherwise) to purchase or acquire any of its capital
stock from it and no oral or written agreement, contract, arrangement,
understanding, plan or instrument of any kind to which it or any of its
Subsidiaries is subject with respect to the issuance, voting or sale of issued
or unissued shares of its capital stock. A true and complete copy of each plan
or agreement pursuant to which such options, convertible securities, warrants
or other rights have been granted or issued, as in effect on the date of this
Agreement, is included in Section 2.2 of its Disclosure Schedule. Only the
holders of its common stock have the right to vote at meetings of its
stockholders on matters to be voted thereat (including the Company Merger).
I-9
<PAGE>
(b) With respect to the shares of Alliance Bancorp Common Stock to be issued
in the Company Merger, HFC represents and warrants that such shares when so
issued in accordance with this Agreement will be duly authorized, validly
issued, fully paid and nonassessable and not subject to any preemptive rights
or other liens.
2.3 Ownership of Subsidiaries. All outstanding shares of capital stock of
its Subsidiaries are validly issued, fully paid, nonassessable and owned
beneficially and of record by it or one of its Subsidiaries free and clear of
any lien, claim, charge, restriction or encumbrance (collectively,
"Encumbrance"), except as set forth in Section 2.3 of its Disclosure Schedule.
There are no options, convertible securities, warrants or other rights
(preemptive or otherwise) to purchase or acquire any capital stock of any of
its Subsidiaries and no contracts to which it or any of its Subsidiaries is
subject with respect to the issuance, voting or sale of issued or unissued
shares of the capital stock of any of its Subsidiaries. Neither it nor any of
its Subsidiaries owns more than 2% of the capital stock or other equity
securities (including securities convertible or exchangeable into such
securities) of or more than 2% of the aggregate profit participations, in any
"company" (as defined in Section 10(a)(1)(C) of the HOLA) other than a
Subsidiary or as otherwise set forth in Section 2.3 of its Disclosure
Schedule.
2.4 Financial Statements and Reports. (a) No registration statement,
offering circular, proxy statement, schedule or report filed by it or any of
its Subsidiaries with the SEC or the OTS under the Securities Act or the
Securities Exchange Act ("SEC Reports"), on the date of effectiveness in the
case of such registration statements, or on the date of filing in the case of
such reports or schedules, or on the date of mailing in the case of such proxy
statements, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. For the past five years, it and its Subsidiaries have timely
filed all reports and documents required to be filed by them with the SEC, the
OTS or the FDIC under various securities and financial institution laws and
regulations except to the extent that all failures to so file, in the
aggregate, would not have a material adverse effect on the business, financial
condition or results of operations of it and its consolidated Subsidiaries,
taken as a whole; and all such documents, as finally amended, complied in all
material respects with applicable requirements of law and, as of their
respective date or the date as amended, did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
stated therein, all financial statements and schedules included in the
documents referred to in the preceding sentences (or to be included in similar
documents to be filed after the date hereof) (i) are or will be (with respect
to financial statements in respect of periods ending after March 31, 1996), in
accordance with its books and records and those of any of its consolidated
Subsidiaries, and (ii) present (and in the case of financial statements in
respect of periods ending after March 31, 1996, will present) fairly the
consolidated financial position and the consolidated results of operations or
income, changes in stockholders' equity and cash flows of it and its
Subsidiaries as of the dates and for the period indicated in accordance with
generally accepted accounting principles applied on a basis consistent with
prior periods (except for the omission of notes to unaudited statements and in
the case of interim financial statements to normal recurring year-end
adjustments normal in nature and amounts). Its audited consolidated financial
statements at September 30, 1995 and for the year then ended in the case of
HFC and at December 31, 1995 and for the year then ended in the case of LBI
and the consolidated financial statements for all periods thereafter up to the
Closing reflect or will reflect, as the case may be, all liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise, whether due or to
become due and regardless of when asserted) as of such date of it and its
Subsidiaries required to be reflected in such financial statements according
to generally accepted accounting principles and contain or will contain (as
the case may be) adequate reserves for losses on loans and properties acquired
in settlement of loans, taxes and all other material accrued liabilities and
for all reasonably anticipated material losses, if any, as of such date in
accordance with generally accepted accounting principles. There exists no set
of circumstances that could reasonably be expected to result in any liability
or obligation material to it or its Subsidiaries, taken as a whole, except as
disclosed in such consolidated financial statements at March 31, 1996 or for
transactions effected or actions occurring or expected to be taken after March
31, 1996 (i) in the ordinary course of business, (ii) as permitted by this
Agreement or (iii) as disclosed in the SEC Reports filed with the SEC since
January 1, 1993 and before the date of this Agreement. A true and complete
copy of such March 31, 1996 financial statements has been delivered by it to
the other party.
I-10
<PAGE>
(b) It has delivered to the other party each SEC Report filed, used or
circulated by it with respect to periods since January 1, 1993 through the
date of this Agreement and will promptly deliver each such SEC Report filed,
used or circulated after the date hereof, each in the form (including exhibits
and any amendments thereto) filed with the SEC or the OTS (or, if not so
filed, in the form used or circulated), including, without limitation, its
Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q.
2.5 Absence of Changes.
(a) Since March 31, 1996, there has been no material adverse change
affecting it and its Subsidiaries, taken as a whole. There is no occurrence,
event or development of any nature existing or, to its best knowledge,
threatened which may reasonably be expected to have a material adverse effect
upon it or any of its Subsidiaries.
(b) Except as set forth in Section 2.5 of its Disclosure Schedule or in its
SEC Reports filed with the SEC since January 1, 1993 and before the date of
this Agreement, each of it and its Subsidiaries has owned and operated its
respective assets, properties and businesses in the ordinary course of
business and consistent with past practice.
2.6 Prospectus/Joint Proxy Statement. At the time the Prospectus/Joint Proxy
Statement is mailed to the stockholders of HFC and LBI for the solicitation of
proxies for the approvals referred to in Section 1.7 hereof and at all times
after such mailings up to and including the times of such approvals, such
Prospectus/Joint Proxy Statement (including any supplements thereto), with
respect to all information set forth therein relating to it (including its
Subsidiaries) and its stockholders, its common stock, this Agreement, the
Merger and the other transactions contemplated hereby, will:
(a) Comply in all material respects with applicable provisions of the
Securities Act, the Securities Exchange Act and the rules and regulations
under such Acts; and
(b) Not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements contained therein, in light of the circumstances under which it is
made, not misleading.
2.7 No Broker's or Finder's Fees. No agent, broker, investment banker,
person or firm acting on behalf or under authority of it or any of its
Subsidiaries is or will be entitled to any broker's or finder's fee or any
other commission or similar fee directly or indirectly in connection with the
Merger or any other transaction contemplated hereby, except as set forth in
Section 2.7 of its Disclosure Schedule.
2.8 Litigation and Other Proceedings. Except for matters which would not
have a material adverse effect on it and its Subsidiaries taken as a whole, or
except as set forth in Section 2.8 of its Disclosure Schedule or its SEC
Reports filed with the SEC, as of the date hereof, neither it nor any of its
Subsidiaries is a defendant in, nor is any of its property subject to, any
pending or, to its best knowledge, threatened claim, action, suit,
investigation or proceeding or subject to any judicial order, judgment or
decree.
2.9 Compliance with Law. Except as set forth in Section 2.9 of its
Disclosure Schedule or its SEC Reports filed with the SEC since January 1,
1993:
(a) It and each of its Subsidiaries are in compliance in all material
respects with all laws, regulations, ordinances, rules, judgments, orders
or decrees applicable to their respective operations or with respect to
which compliance is a condition of engaging in their respective business,
including without limitation the Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act, the Home Owners' Disclosure
Act and all other applicable fair lending laws or other laws relating to
discrimination. Neither it nor any of its Subsidiaries has received notice
from any federal, state or local government or governmental agency of any
material violation of, and does not know of any material violations of, any
of the above.
(b) It and each of its Subsidiaries have all permits, licenses,
certificates of authority, orders and approvals of, and have made all
filings, applications and registrations with, all federal, state, local and
I-11
<PAGE>
foreign governmental or regulatory bodies that are required in order to
permit them to carry on their respective businesses as they are presently
conducted.
(c) It and each of its Subsidiaries have received since January 1, 1993
no notification or communication from any governmental entity (including,
but not limited to, the OTS and any other regulatory authority) or the
staff thereof (A) asserting that it or any of its Subsidiaries is not in
compliance with any of the statutes, regulations or ordinances that such
governmental entity administers or enforces; (B) threatening to revoke any
license, franchise, permit or governmental authorization; or (c)
threatening or contemplating revocation or limitation of, or which would
have the effect of revoking or limiting, the FDIC deposit insurance of any
Bank Subsidiary (nor, to the best knowledge of its executive officers, do
any grounds for any of the foregoing exist); and
(d) It and each of its Subsidiaries are not required to give prior notice
to any federal banking or savings institution regulatory agency of the
proposed addition of an individual to their respective board of directors
or the employment of an individual as a senior executive officer.
2.10 Corporate Actions.
(a) Its Board of Directors (or the Board of Directors of its Bank
Subsidiary, as applicable) has (i) duly approved the Merger, this Agreement,
the Bank Merger Agreement, and each Stock Option Agreement, and authorized its
officers to execute and deliver this Agreement, the Bank Merger Agreement,
each Stock Option Agreement and the Voting Agreements and to take all action
necessary to consummate the Merger and the other transactions contemplated
hereby, (ii) authorized and directed the submission for stockholders' approval
of this Agreement, the Merger and any related matters requiring such approval
including, in the case of HFC, amendments to the Certificate of Incorporation
of HFC as contemplated in Section 1.7(a) herein and, (iii) approved the
execution of the Stock Option Agreement, and authorized and approved the
Company Merger (before the date of execution of the Stock Option Agreement),
in accordance with Section 203 of the DGCL.
(b) Its Board of Directors has taken all necessary action to exempt this
Agreement, the Bank Merger Agreement, the Voting Agreements and the Stock
Option Agreement and the transactions contemplated hereby and thereby from,
and this Agreement, the Bank Merger Agreement and the Stock Option Agreement
and the transactions contemplated hereby and thereby are exempt from, (i) any
applicable state takeover laws, (ii) any state laws limiting or restricting
the voting rights of stockholders, (iii) any state laws requiring a
stockholder approval vote in excess of the vote normally required in
transactions of similar type not involving a "related person," "interested
stockholder" or person or entity of similar type and (iv) any provision in its
or any of its Subsidiaries' articles of incorporation, certificate of
incorporation, or bylaws, (A) restricting or limiting stock ownership or the
voting rights of stockholders or (B) requiring a stockholder approval vote in
excess of the vote normally required in transactions of similar type not
involving a "related person," interested stockholder" or person or entity of
similar type.
2.11 Authority. Except as set forth in Section 2.11 of its Disclosure
Schedule, neither the execution and delivery of and performance of its
obligations under this Agreement, the Bank Merger Agreement and the Stock
Option Agreement by it or its applicable Bank Subsidiary nor consummation of
the Merger will violate any of the provisions of, or constitute a breach or
default under or give any person the right to terminate or accelerate payment
or performance under, (i) its certificate of incorporation or bylaws, or the
articles of incorporation, certificate of incorporation, bylaws of any of its
Subsidiaries, (ii) any regulatory restraint on the acquisition of it or
control thereof, (iii) any law, rule, ordinance or regulation or judgment,
decree, order, award or governmental or non-governmental permit or license to
which it or any of its Subsidiaries is subject or (iv) any material agreement,
lease, contract, note, mortgage, indenture, arrangement or other obligation or
instrument ("Contract") to which it or any of its Subsidiaries is a party or
is subject or by which any of its or their properties or assets is bound. The
parties acknowledge that the consummation of the Merger and the other
transactions contemplated hereby is subject to various regulatory approvals.
It or its applicable Bank Subsidiary has all requisite corporate power and
authority to enter into this Agreement, the Bank Merger Agreement and each
Stock Option Agreement and to perform its obligations hereunder and
thereunder, except, with respect to this
I-12
<PAGE>
Agreement and the Company Merger, the approval of its stockholders required
under applicable law. Other than the receipt of Governmental Approvals (as
defined in Section 4.1(c)), the approval of its stockholders and except as set
forth in Section 2.11 of its Disclosure Schedule with respect to any Contract,
no consents or approvals are required on its behalf or on behalf of any of its
Subsidiaries in connection with the consummation of the transactions
contemplated by this Agreement, the Bank Merger Agreement and each Stock
Option Agreement. This Agreement and each Stock Option Agreement constitute
the valid and binding obligations of it, and each is enforceable in accordance
with its terms, except as enforceability may be limited by applicable laws
relating to bankruptcy, insolvency or creditors rights generally and general
principles of equity.
2.12 Employment Arrangements. Except as set forth in Section 2.12 of its
Disclosure Schedule, there are no agreements, plans or other arrangements with
respect to the employment, severance or other benefits with any current or
former directors, officers or employees of it or any of its Subsidiaries which
may not be terminated without penalty or expense (including any augmentation
or acceleration of benefits) on 30 days' or less notice to any such person.
Except as set forth in Section 2.12 of its Disclosure Schedule, no payments
and benefits (including any augmentation or acceleration of benefits) to
current or former directors, officers or employees of it or any of its
Subsidiaries resulting from the transactions contemplated hereby or the
termination of such person's service or employment within two years following
consummation of the Merger will cause the imposition of excise taxes under
Section 4999 of the Internal Revenue Code or the disallowance of a deduction
to it, Alliance Bancorp as the surviving corporation, or any of their
respective Subsidiaries pursuant to Sections 162, 280G or any other section of
the Internal Revenue Code.
2.13 Employee Benefits. (a) Neither it nor any of its Subsidiaries maintains
any funded deferred compensation plans (including profit sharing, pension,
retirement savings or stock bonus plans), unfunded deferred compensation
arrangements or employee benefit plans as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), other
than any plans ("Employee Plans") set forth in Section 2.13 of its Disclosure
Schedule (true and correct copies of which it has delivered to the other
party). Neither it nor any of its Subsidiaries has incurred or reasonably
expects to incur any liability to the Pension Benefit Guaranty Corporation
except for required premium payments which, to the extent due and payable,
have been paid. The Employee Plans intended to be qualified under Section
401(a) of the Internal Revenue Code are so qualified, and it is not aware of
any fact which would adversely affect the qualified status of such plans.
Except as set forth in Section 2.13 of its Disclosure Schedule, neither it nor
any of its Subsidiaries (a) provides health, medical, disability, death or
survivor benefits to any former employee, director or officer or beneficiary
thereof or (b) maintains any form of current (exclusive of base salary and
base wages) or deferred compensation, bonus, stock option, stock appreciation
right, benefit, severance pay, retirement, employee stock ownership,
incentive, group or individual health insurance, welfare or similar plan or
arrangement for the benefit of any single or class of directors, officers or
employees, whether active or retired (collectively "Benefit Arrangements").
(b) Except as disclosed in Section 2.13 of its Disclosure Schedule, all
Employee Plans and Benefit Arrangements which are in effect were in effect for
substantially all of calendar year 1995 and there has been no material
amendment thereof (other than amendments required to comply with applicable
law or as contemplated by Section 3.10 herein) or material increase in the
cost thereof or benefits payable thereunder on or after January 1, 1996 except
to the extent provided for in Section 3.10 herein.
(c) To its best knowledge, with respect to all Employee Plans and Benefit
Arrangements, it and each of its Subsidiaries are in substantial compliance
with the requirements prescribed by any and all statutes, governmental or
court orders or rules or regulations currently in effect, including but not
limited to ERISA and the Internal Revenue Code, applicable to such Employee
Plans or Benefit Arrangements. No condition exists that could constitute
grounds for the termination of any Employee Plan under Section 4042 of ERISA;
no "prohibited transaction," as defined in Section 406 of ERISA and Section
4975 of the Internal Revenue Code, has occurred with respect to any Employee
Plan, or any other employee benefit plan maintained by it or any of its
Subsidiaries which is covered by Title I of ERISA, which could subject any
person to liability under Title I of ERISA or to
I-13
<PAGE>
the imposition of any tax under Section 4975 of the Internal Revenue Code
which could have an adverse effect on the business, assets, financial
condition, results of operations or prospects of it or any of its
Subsidiaries; to its best knowledge, no Employee Plan subject to Part III of
Subtitle B of Title I of ERISA or Section 412 of the Internal Revenue Code, or
both, has incurred any "accumulated funding deficiency," as defined in Section
412 of the Internal Revenue Code, whether or not waived; neither it nor any of
its Subsidiaries has failed to make any contribution or pay any amount due and
owing as required by the terms of any Employee Plan or Benefit Arrangement.
Except as disclosed in Schedule 2.13, neither it nor any of its Subsidiaries
has incurred or expects to incur, directly or indirectly, any liability under
Title IV of ERISA arising in connection with the termination of, or a complete
or partial withdrawal from, any plan covered or previously covered by Title IV
of ERISA which could constitute a liability of Alliance Bancorp as the
surviving corporation or any of its Subsidiaries at or after the Company
Merger Effective Time. Except as disclosed in Schedule 2.13, the present value
of "benefit liabilities" (within the meaning of 4001(a)(16) of ERISA) under
the Defined Benefit Plan (as defined in Section 3.13(a)), as of its latest
valuation date and based upon the actuarial assumptions currently prescribed
for plan terminations by the Pension Benefit Guaranty Corporation, did not
exceed the then current value of the assets of such plan allocable to such
accrued benefits, and there have been no reportable events under Section 4043
of ERISA (with respect to which the 30-day notice requirement has not been
waived by regulation) with respect to the Defined Benefit Plan.
2.14 Information Furnished. No statement contained in any schedule,
certificate or other document furnished (whether before, on or after the date
of this Agreement) or to be furnished in writing by or on behalf of it to the
other party pursuant to this Agreement contains or will contain any untrue
statement of a material fact or any material omission. To its best knowledge,
no information which is material to the Merger and necessary to make the
representations and warranties herein not misleading has been withheld from
the other party.
2.15 Property and Assets. (i) It and its Subsidiaries have good and
marketable title to all of their real property reflected in the financial
statements at March 31, 1996, referred to in Section 2.4 hereof (other than
property sold or transferred in the ordinary course of business since the date
of such financial statements) or acquired subsequent thereto, free and clear
of all Encumbrances, except for (a) such items shown in such financial
statements or in the notes thereto, (b) liens for current real estate taxes
not yet delinquent, (c) customary easements, restrictions of record and title
exceptions that have no material adverse effect upon the value or use of such
property, (d) pledges or liens incurred in the ordinary course of business and
(e) as otherwise specifically indicated in its SEC Reports filed with the SEC
since January 1, 1993 and before the date of this Agreement or in Section 2.15
of its Disclosure Schedule. (ii) It and its Subsidiaries enjoy peaceful and
undisturbed possession under all material leases for the use of real property
under which they are the lessee; all of such leases are valid and binding and
in full force and effect, and neither it nor any of its Subsidiaries is in
default in any material respect under any such lease. No default will arise
under any material real property or material personal property lease by reason
of consummation of the Merger without the lessor's consent except as set forth
in Section 2.15 of its Disclosure Schedule. (iii) There has been no material
physical loss, damage or destruction, whether or not covered by insurance,
affecting the real properties of it and its Subsidiaries since March 31, 1996.
Except as set forth in Section 2.15 of its Disclosure Schedule, all property
and assets material to its or any of its Subsidiaries' respective business and
currently used by it or any of its Subsidiaries are, in all material respects,
in good operating condition and repair.
2.16 Agreements and Instruments. Except as set forth in its SEC Reports
filed with the SEC since January 1, 1993 and before the date of this Agreement
or in Section 2.16 of its Disclosure Schedule, neither it nor any of its
Subsidiaries is a party to (a) any material agreement, arrangement or
commitment not made in the ordinary course of business, (b) any agreement,
indenture or other instrument relating to the borrowing of money by it or any
of its Subsidiaries or the guarantee by it or of its Subsidiaries of any such
obligation (other than Federal Home Loan Bank advances with a maturity of one
year or less from the date hereof), (c) any agreements to make loans or for
the provision, purchase or sale of goods, services or property between it or
any of its Subsidiaries and any director or officer of it or any of its
Subsidiaries or any affiliate or member of the immediate family of any of the
foregoing, (d) any agreements with or concerning any labor or employee
organization to
I-14
<PAGE>
which it or any of its Subsidiaries is a party, (e) any agreements between it
or any of its Subsidiaries and any five percent or more stockholder of it and
(f) any agreements, directives, orders or similar arrangements between or
involving it or any of its Subsidiaries and any state or federal savings
institution regulatory authority.
2.17 Material Contract Defaults. Neither it or any of its Subsidiaries nor
the other party thereto is in default in any respect under any contract,
agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it or any Subsidiary of it is a party or by which its
respective assets, business or operations may be bound or affected or under
which it or its respective assets, business or operations receives benefits,
which default is reasonably expected to have either individually or in the
aggregate a material adverse effect on it or any of its Subsidiaries, and
there has not occurred any event that, with the lapse of time or the giving of
notice or both, would constitute such a default.
2.18 Tax Matters. (a) It and each of its Subsidiaries have duly and properly
filed all federal, state, local and other tax returns and reports required to
be filed by them and have made timely payments of all taxes due and payable,
whether disputed or not; the current status of audits of such returns or
reports by the Internal Revenue Service ("IRS") and other applicable tax
authorities is as set forth in Section 2.18 of its Disclosure Schedule; and,
except as set forth in Section 2.18 of its Disclosure Schedule, there is no
agreement by it or any of its Subsidiaries for the extension of time or for
the assessment or payment of any taxes payable. Except as set forth in Section
2.18 of its Disclosure Schedule, neither the IRS nor any other taxing
authority is now asserting or, to its best knowledge, threatening to assert
any deficiency or claim for additional taxes (or interest thereon or penalties
in connection therewith), nor is it aware of any basis for any such assertion
or claim. It and each of its Subsidiaries have complied in all material
respects with applicable IRS backup withholding requirements. It and each of
its Subsidiaries have complied with all applicable state law tax collection
and reporting requirements.
(b) Adequate provision for any unpaid federal, state, local or foreign taxes
due or to become due from it or any of its Subsidiaries for all periods
through and including March 31, 1996 has been made and is reflected in its
March 31,1996 consolidated financial statements referred to in Section 2.4 and
has been or will be made with respect to periods ending after March 31, 1996.
2.19 Environmental Matters. To its best knowledge, except as set forth in
Section 2.19 of its Disclosure Schedule neither it nor any of its Subsidiaries
owns, leases or otherwise controls any property affected by toxic waste, radon
gas or other hazardous conditions or constructed in part with the use of
asbestos. Neither it nor any of its Subsidiaries is aware of, nor has it or
any of its Subsidiaries received written notice from any governmental or
regulatory body of, any past, present or future conditions, activities,
practices or incidents which may interfere with or prevent compliance or
continued compliance with hazardous substance laws or any regulation, order,
decree, judgment or injunction, issued, entered, promulgated or approved
thereunder or which may give rise to any common law or legal liability or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge, release or threatened release into the environment, of
any pollutant, contaminant, chemical or industrial, toxic or hazardous
substance or waste. There is no civil, criminal or administrative claim,
action, suit, proceeding, hearing or investigation pending or, to its
knowledge, threatened against it or any of its Subsidiaries relating in any
way to such hazardous substance laws or any regulation, order, decree,
judgment or injunction issued, entered, promulgated or approved thereunder.
2.20 Loan Portfolio; Portfolio Management. (a) All evidences of indebtedness
reflected as assets in its financial statements at March 31, 1996, referred to
in Section 2.4 herein, or originated or acquired since such date, are (except
with respect to those assets which are no longer assets of it or any of its
Subsidiaries) binding obligations of the respective obligors named therein
except as enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors rights generally and
except as to the availability of equitable remedies, including specific
performance, which are subject to the discretion of the court before which a
proceeding may be brought, and the payment of no material amount thereof
(either individually or in the aggregate with other evidences of indebtedness)
is subject to any defenses or offsets which have been
I-15
<PAGE>
threatened or asserted against it or any Subsidiary. All such indebtedness
which is secured by an interest in real property is secured by a valid and
perfected mortgage lien having the priority specified in the loan documents.
All loans originated or purchased by it or any of its Subsidiaries were at the
time entered into and at all times owned by it or its Subsidiaries in
compliance in all material respects with all applicable laws and regulations
(including, without limitation, all consumer protection laws and regulations).
It and its Subsidiaries (as applicable) administer their loan and investment
portfolios (including, but not limited to, adjustments to the interest rate
and payment on adjustable mortgage loans) in accordance with all applicable
laws and regulations and the terms of applicable instruments. The records of
it and any of its Subsidiaries (as applicable) regarding all loans outstanding
on its books are accurate in all material respects. The risk classification
system utilized by its Bank Subsidiaries has been established in accordance
with the requirements of the OTS.
(b) Section 2.20 of its Disclosure Schedule sets forth a list, accurate and
complete in all material respects, of the aggregate amounts of loans,
extensions of credit and other assets of it and its Subsidiaries that have
been adversely designated, criticized or classified by it as of March 31,
1996, separated by category of classification or criticism (the "Asset
Classification"); and no amounts of loans, extensions of credit or other
assets that have been adversely designated, classified or criticized as of the
date hereof by any representative of any government entity as "Special
Mention," "Substandard," "Doubtful," "Loss," or words of similar import, are
excluded from the amounts disclosed in the Asset Classification, other than
amounts of loans, extensions of credit or other assets that were charged off
by it or any of its Subsidiaries on or before March 31, 1996, as reflected in
the financial statements referenced in Section 2.4.
2.21 Real Estate Loans and Investments. Except for properties acquired in
settlement of loans, there are no facts, circumstances or contingencies known
to it or any of its Subsidiaries which exist and would require a material
reduction under generally accepted accounting principles in the present
carrying value of any of the real estate investments, joint ventures,
construction loans, other investments or other loans of it or any of its
Subsidiaries (either individually or in the aggregate with other loans and
investments).
2.22 Derivatives Contracts. Neither it nor any of its Subsidiaries is a
party to or has agreed to enter into swap, forward, future, option, cap, floor
or collar financial contract or any other contract not included in its
financial statement as of March 31, 1996 filed as part of its SEC Reports or
disclosed in its Form 10-Q as filed with the SEC for the quarter ended March
31, 1996 (or in its financial statement included therein) which is a
derivatives contract (including various combinations thereof) (each, a
"Derivatives Contract") or owns securities that are identified in Thrift
Bulletin No. 65 or otherwise referred to as structured notes (each, a
"Structured Note"), except for those Derivatives Contracts and Structured
Notes set forth in Section 2.22 of its Disclosure Schedule, including a list,
as applicable, of any of its or any of its Subsidiaries' assets pledged as
security for a Derivatives Contract.
2.23 Exceptions to Representations and Warranties. (a) On or before the date
hereof, HFC has delivered to LBI and LBI has delivered to HFC its respective
Disclosure Schedule setting forth, among other things, exceptions to any and
all of its representations and warranties in Article II, provided that each
exception set forth in a Disclosure Schedule shall be deemed disclosed for
purposes of all representations and warranties if such exception is contained
in a section of the Disclosure Schedule corresponding to a Section in Article
II and provided further that (i) no such exception is required to be set forth
in a Disclosure Schedule if its absence would not result in the related
representation or warranty being deemed untrue or incorrect under the standard
established by Section 2.23(b) and (ii) the mere inclusion of an exception in
a Disclosure Schedule shall not be deemed an admission by a party that such
exception represents a material fact, event or circumstance or would result in
a material adverse effect or material adverse change.
(b) Except as to the representations contained in Section 2.11, no
representation or warranty of HFC or LBI contained in Article II shall be
deemed untrue or incorrect, and no party shall be deemed to have breached a
representation or warranty contained herein, as a consequence of the existence
of any fact, circumstance or event if such fact, circumstance or event,
individually or taken together with all similar facts, circumstances or
events,
I-16
<PAGE>
would not, or in the case of Section 2.8 is not reasonably likely to, have a
material adverse effect or material adverse change.
As used in this Agreement, the term "material adverse effect" or "material
adverse change" means an effect or change which (i) is materially adverse to
the business, financial condition, results of operations or prospects of HFC
or LBI and its respective Subsidiaries taken as a whole or (ii) enables any
person to prevent the consummation of the transactions contemplated hereby;
provided however that any effect or change resulting from (A) actions or
omissions of HFC or LBI taken with the prior consent of the other or as
provided for herein or (B) circumstances affecting the savings institution
industry generally (including changes in laws or regulations, accounting
principles or general levels of interest rates including, without limitation,
the effects of changes in interest rates on earnings, portfolio market value
and interest rate risk exposure) shall be deemed not to be or have a material
adverse effect or material adverse change.
ARTICLE III
Covenants
3.1 Investigations; Access and Copies. Between the date of this Agreement
and the Company Merger Effective Time, each party agrees to give to the other
party and its respective representatives and agents full access (to the extent
lawful) to all of the premises, books, records and employees of it and its
Subsidiaries at all reasonable times and to furnish and cause its Subsidiaries
to furnish to the other party and its respective agents or representatives
access to and true and complete copies of such financial and operating data,
all documents with respect to matters to which reference is made in Article II
of this Agreement or on any list, schedule or certificate delivered or to be
delivered in connection herewith and such other documents, records, or
information with respect to the business and properties of it and its
subsidiaries as the other party or its respective agents or representatives
shall from time to time reasonably request; provided however, that any such
inspection (a) shall be conducted in such manner as not to interfere
unreasonably with the operation of the business of the entity inspected and
(b) shall not affect any of the representations and warranties hereunder. Each
party will also give prompt written notice to the other party of any event or
development which, (x) had it existed or been known on the date of this
Agreement, would have been required to be disclosed under this Agreement, (y)
would cause any of its representations and warranties contained herein to be
inaccurate or otherwise materially misleading or (z) materially relates to the
satisfaction of the conditions set forth in Article IV of this Agreement.
Notwithstanding anything to the contrary herein, neither party hereto nor any
of its Subsidiaries shall be required to provide access to or to disclose
information where such access or disclosure would jeopardize the attorney-
client privilege of the institution in possession or control of such
information or contravene any law, rule, regulation, order, judgment, decree,
fiduciary duty or binding agreement entered into prior to the date of this
Agreement or, in the event of any litigation or threatened litigation between
the parties over the terms of this Agreement, where access to information may
be adverse to the interests of such party. Each party shall inform the other
when it is unable to provide access, or disclose information, to the other
party as a result of the preceding sentence. To the extent reasonably
practicable, the parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
3.2 Conduct of Business. Between the date of this Agreement and the Company
Merger Effective Time or the termination of this Agreement (whichever occurs
first), each party agrees, on behalf of itself and each of its respective
Subsidiaries, except as contemplated herein or insofar as the Chief Executive
Officer of HFC or the Chief Executive Officer of LBI shall otherwise consent
in writing (which consent shall not be unreasonably withheld):
(a) That it and its Subsidiaries shall (i) except as contemplated in this
Agreement, conduct their business only in the ordinary course consistent
with past practices, (ii) maintain their books and records in accordance
with past practices and (iii) use all reasonable efforts to preserve intact
their business organizations and assets, to maintain their rights,
franchises and existing relations with customers, suppliers,
I-17
<PAGE>
employees and business associates and to take no action that would (A)
adversely affect the ability of any of them to obtain the Governmental
Approvals (as defined in Section 4.1(c) herein) or which would reasonably
be expected to hinder or delay receipt of the Governmental Approvals or (B)
adversely affect its ability to perform its obligations under this
Agreement, the Bank Merger Agreement or the applicable Stock Option
Agreement;
(b) That it and its Subsidiaries shall not: (i) declare, set aside or pay
any dividend or make any other distribution with respect to its capital
stock, except for (A) the declaration and payment of regular quarterly cash
dividends by LBI in an amount not in excess of $.60 (annualized) for each
outstanding share of LBI Common Stock, in each case with usual record and
payment dates for such dividends consistent with such parties' past
dividend practices, or (B) dividends or distributions by a wholly-owned
Subsidiary of such party to such party; (ii) reacquire or buy any of its
outstanding shares; (iii) issue or sell or buy any shares of capital stock
of it or any of its Subsidiaries, except shares of its common stock issued
pursuant to the Stock Option Agreement and shares issued pursuant to
exercise of stock options previously issued and identified in Section 2.2
of its Disclosure Schedule; (iv) effect any stock split, stock dividend,
reverse stock split other reclassification or recapitalization of its
common stock; or (v) except with respect to the Stock Option Agreement,
grant any options or issue any warrants exercisable for or securities
convertible or exchangeable into capital stock of it or any of its
Subsidiaries or grant any stock appreciation or other rights with respect
to shares of capital stock of it or of any of its Subsidiaries; or (vi)
purchase or acquire any of the outstanding shares of capital stock of the
other party hereto or any Subsidiary thereof other than as contemplated by
the Stock Option Agreement or in connection with the Merger as contemplated
herein;
(c) That, except where the provisions herein are limited to a specific
party and/or its Subsidiaries, it and its Subsidiaries shall not: (i) sell,
dispose of or pledge any significant assets of it or of any of its
Subsidiaries other than in the ordinary course of business consistent with
past practices or in connection with the borrowing of funds consistent with
the provisions hereinafter contained; (ii) merge or consolidate it or any
of its Subsidiaries with or into any other entity or otherwise acquire any
other entity or acquire any significant assets; (iii) sell or pledge or
agree to sell or pledge or permit any lien to exist on any stock of any of
its Subsidiaries owned by it; (iv) change the certificate of incorporation,
bylaws or other governing instruments of it or any of its Subsidiaries,
except as contemplated in this Agreement; (v) engage in any lending
activities other than in the ordinary course of business consistent with
past practices but subject to the restrictions contained in Section 3.2(e)
hereof and provided HFC and LBI and their respective Subsidiaries
collectively shall limit their new loans to a Relationship (as defined
herein) to $3.0 million; for purposes of this Agreement, a "Relationship"
means common borrowers, guarantors or partners or other relationships
considered related or affiliated by management of the lending entity; (vi)
form any new subsidiary or cause or permit a material change in the
activities presently conducted by any Subsidiary or make additional
investments in subsidiaries in excess of $1.0 million; (vii) engage in any
off balance sheet interest rate swap, cap or floor agreement; (viii) engage
in any activity not contemplated by its written business plan in effect on
the date hereof; (ix) purchase any equity securities other than Federal
Home Loan Bank stock; (x) make any investment which would cause any Banking
Subsidiary not to be a qualified thrift lender under Section 10(m) of the
HOLA or a "domestic building and loan association" as defined in Section
7701 (a) (19) of the Internal Revenue Code; (xi) authorize capital
expenditures other than in the ordinary and usual course of business; (xii)
implement or adopt any change in its accounting principles, practices or
methods other than as may be required by generally accepted accounting
principles; or (xiii) engage any independent auditors other than such
auditors engaged as of the date hereof. The limitations contained in this
Section 3.2(c) shall also be deemed to constitute limitations as to the
making of any commitment with respect to any of the matters set forth in
this Section 3.2(c).
(d) That, except where the provisions herein are limited to a specific
party and/or its Subsidiaries, it and its Subsidiaries shall not: (i) incur
any debt obligation (excluding deposits) or other obligation for borrowed
money with terms in excess of one year other than FHLB advances consistent
with past practices; (ii) grant any general increase in compensation or
benefits, or pay any bonuses (except normal year-end bonuses consistent
with past practices) to its employees or officers; (iii) except as
contemplated by this Agreement, extend, renew, modify, amend or otherwise
change any employment or severance agreements
I-18
<PAGE>
with any of its directors, officers or employees; (iv) grant any increase
in fees or other increases in compensation or other benefits to any of its
present or former directors in such capacity; or (v) except as contemplated
by Section 3.10 hereof, establish or sponsor any new Employee Plan or
Benefit Arrangement or effect any change in its Employee Plans or Benefit
Arrangements (unless such change is required by applicable law or, in the
opinion of its counsel, is necessary to maintain continued qualification of
any tax-qualified plan that provides for retirement benefits).
(e) That, except where the provisions herein are limited to a specific
party and/or its Subsidiaries, it and its Subsidiaries shall not without
the prior consultation with the other party: (i) extend, restructure,
modify or otherwise amend or alter any of the following types of commercial
real estate loans or commitments: (A) any loan secured by real estate (or
to be secured) located in the State of Illinois with a loan balance (or
commitment amount) of $1.0 million or greater (B) any loan or commitment to
a Relationship that has or would have (if the commitment was fully
implemented) loans exceeding $3,000,000; (C) any loan secured by (or
commitment to be secured by) real estate located outside the State of
Illinois with a loan balance of or a commitment amount of $500,000 greater;
(D) any loan exceeding $500,000 as of the date of this Agreement which is
more than 90 days delinquent as to payment, in bankruptcy or foreclosure,
or carried as a restructured troubled debt; or (E) any loan with a balance
of $250,000 or greater and internally classified as Special Mention, Sub-
Standard, Doubtful, or Loss as of the date of this Agreement; for purposes
of the dollar amounts set forth in subparts (A)-(E) above any specific
reserves or allocated general reserves shall be reversed; (ii) take any
individual commercial mortgage or multi-family loan application in an
amount greater than $1,000,000 or acquisition and development loan
application in an amount greater than $1,000,000; (iii) make any
residential loan in an amount greater than $600,000; (iv) enter into or
renew any contract for the purchase of consumer loans (as defined by the
rules and regulations of OTS), on a whole loan and participation basis; or
(v) originate mobil home loans (including pipeline loans in process) in an
aggregate amount exceeding $100,000.
3.3 No Solicitation. Each party agrees, on behalf of itself and each of its
Subsidiaries, that it will not authorize or permit any officer, director,
employee, investment banker, financial consultant, attorney, accountant or
other representative of it or any of its Subsidiaries, directly or indirectly,
to initiate contact with any person or entity in an effort to solicit,
initiate or encourage any "Takeover Proposal" (as such term is defined below).
Except as the fiduciary duties of its Board of Directors may otherwise require
(as determined in good faith after consultation with legal counsel), each
party agrees that it will not authorize or permit any officer, director,
employee, investment banker, financial consultant, attorney, accountant or
other representative of it or any of its Subsidiaries, directly or indirectly,
(A) to cooperate with, or furnish or cause to be furnished any non-public
information concerning its business, properties or assets to, any person or
entity in connection with any Takeover Proposal; (B) to negotiate any Takeover
Proposal with any person or entity; or (C) to enter into any agreement, letter
of intent or agreement in principle as to any Takeover Proposal. Each party
agrees that it shall promptly give written notice to the other upon becoming
aware of any Takeover Proposal, such notice to contain, at a minimum, the
identity of the persons submitting the Takeover Proposal, a copy of any
written inquiry or other communication, the terms of any Takeover Proposal,
any information requested or discussions sought to be initiated and the status
of any requests, negotiations or expressions of interest. As used in this
Agreement, "Takeover Proposal" shall mean any proposal, other than as
contemplated by this Agreement, for a merger or other business combination
involving either party or any of their respective Bank Subsidiaries or for the
acquisition of a twenty-five percent (25%) or greater equity interest in
either party or any of their respective Bank Subsidiaries, or for the
acquisition of a substantial portion of the assets of either party or any of
their respective Bank Subsidiaries.
3.4 Stockholder Approvals. The parties shall call the meetings of their
respective stockholders to be held for the purpose of voting upon the Merger
and related matters, as referred to in Section 1.7 hereof, as soon as
practicable. In connection with the HFC and LBI Stockholders' Meetings, the
respective Boards of Directors shall recommend approval of this Agreement, the
Merger and any other matters requiring stockholder action (including, in the
case of HFC, the amendments to its Certificate of Incorporation as
contemplated in Section 1.7(a) herein) relating to the transactions
contemplated herein (and such recommendation shall be contained in
I-19
<PAGE>
the Prospectus/Joint Proxy Statement) unless as a result of an unsolicited
Takeover Proposal received by a party after the date hereof, the Board of
Directors of such party determines in good faith after consultation with legal
counsel and an investment banking firm of recognized standing that to do so
would constitute a breach of the fiduciary duties of such Board of Directors
to the stockholders of such party. Each of the parties shall use its best
efforts to solicit from its stockholders proxies in favor of approval and to
take all other action necessary or helpful to secure a vote of the holders of
the outstanding shares of its common stock in favor of the Merger and, in the
case of HFC, the amendments to its Certificate of Incorporation as
contemplated in Section 1.7(a) herein, except as the fiduciary duties of its
Board of Directors may otherwise require.
3.5 Accountants' Letters. Each party agrees to use all reasonable efforts to
cause to be delivered to the other, and such other party's directors and
officers who sign the Registration Statement, a letter of its independent
auditors, dated (i) the date on which the Registration Statement shall become
effective and (ii) a date on or shortly prior to the date of the Closing, and
addressed to such other party, and such directors and officers, in form and
substance customary for "comfort" letters delivered by independent accountants
in connection with registration statements similar to the Registration
Statement.
3.6 Publicity. Between the date of this Agreement and the Company Merger
Effective Time, neither party nor any of its Subsidiaries shall, without the
prior approval of the other party, issue or make, or permit any of its
directors, employees, officers or agents to issue or make, any press release,
disclosure or statement to the press or any third party with respect to the
Merger or the other transactions contemplated hereby, except as required by
law. The parties shall cooperate when issuing or making any press release,
disclosure or statement with respect to the Merger or the other transactions
contemplated hereby.
3.7 Cooperation Generally. Between the date of this Agreement and the
Company Merger Effective Time, the parties and their respective Subsidiaries
shall in conformance with the provisions of this Agreement use their best
efforts, and take all actions necessary or appropriate, to consummate the
Merger and the other transactions contemplated hereby at the earliest
practicable date.
3.8 Additional Financial Statements and Reports. As soon as reasonably
practicable after they become publicly available, each party shall furnish to
the other its statements of financial condition, statements of operations or
statements of income, statements of cash flows and statements of changes in
stockholders' equity at all dates and for all periods normally prepared before
the Closing. Such financial statements will be prepared in conformity with
generally accepted accounting principles applied on a consistent basis and
will fairly present the financial condition, results of operations and cash
flows of the respective parties (subject, in the case of unaudited financial
statements, to (a) normal year-end audit adjustments, (b) any other
adjustments described therein and (c) the absence of notes which, if
presented, would not differ materially from those included with its most
recent audited consolidated financial statements), and all of such financial
statements will be prepared in conformity with the requirements of Form 10- Q
or Form 10-K, as applicable, under the Exchange Act.
3.9 Stock Exchange Listing. HFC agrees to use all reasonable efforts to
cause to be listed on the NASDAQ National Market, subject to official notice
of issuance, the shares of Alliance Bancorp Common Stock to be issued in the
Merger.
3.10 Employee Benefits and Agreements. For purposes of this Section 3.10,
references to HFC shall include Hinsdale Federal Bank, references to LBI shall
include Liberty Federal, and references to Alliance Bancorp shall include
Liberty Federal Bank.
(a) Employees of HFC or LBI, who are enrolled in a group health plan made
available by HFC, LBI or Alliance Bancorp, whose employment is terminated
in connection with the Company Merger or Bank Merger, shall be eligible for
group health coverage, consistent with the requirements of the Consolidated
Omnibus Budget Reconciliation Act ("COBRA") requirements of the Internal
Revenue Code and ERISA, as in effect on the date of such termination, for
the applicable period set forth in the Internal Revenue Code.
I-20
<PAGE>
(b) The executives and officers of HFC and LBI who have entered into
employment agreements, severance agreements, or special termination
agreements (collectively, "Contract Severance Agreements") with HFC and its
Subsidiaries and LBI and its Subsidiaries shall enter into a supplemental
agreement or waiver with HFC or LBI, as applicable, wherein it is
stipulated by said executive or officer that the Company Merger and/or the
Bank Merger shall not constitute a change in control for purposes of, nor
result in the obligation of HFC or LBI to pay severance or other benefits
under, said Contract Severance Agreement.
(c) Alliance Bancorp agrees to continue to employ Messrs. Edward J.
Burns, Fredric G. Novy, Joseph W. Stachnik, and Kenne P. Bristol as of the
Company Merger Effective Time pursuant to their existing employment
agreements, subject to such adjustments or amendments as are necessary to
reflect the provisions of this Agreement.
(d) Immediately prior to or, upon mutual consent of the parties, after
the Merger Effective Time, the pension plan maintained by LBI or its
Subsidiary (the "LBI pension plan") shall be terminated. In connection with
the termination of the LBI pension plan, the parties hereto have agreed
that the LBI pension plan shall be amended in order to maximize the benefit
accruals to participants and beneficiaries in a manner consistent with the
requirements of the Internal Revenue Code and ERISA, in order to fully
utilize the assets of the plan for the payment of benefits to participants
and beneficiaries of the LBI pension plan. In connection with the amendment
and termination of the LBI pension plan, the LBI pension plan shall seek a
favorable determination letter from the Internal Revenue Service with
respect to the continued qualification of the LBI pension plan under
Internal Revenue Code Section 401(a) upon amendment and termination. At the
time of termination of the LBI pension plan, the supplemental executive
retirement plan ("SERP") maintained by LBI for the benefit of certain
executives shall be frozen and shall accrue no additional benefits. The
present value of the accrued benefit payable to a participant under the
SERP at the time the SERP is frozen shall be payable, in accordance with
the SERP, in the form of a monthly single life annuity with a ten (10) year
certain for the duration of the participant's life, commencing within
thirty (30) days of the participant's termination of employment with LBI or
Alliance Bancorp.
(e) Immediately prior to or after the Merger Effective Time, the pension
plan maintained by HFC (the "HFC pension plan") shall be terminated. The
timing of the termination of the HFC pension plan shall be determined after
taking into consideration (i) the necessity of making additional
contributions to said plan in order that the HFC pension plan shall have
assets sufficient to satisfy its liabilities in connection with the
termination and (ii) the annual limitations on contributions established
under Internal Revenue Code Section 404, provided, however, that such
termination shall occur no later than the last day of the transition period
set forth under Internal Revenue Code Section 410(b)(6)(C)(ii).
(f) In connection with the Merger, the employee stock ownership plans
("ESOPs") maintained by HFC and LBI shall be terminated. In connection with
said ESOP terminations, a number of the unallocated shares held by each
ESOP shall be sold by each ESOP, in a manner which is intended to comply
with the Internal Revenue Code and ERISA, in order to provide sufficient
proceeds to repay the outstanding ESOP loans (which are exempt loans under
Internal Revenue Code Section 4975) and such outstanding ESOP loans shall
be repaid in full as soon as reasonably practicable. Also in connection
with the termination of each ESOP, each ESOP shall be amended in order to
maximize the allocation of unallocated shares to the existing participants
in the ESOPs in a manner consistent with the Internal Revenue Code and
ERISA. It is contemplated that such amendments shall, among other things,
set forth that the assets remaining in the suspense account on termination
of the ESOP and repayment of the outstanding ESOP loan shall be allocated
among the accounts of participants as earnings of the ESOP based on the
ratio of the participant's account balance to that of all participants in
the ESOP. Upon repayment of the outstanding loans and amendment and
termination of the ESOPs, the HFC ESOP and the LBI ESOP shall seek from the
Internal Revenue Service a favorable determination letter with respect to
the continued qualification of the ESOP under Internal Revenue Code Section
401(a) on amendment and termination. In the event that the Internal Revenue
Service disagrees with the characterization of the assets remaining in the
suspense account as earnings of the ESOP, the Board of Directors of
Alliance Bancorp may determine to continue with the termination of the
ESOPs, or to reinstate
I-21
<PAGE>
the ESOPs and revoke the terminations in order to maximize the allocations
to the participants and beneficiaries of each ESOP through continuing
contributions to the accounts of participants and beneficiaries consistent
with the requirements of the Internal Revenue Code and ERISA, provided,
however, that, if necessary to comply with the Internal Revenue Code, the
ESOPs' separate existence shall continue no later than the last day of the
transition period set forth under Internal Revenue Code Section
410(b)(6)(C)(ii). If all allocations cannot be made under the separate
ESOPs to participants and beneficiaries prior to the end of said transition
period, Alliance Bancorp shall determine whether to merge the ESOPs and
continue the single ESOP in existence until any remaining assets in the
ESOP suspense account have been fully allocated, or to merge both ESOPs
into the 401(k) Plan of Alliance Bancorp.
(g) LBI presently maintains a post-employment medical program for the
benefit of certain of its employees who have attained age 55 and have 10
years of service with LBI or an LBI Subsidiary. LBI agrees to discontinue
the availability of said post-retirement medical program for all employees
or former employees who are not currently eligible for or receiving
benefits under said program, except for the following: any employee who
would satisfy the eligibility requirements if 5 years are added to his age
or service or a combination of the two (i.e., 2 years to age and 3 years to
service) will continue to be eligible for the post-retirement medical
program upon termination of employment with LBI or Alliance Bancorp.
(h) Notwithstanding anything to the contrary herein, to the extent there
remains any shares reserved for issuance under any existing management
recognition plans of HFC and LBI, said shares may at the discretion of the
Board of Directors of the respective parties, be awarded to employees of
the respective parties.
(i) Subject to the provisions set forth in Section 3.10(a), (b), (c),
(d), (e), (f), (g) and (h) above, HFC and LBI and its Subsidiaries shall,
prior to the Company merger Effective Time, each continue to maintain their
employee benefit and welfare plans and programs. From and after the Company
Merger Effective Time, Alliance Bancorp and its Subsidiaries shall have the
right to continue, amend, terminate or merge any of the employee benefit
and welfare plans and programs of LBI and its Subsidiaries. To the extent
permitted by applicable law, from and after the Company Merger Effective
Time the former employees of LBI and its Subsidiaries who are continuing
employees of Alliance Bancorp or its Subsidiaries (the "Continuing
Employees") shall be entitled to participate in the Alliance Bancorp
employee benefit and welfare plans and programs (except to the extent that
coverage is provided under a continuing LBI plan or program, it being
agreed and understood that there shall be no duplication of benefits) on
the same basis that similarly-situated employees of Alliance Bancorp
(formerly, HFC) and its Subsidiaries are entitled to participate in such
plans and programs including, but not limited to tax-qualified retirement
plans. For purposes of eligibility, participation and vesting in such
Alliance Bancorp plans and programs, but not for purposes of benefit
accrual, the Continuing Employees shall receive past service credit for
their full-time employment with LBI and its Subsidiaries (including service
with any entity acquired by LBI or Liberty Federal). The Continuing
Employees will not be subject to any exclusion or penalty for pre-existing
conditions that were covered under the LBI medical plan immediately prior
to the Company Merger Effective Time or any waiting period relating to
coverage under the HFC medical plan and they will receive full credit for
prior service and payment of current and past premiums, co-payments and
deductibles. If, on or after the date hereof, HFC or its Subsidiaries
adopts a new "employee benefit plan" within the meaning of ERISA for the
benefit of its employees generally, then to the extent participants receive
a credit for past service with HFC or its Subsidiaries, equivalent credit
shall be given to Continuing Employees for past service with LBI or its
Subsidiaries.
(j) Notwithstanding any other provision of this Agreement, HFC agrees
that LBI and its Subsidiaries may take such actions on or before the
Company Merger Effective Time as are necessary or appropriate to effectuate
the purposes of this Section 3.10, including but not limited to (i) the
adoption and execution of agreements and amendments relating to the plans
and programs referenced herein, and (ii) the adoption and execution of any
amendment required by applicable law.
(k) Immediately prior to or, upon mutual consent of the parties, after
the Merger Effective Time, the executive deferred compensation plan and
deferred compensation plan for directors (collectively, the "Deferred
Compensation Plans") maintained by LBI shall be frozen and no further
contributions shall be
I-22
<PAGE>
made to such Deferred Compensation Plans. The assets of the Deferred
Compensation Plans shall continue to earn interest, at the interest rate
set forth in the Deferred Compensation Plans, until paid to participants.
All employer discretionary contributions under the executive deferred
compensation plan shall be and become immediately 100% vested at the time
that said plan is frozen. The account balances attributable to the
participants in the Deferred Compensation Plans shall be amortized over a
period of one hundred twenty (120) months and shall be paid in equal
monthly installments over such period, commencing not later than sixty (60)
days after the Merger Effective Time.
3.11 Conforming Adjustments. The parties and their respective Subsidiaries
shall cooperate in the establishment of additional accruals and reserves
("Conforming Adjustments"). These Conforming Adjustments enable both parties
to conform accounting policies and practices as well as to conform their
interest rate risk position. The Conforming Adjustments shall, to the extent
determined by the parties, be made immediately prior to the Closing but after
the satisfaction or waiver of all conditions and/or obligations precedent to
Closing contained in Article IV of this Agreement as confirmed by the parties
at such time. Notwithstanding anything to the contrary contained in this
Agreement, (a) no Conforming Adjustment shall be taken into account for
purposes of determining contributions to qualified or non-qualified employee
benefit plans and (b) no Conforming Adjustment, or any litigation or
regulatory proceeding relating thereto, or any other effect on any party
resulting from its compliance with this Section 3.11, shall constitute or be
deemed to be a breach, violation of or failure to satisfy any representation,
warranty, covenant, condition or other provision of this Agreement or
otherwise be considered in determining whether any such breach, violation or
failure to satisfy shall have occurred or be deemed to constitute or cause a
material adverse effect or material adverse change on either party hereto or
their Subsidiaries, taken as a whole.
3.12 Fairness Opinion. Each of HFC and LBI has received the oral opinion of
its financial advisor that the Merger is fair to its stockholders from a
financial point of view, and HFC and LBI will request such financial advisor
to deliver a written fairness opinion for inclusion in the Prospectus/Joint
Proxy Statement.
ARTICLE IV
Conditions of the Merger;
Termination of Agreement
4.1 General Conditions. The obligations of each party to effect the Company
Merger shall be subject to the satisfaction (or written waiver by such party,
to the extent such condition is waivable) of the following conditions before
the Company Merger Effective Time:
(a) Stockholder Approval. The holders of a majority of the outstanding
shares of HFC and LBI Common Stock shall have approved this Agreement and
the Company Merger as specified in Section 1.7 hereof or as otherwise
required by applicable law.
(b) No Proceedings. No order shall have been entered and remain in force
restraining or prohibiting the Merger in any legal, administrative,
arbitration, investigatory or other proceedings (collectively,
"Proceedings") by any governmental or judicial or other authority.
(c) Governmental Approvals. To the extent required by applicable law or
regulation, all approvals of or filings with any governmental authority
(collectively, "Governmental Approvals"), including without limitation
those of the OTS, the FDIC, the FTC, the DOJ, the SEC and any state
securities authorities, shall have been obtained or made, and any waiting
periods shall have expired in connection with the consummation of the
Merger, provided however that none of the preceding shall be deemed
obtained or made if it shall be conditioned or restricted in a manner that
would have or result in a material adverse effect on Alliance Bancorp as
the Surviving Corporation as contemplated by the parties. All other
statutory or regulatory requirements for the valid consummation of the
Merger and related transactions shall have been satisfied.
I-23
<PAGE>
(d) Registration Statement. The Registration Statement shall have been
declared effective and shall not be subject to a stop order of the SEC (and
no proceedings for that purpose shall have been initiated or threatened by
the SEC) and, if the offer and sale of the Surviving Corporation Common
Stock in the Merger pursuant to this Agreement is subject to the securities
laws of any state, shall not be subject to a stop order of any state
securities authority.
(e) Federal Tax Opinion. Each party shall have received an opinion of
Luse Lehman Gorman Pomerenk & Schick, P.C. ("LLGP&S"), dated as of the
Company Merger Effective Time, to the effect that for federal income tax
purposes:
(i) The Company Merger and the Bank Merger will each qualify as a
"reorganization" under Section 368(a) of the Internal Revenue Code.
(ii) No gain or loss will be recognized by HFC, Hinsdale Federal
Bank, LBI or Liberty Federal by reason of the Company Merger or the
Bank Merger.
(iii) No gain or loss will be recognized by any stockholder of LBI
upon the exchange of LBI Common Stock solely for Alliance Bancorp
Common Stock in the Company Merger.
(iv) The basis of the Alliance Bancorp Common Stock received by each
stockholder of LBI who exchanges LBI Common Stock for Alliance Bancorp
Common Stock in the Company Merger will be the same as the basis of the
LBI Common Stock surrendered in exchange therefor (subject to any
adjustments required as the result of receipt of cash in lieu of a
fractional share of Surviving Corporation Common Stock).
(v) The holding period of the Alliance Bancorp Common Stock received
by a stockholder of LBI in the Company Merger will include the holding
period of the LBI Common Stock surrendered in exchange therefore,
provided that such shares of LBI Common Stock were held as a capital
asset by such stockholders at the Company Merger Effective Time.
(vi) Cash received by a LBI shareholder in lieu of a fractional share
interest of Alliance Bancorp Common Stock as part of the Company Merger
will be treated as having been received as a distribution in full
payment in exchange for the fractional share interest of Alliance
Bancorp Common Stock which such stockholder would otherwise be entitled
to receive and will qualify as capital gain or loss (assuming the LBI
stock was a capital asset in such stockholder's hands at the Company
Merger Effective Time).
(f) Third Party Consents. All consents or approvals of all persons (other
than the Governmental Approvals referenced in Section 4.1 (c) herein)
required for or in connection with the execution, delivery and performance
of this Agreement and the consummation of the Merger shall have been
obtained and shall be in full force and effect, unless the failure to
obtain any such consent or approval is not reasonably likely to have,
individually or in the aggregate, a material adverse effect on Alliance
Bancorp as the Surviving Corporation as the parties hereto shall reasonably
and in good faith agree.
(g) Listing. The shares of Alliance Bancorp Common Stock to be issued in
the Company Merger shall have been approved for listing on the National
Association of Securities Dealers Automated Quotation National Market
("Nasdaq National Market"), subject to official notice of issuance.
(h) Employment Arrangements. There shall exist no impediment or
restriction upon the ability of Alliance Bancorp and Liberty Federal Bank
to implement the arrangements and agreements as to employee benefit matters
that are contemplated by Section 3.10 hereof.
4.2 Conditions to Obligations of HFC. The obligations of HFC to effect the
Merger and the other transactions contemplated hereby shall be subject to the
satisfaction or written waiver by HFC of the following additional conditions
before the Company Merger Effective Time:
(a) Opinion of Counsel for LBI. HFC shall have received the opinions of
Rock, Fusco, Reynolds, Crowe & Garvey, Ltd., counsel to LBI, dated the date
of the Closing, substantially in the form set forth in Exhibit 4.2 hereof.
I-24
<PAGE>
(b) Accountants' Letter. HFC shall have received from LBI's independent
auditors the letters referred to in Section 3.5 hereof.
(c) No Material Adverse Effect. Between the date of this Agreement and
the Closing, LBI shall not have been affected by any event or change which
has had or caused a material adverse effect or material adverse change on
LBI and its Subsidiaries, taken as a whole.
(d) Representations and Warranties to be True, Fulfillment of Covenants
and Conditions. (i) The representations and warranties of LBI and its
subsidiaries shall be true and correct (subject to Section 2.23 hereof) as
of the date hereof and at the Company Merger Effective Time with the same
effect as though made at the Company Merger Effective Time (or on the date
when made in the case of any representation or warranty which specifically
relates to an earlier date); (ii) LBI and its Subsidiaries shall have
performed all obligations and complied with each covenant, in all material
respects, and satisfied all conditions under this Agreement on its part to
be satisfied at or before the Company Merger Effective Time; and (iii) LBI
shall have delivered to HFC a certificate, dated the Company Merger
Effective Time and signed by its chief executive officer and chief
financial officer, certifying as to the satisfaction of clauses (i) and
(ii) hereof.
(e) No Litigation. Neither LBI nor any LBI Subsidiary shall be subject to
any pending litigation which, if determined adversely to LBI or any LBI
Subsidiary, would have a material adverse effect on LBI and its
Subsidiaries, taken as a whole.
4.3 Conditions to Obligations of LBI. The obligations of LBI to effect the
Merger and the other transactions contemplated hereby shall be subject to the
satisfaction or written waiver by LBI of the following additional conditions
before the Company Merger Effective Time:
(a) Opinion of Counsel for HFC. LBI shall have received the opinions of
counsel of Gomberg, Sharfman, Gold & Ostler, P.C., counsel to HFC, dated
the date of the Closing, substantially in the form set forth in Exhibit 4.3
hereto.
(b) Accountant's Letter. LBI shall have received from HFC's independent
auditors the letters referred to in Section 3.5 hereof.
(c) No Material Adverse Effect. Between the date of this Agreement and
Closing, HFC shall not have been affected by any event or change which has
had or caused a material adverse effect or material adverse change on HFC
and its Subsidiaries, taken as a whole.
(d) Representations and Warranties to be True, Fulfilment of Covenants
and Conditions. (i) The representations and warranties of HFC and its
Subsidiaries shall be true and correct (subject to Section 2.23 hereof) as
of the date hereof and at the Company Merger Effective Time with the same
effect as though made at the Company Merger Effective Time (or on the date
when made in the case of any representation or warranty which specifically
relates to an earlier date); (ii) HFC and its Subsidiaries shall have
performed all obligations and complied with each covenant, in all material
respects, and satisfied all conditions under this Agreement on its part to
be satisfied at or before the Company Merger Effective Time; and (iii) HFC
shall have delivered to LBI a certificate, dated the Company Merger
Effective Time and signed by its chief executive officer and chief
financial officer, certifying as to the satisfaction of clauses (i) and
(ii) hereof.
(e) Surviving Corporation Common Stock. A certificate for the required
number of whole shares of Alliance Bancorp Common Stock, as determined
pursuant to Section 1.3 herein, and cash for fractional share interests, as
so determined, shall have been delivered to the Exchange Agent.
(f) No Litigation. Neither HFC nor any HFC Subsidiary shall be subject to
any pending litigation which, if determined adversely to HFC or any HFC
Subsidiary, would have a material adverse effect on HFC and its HFC
Subsidiaries, taken as a whole.
4.4 Termination of Agreement and Abandonment of Merger. This Agreement, the
Company Merger Agreement and the Bank Merger Agreement may be terminated at
any time before the Company Merger Effective Time, whether before or after
approval thereof by the stockholders of HFC or LBI, as provided below:
(a) Mutual Consent. By mutual consent of the parties, evidenced by their
written agreement.
I-25
<PAGE>
(b) Closing Delay. At the election of either party, evidenced by written
notice, if (i) the Closing shall not have occurred on or before June 30,
1997, or such later date as shall have been agreed to in writing by the
parties, provided however that the right to terminate under this Section
4.4(b) shall not be available to any party whose failure to perform an
obligation hereunder has been the cause of, or has resulted in, the failure
of the Closing to occur on or before such date; (ii) any approval or
authorization of any governmental entity, the lack of which would result in
the failure to satisfy the closing condition set forth in Section 4.1(c)
hereof, shall have been denied by such governmental entity, or such
governmental entity shall have requested the withdrawal of any application
therefor or indicated an intention to deny, or impose a condition or a
restriction of a type referred to in the proviso to Section 4.1(c) with
respect to, such approval or authorization, or (iii) the approval of the
stockholders of HFC or LBI referred to in Section 4.1(a) shall not have
been obtained at the meeting of stockholders held to approve the Merger,
provided that the electing party is not then in breach of its obligations
under Section 3.4 hereof.
(c) Conditions to HFC Performance Not Met. By HFC upon delivery of
written notice of termination to LBI if any event occurs which renders
impossible of satisfaction in any material respect one or more of the
conditions to the obligations of HFC to effect the Merger set forth in
Sections 4.1 and 4.2 and noncompliance is not waived in writing by HFC.
(d) Conditions to LBI Performance Not Met. By LBI upon delivery of
written notice of termination to HFC if any event occurs which renders
impossible of satisfaction in any material respect one or more of the
conditions to the obligations of LBI to effect the Merger set forth in
Sections 4.1 and 4.3 and noncompliance is not waived in writing by LBI.
(e) Breach. By either HFC or LBI if there has been a material breach of
the other party's representations and warranties (as contemplated in this
Agreement), covenants or agreements set forth in this Agreement of which
written notice has been given to such breaching party and which has not
been fully cured or cannot be fully cured within the earlier of (i) 30 days
of receipt of such notice or (ii) 5 days prior to the Closing and which
breach would, in the reasonable opinion of the non-breaching party,
individually or in the aggregate, have, or be reasonably likely to have, a
material adverse effect on the breaching party and its Subsidiaries, taken
as a whole, or upon consummation of the transactions contemplated by this
Agreement.
(f) HFC Election. By HFC if (i) the Board of Directors of LBI shall not
have publicly recommended in the Prospectus/Joint Proxy Statement that its
stockholders approve and adopt this Agreement or shall have withdrawn,
modified or changed in a manner adverse to HFC its approval or
recommendation of this Agreement, (ii) the Board of Directors of LBI shall
have authorized LBI to enter into any agreement, letter of intent or
agreement in principle with the intent to pursue or effect a Takeover
Proposal or (iii) the Board of Directors of HFC shall have failed to
recommend to its stockholders the adoption of this Agreement or shall have
withdrawn, modified or changed such recommendation pursuant to the exercise
of its fiduciary obligations under Section 3.4 herein.
(g) LBI Election. By LBI if (i) the Board of Directors of HFC shall not
have publicly recommended in the Prospectus/Joint Proxy Statement that its
stockholders approve and adopt this Agreement or withdrawn, modified or
changed in a manner adverse to LBI its approval or recommendation of this
Agreement, (ii) the Board of Directors of HFC shall have authorized HFC to
enter into any agreement, letter of intent or agreement in principle with
the intent to pursue or effect a Takeover Proposal or (iii) the Board of
Directors of LBI shall have failed to recommend to its stockholders the
adoption of this Agreement or shall have withdrawn, modified or changed
such recommendation pursuant to the exercise of its fiduciary obligations
under Section 3.4 herein.
I-26
<PAGE>
ARTICLE V
Termination of Obligations; Payments of Expenses
5.1 Termination, Lack of Survival of Representations and Warranties. In the
event of the termination and abandonment of this Agreement pursuant to Section
4.4 hereof, this Agreement shall become void and have no effect, except (i)
the provisions of Sections 2.7 (No Broker's or Finder's Fees), 3.6
(Publicity), 5.2 (Payment of Expenses) and 7.2 (Confidentiality) hereof shall
survive any such termination and abandonment, and (ii) a termination pursuant
to Section 4.4(c), 4.4(d) or 4.4(e) of this Agreement shall not relieve the
breaching party from liability for any uncured intentional and willful breach
of a representation, warranty, covenant or agreement giving rise to such
termination.
The representations, warranties and agreements set forth in this Agreement
shall not survive the Company Merger Effective Time and shall be terminated
and extinguished at the Company Merger Effective Time, and from and after the
Company Merger Effective Time no party shall have any liability to the other
on account of any breach or failure of any of those representations,
warranties and agreements, provided however that the foregoing clause (i)
shall not apply to agreements of the parties which by their terms are intended
to be performed after the Company Merger Effective Time by Alliance Bancorp or
the Surviving Institution in the Bank Merger or otherwise and (ii) shall not
relieve any party or person for liability for fraud, deception or intentional
misrepresentation.
5.2 Payment of Expenses. Each party shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereby, except that the costs of printing and mailing the
Prospectus/Joint Proxy Statement shall be shared equally by the parties.
ARTICLE VI
Certain Post-Merger Agreements
6.1 Registration of Stock Underlying Stock Options. In order to permit the
exercise of options to purchase Alliance Bancorp Common Stock which were
originally granted under the LBI Option Plans and are to be substituted and
assumed by Alliance Bancorp as the surviving corporation under the provisions
of Section 1.8 hereof, at and after the Company Merger Effective Time Alliance
Bancorp shall take all such actions as may be necessary or appropriate in
order to carry out fully the provisions of Section 1.8 hereof.
6.2 Reports to the SEC. Alliance Bancorp as the Surviving Corporation shall
continue to file all reports and data with the SEC necessary to permit
stockholders of HFC and LBI who may be deemed affiliates of HFC or LBI within
the meaning of Rule 145 under the Securities Act to sell the Surviving
Corporation Common Stock held or received by them in connection with the
Merger pursuant to Rules 144 and 145 under such Act if they would otherwise be
so entitled. After the Company Merger Effective Time, Alliance Bancorp will
file with the SEC all reports, statements and other materials required by the
federal securities laws on a timely basis.
6.3 Indemnification. (a) From and after the Company Merger Effective Time,
Alliance Bancorp as the Surviving Corporation shall indemnify, defend and hold
harmless each person who is now, or who has been at any time before the date
hereof or who becomes before the Company Merger Effective Time, an officer,
director or employee of either HFC or LBI or any of their respective
Subsidiaries (the "Indemnified Parties") against all losses, claims, damages,
costs, expenses (including attorney's fees), liabilities or judgments or
amounts that are paid in settlement (which settlement shall require the prior
written consent of Alliance Bancorp as the surviving corporation, which
consent shall not be unreasonably withheld) of or in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal, or
administrative (each a "Claim"), in which an Indemnified Party is, or is
threatened to be made, a party or a witness based in whole or in part on or
arising in whole or in part out of the fact that such person is or was a
director, officer or employee of either HFC or LBI or any of their respective
Subsidiaries if such Claim pertains to any matter or fact arising, existing or
occurring on or
I-27
<PAGE>
before the Company Merger Effective Time (including, without limitation, the
Merger and the other transactions contemplated hereby), regardless of whether
such Claim is asserted or claimed before, or at or after, the Company Merger
Effective Time (the "Indemnified Liabilities"), to the fullest extent
permitted under applicable Delaware or federal law in effect as of the date
hereof or as amended applicable to a time before the Company Merger Effective
Time and under HFC's or LBI's governing corporation documents (as the case may
be)(including the right to an advancement of expenses), and Alliance Bancorp
shall pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the full extent permitted by
applicable Delaware or federal law in effect as of the date hereof or as
amended applicable to a time before the Company Merger Effective Time or as
set forth in HFC's and LBI's corporate documents upon receipt of any
undertaking required by applicable law. Any Indemnified Party wishing to claim
indemnification under this Section 6.3(a), upon learning of any Claim, shall
notify Alliance Bancorp as the Surviving Corporation (but the failure so to
notify Alliance Bancorp as the Surviving Corporation shall not relieve it from
any liability which it may have under this Section 6.3(a) except to the extent
such failure materially prejudices Alliance Bancorp) and shall deliver to
Alliance Bancorp as the Surviving Corporation the undertaking, if any,
required by applicable law. Alliance Bancorp as the Surviving Corporation
shall insure, to the extent permitted under applicable law, that all
limitations of liability existing in favor of the Indemnified Parties as
provided in HFC's or LBI's governing corporation documents (as the case may
be), as in effect as of the date hereof, or allowed under applicable state or
federal law as in effect as of the date hereof or as amended applicable to a
time before the Company Merger Effective Time, with respect to claims or
liabilities arising from facts or events existing or occurring before the
Company Merger Effective Time (including, without limitation, the transactions
contemplated hereby), shall survive the Company Merger.
(b) From and after the Company Merger Effective Time, the directors,
officers and employees of HFC and LBI hereto or any of their respective
Subsidiaries who become directors, officers or employees of Alliance Bancorp
as the Surviving Corporation or any of its Subsidiaries, as set forth in
paragraph (a) of this Section 6.3, shall have indemnification rights having
prospective application only. The prospective indemnification rights shall
consist of such rights to which directors, officers and employees of Alliance
Bancorp as the surviving corporation and its Subsidiaries are entitled under
the provisions of the governing corporation documents of Alliance Bancorp as
the surviving corporation and its Subsidiaries, as in effect from time to time
after the Company Merger Effective Time, as applicable, and provisions of
applicable Delaware and federal law as in effect from time to time after the
Company Merger Effective Time.
(c) For a period of three years from and after the Company Merger Effective
Time, Alliance Bancorp shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by LBI and
the LBI Subsidiaries (provided that Alliance Bancorp may substitute therefor
policies from financially capable insurers of at least the same coverage and
amounts containing terms and conditions which are substantially no less
advantageous or in the event such coverage is provided through Alliance
Bancorp's insurer it may be on terms and conditions (other than coverage and
amounts) consistent with Alliance Bancorp's coverage) with respect to claims
arising from facts or events which occurred before the Company Merger
Effective Time. Following consummation of the Merger, the directors and
officers of the Surviving Corporation shall be covered by the directors' and
officers' liability insurance maintained by Alliance Bancorp as the surviving
corporation.
(d) The obligations of Alliance Bancorp provided under paragraphs (a) (b)
and (c) of this Section 6.3 are intended to be enforceable against Alliance
Bancorp directly by the Indemnified Parties and shall be binding on all
respective successors and permitted assigns of Alliance Bancorp as the
surviving corporation.
6.4 Directors, Executive Officers and Committees of Surviving Corporation.
(a) At the Company Merger Effective Time, the Board of Directors of Alliance
Bancorp as the surviving corporation shall be fixed at 14 directors (the
"Initial Directors"), seven of whom shall be selected by the Board of
Directors of HFC and seven of whom shall be selected by the Board of Directors
of LBI, in each case prior to
I-28
<PAGE>
the Company Merger Effective Time. The persons who shall be the initial
directors of the Surviving Corporation are as follows: Messrs. Fredric G. Novy
(Chairman of the Board), Kenne P. Bristol, Edward J. Burns, H. Verne Loeppert,
William C. O'Donnell, Whit G. Hughes, Dr. David D. Mill, Vernon B. Thomas,
Jr., Howard R. Jones, William R. Rybak, Donald E. Sveen, Russell F. Stephens,
Jr., Howard A. Davis, and one additional person to be appointed by HFC. As
soon as practicable, HFC and LBI shall agree as to the class and term for each
of the persons so selected as a director (it being the intention that to the
greatest extent practicable, the HFC and LBI directors shall serve in equal
number in each of the three classes of directors). HFC and its Board of
Directors shall take all necessary corporate action prior to the Company
Merger Effective Time to effectuate this agreement of the parties including
the election of the designated persons as directors of Alliance Bancorp as the
surviving corporation, effective at the Company Merger Effective Time, for the
agreed upon classes and terms.
(b) It is the intention of the parties that the fees and benefits to be
received by the directors of Alliance Bancorp as the surviving corporation
shall be as set forth in Schedule 6.4.
(c) The Executive Officers of Alliance Bancorp following the Company Merger
Effective Time shall be: Fredric G. Novy--Chairman of the Board: Kenne P.
Bristol--President and Chief Executive Officer, and such other officers as
determined by the Board of Directors.
(d) Initially the Board of Directors of Alliance Bancorp shall have a nine
person Executive Committee and such other committees as the Board shall
establish in accordance with Section 141 of the DGCL, Alliance Bancorp's
Certificate of Incorporation and the Bylaws. The nine members of the Executive
Committee shall be Messrs. William R. Rybak (who shall be the Chairman of the
Executive Committee), Edward J. Burns (who shall be Vice Chairman of the
Executive Committee), Kenne P. Bristol, Donald E. Sveen, Fredric G. Novy, H.
Verne Loeppert, William C. O'Donnell, Russell F. Stephens, Jr. and one
additional person as determined by HFC. The Executive Committee shall not have
such power or authority as is specifically excluded to it pursuant to Section
141 of the DGCL. The Executive Committee shall act by majority vote to carry
out the policies, plans, practices and directions previously approved by the
Board of Directors (or those approved by the members of the Executive
Committee) and to otherwise enable Alliance Bancorp, as the surviving
corporation, to conduct its business in the normal and regular course
consistent with Alliance Bancorp's then current policies, plans, practices and
directions. Prior to the Company Merger Effective Time, HFC and LBI shall
reasonably agree as to the initial members of each other committee of the
Board of Directors of Alliance Bancorp as the Surviving Corporation.
(e) Those provisions of this Section 6.4 intended to survive the Company
Merger Effective Time shall survive the Company Merger Effective Time and
remain in effect until the third anniversary thereof, terminating thereafter.
6.5 Directors and Executive Officers of Liberty Federal Bank.
(a) Subject to OTS approval if necessary, at the Bank Merger Effective Time,
the Board of Directors of Liberty Federal Bank shall be fixed at nine persons,
consisting of nine members who shall initially be Messrs. Fredric G. Novy
(Chairman of the Board), Kenne P. Bristol, Edward J. Burns, Joseph W.
Stachnik, William R. Rybak, Donald E. Sveen, Vernon B. Thomas, Jr., Dr. David
D. Mill and one additional person designated by Hinsdale Federal Bank. Each
such Initial Director shall serve as a director of Liberty Federal Bank
subsequent to the Bank Merger Effective Time during the same period each
serves as a director of Alliance Bancorp. Hinsdale Federal Bank and its Board
of Directors shall take all necessary corporate action prior to the Bank
Merger Effective Time to effectuate the election of the designated persons as
directors of the Surviving Institution in the Bank Merger, effective at the
Bank Merger Effective Time, for the agreed upon classes and terms.
(b) The fees and benefits to be received by the directors of the Surviving
Institution following the Bank Merger Effective Time shall be as set forth in
Disclosure Schedule 6.4.
(c) The Executive Officers of the Surviving Institution following the Bank
Merger Effective Time shall be: Fredric G. Novy--Chairman of the Board; Kenne
P. Bristol--President and Chief Executive Officer and such other officers as
determined by the Board of Directors of Liberty Federal Bank.
I-29
<PAGE>
(d) Those provisions of this Section 6.5 intended to survive the Company
Merger Effective Time shall survive the Bank Merger Effective Time and remain
in effect until the third anniversary thereof.
ARTICLE VII
General
7.1 Amendments. Subject to applicable law, this Agreement may be amended,
whether before or after any stockholder approval hereof, by an agreement in
writing executed in the same manner as this Agreement and authorized or
ratified by the Boards of Directors of the parties hereto, provided that after
the approval of this Agreement by the stockholders of either party hereto, no
such amendment may change the amount or form of the consideration to be
delivered hereunder pursuant to Section 1.3 herein without their approval.
7.2 Confidentiality. All information disclosed by any party to any other
party, whether prior or subsequent to the date of this Agreement including,
without limitation, any information obtained pursuant to Section 3.1 hereof,
shall be kept confidential by such other party and shall not be used by such
other party otherwise than as herein contemplated, all in accordance with the
terms of the existing confidentiality agreement between the parties (the
"Confidentiality Agreement"). In the event of the termination of this
Agreement, each party shall use all reasonable efforts to return upon request
to the other party all documents (and reproductions thereof) received from
such other party (and, in the case of reproductions, all such reproductions)
that include information subject to the confidentiality requirement set forth
above.
7.3 Governing Law. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Delaware without taking into account any provision regarding choice
of law, except to the extent certain matters may be governed by federal law by
reason of preemption.
7.4 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if sent by registered mail or certified
mail, postage prepaid, addressed, as follows:
If to Hinsdale Financial Corporation, to
One Grant Square
Hinsdale, Illinois 60522
Attention:Mr. Kenne P. Bristol
President and Chief Executive Officer
with a copy to:
Luse Lehman Gorman Pomerenk & Schick, PC
5335 Wisconsin Avenue, NW
Washington, D.C. 20015
Attention:John J. Gorman, Esq.
Alan Schick, Esq.
And
Gomberg, Sharfman, Gold & Ostler, P.C.
208 S. LaSalle
Suite 1200
Chicago, Illinois 60604
Attention:Robert J. Sharfman, Esq.
I-30
<PAGE>
If to Liberty Bancorp, Inc., to
Liberty Bancorp, Inc.
5700 N. Lincoln Avenue
Chicago, Illinois 60659
Attention:Mr. Fredric G. Novy
President and Chief Executive Officer
with a copy to:
Rock, Fusco, Reynolds, Crowe & Garvey, Ltd.
350 North LaSalle
Suite 9900
Chicago, Illinois 60610
Attention:Daniel R. Fusco, Esq.
or such other address as shall be furnished in writing by either party to the
other, and any such notice or communication shall be deemed to have been given
three business days after the date of such mailing (except that the notice of
change of address shall not be deemed to have been given until received by the
addressee). Notices may also be sent by telegram, telex, facsimile
transmission or hand delivery and in such event shall be deemed to have been
given as of the date received by the addressee.
7.5 No Assignment. This Agreement may not be assigned by any party hereto,
by operation of law or otherwise, except as contemplated hereby.
7.6 Headings. The descriptive headings of the several Articles and Sections
of this Agreement are inserted for convenience only and do not constitute a
part of this Agreement.
7.7 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
party and delivered to each other party.
7.8 Construction and Interpretation. Except as the context otherwise
requires, all references herein to any state or federal regulatory agency
shall also be deemed to refer to any predecessor or successor agency, and all
references to state and federal statutes or regulations shall also be deemed
to refer to any successor statute or regulation.
7.9 Entire Agreement. This Agreement, together with the schedules, lists,
exhibits and certificates required to be delivered hereunder, and any
amendment hereafter executed and delivered in accordance with Section 7.1,
constitutes the entire agreement of the parties and supersedes any prior
written or oral agreement or understanding among any parties pertaining to the
Merger, except that the Confidentiality Agreement shall remain in full force
and effect as contemplated in Section 7.2 herein and except with respect to
the applicable Stock Option Agreement.
7.10 Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law then such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of the Agreement.
7.11 No Third Party Beneficiaries. Nothing in this Agreement shall entitle
any person (other than the parties hereto and their respective successors and
assigns permitted hereby) to any claim, cause of action, remedy or right of
any kind, except for Sections 1.8, 3.10, 6.1, 6.3, 6.4, 6.5 and 6.7.
7.12 No Employment Solicitation. If this Agreement is terminated, the
parties hereto agree that, for a period of two years subsequent to such
termination (i) none of the parties shall, without first obtaining the prior
I-31
<PAGE>
written consent of the other, directly or indirectly, actively solicit the
employment of any current director, officer or employee of the other party and
(ii) none of the parties will actively solicit business relationships with
clients of the other party solely as a result of review of the information
contemplated in Section 7.2 herein.
In Witness Whereof, each party has caused this Agreement to be executed on
its behalf by its duly authorized officers as of the date set forth above.
Hinsdale Financial Corporation Liberty Bancorp, Inc.
By: /s/ Kenne P. Bristol By: /s/ Fredric G. Novy
_________________________________ __________________________________
Kenne P. Bristol Fredric G. Novy
President and Chief Executive President and Chief Executive
Officer Officer
I-32
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
Stock Option Agreement, dated August 2, 1996, between Liberty Bancorp, Inc.,
a Delaware corporation ("Issuer") and Hinsdale Financial Corporation, a
Delaware corporation ("Grantee").
W I T N E S S E T H:
Whereas, Grantee and Issuer have entered into an Agreement and Plan of
Merger dated August 2, 1996 (the "Merger Agreement"), which agreement has been
executed by the parties hereto prior to this Agreement; and
Whereas, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined):
Now, Therefore. in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties
hereto agree as follows:
1.(a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to 492,927 fully
paid and nonassessable shares of its common stock, par value $0.01 per share
("Common Stock"), at a price of $24.125 per share (such price, as adjusted if
applicable, the "Option Price"); provided, however, that in the event Issuer
issues or agrees to issue any shares of Common Stock (other than as permitted
under the Merger Agreement) at a price less than $24.125 per share, such
Option Price shall be equal to such lesser price. The number of shares of
Common Stock that may be received upon the exercise of the Option and the
Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement), the number of shares of Common Stock subject to
the Option shall be increased so that, after such issuance, it equals 19.9% of
the number of shares of Common Stock then issued and outstanding without
giving effect to any shares subject or issued pursuant to the Option. Nothing
contained in this Section 1(b) or elsewhere in this Agreement shall be deemed
to authorize Issuer or Grantee to breach any provision of the Merger
Agreement.
2.(a) The holder or holders of the Option (including Grantee or any
subsequent transferee(s)) (the "Holder") may exercise the Option, in whole or
part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2)
within 180 days following the first such Subsequent Triggering Event. Each of
the following shall be an Exercise Termination Event: (i) the Company Merger
Effective Time (as defined in the Merger Agreement); (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event; or (iii) the
passage of twelve months after termination of the Merger Agreement if such
termination follows or occurs at the same time as the occurrence of an Initial
Triggering Event.
(b) The term Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, and the rules and regulations thereunder
(the "1934 Act")) other than Grantee or any of its Subsidiaries (each a
"Grantee Subsidiary"). For purposes of this Agreement, "Acquisition
Transaction" shall mean (x) a merger or
I-33
<PAGE>
consolidation, or any similar transaction, involving Issuer or any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X
promulgated by the SEC) of Issuer, (y) a purchase, lease or other
acquisition of all or substantially all of the assets of Issuer or any
Significant Subsidiary of Issuer, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
beneficial ownership of securities representing 25% or more of the voting
power of Issuer or any Significant Subsidiary of Issuer, provided that the
term "Acquisition Transaction" does not include any internal merger or
consolidation involving only Issuer and/or Issuer Subsidiaries;
(ii)(A) Any person other than Grantee, or any Grantee Subsidiary, or any
Issuer Subsidiary acting in a fiduciary capacity (collectively, "Excluded
Persons"), alone or together with such person's affiliates and associates
(as such terms are defined in Rule 12b-2 under the 1934 Act) shall have
acquired beneficial ownership or the right to acquire beneficial ownership
of 25% or more of the outstanding shares of Common Stock (the term
"beneficial ownership" for purposes of this Option Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules
and regulations thereunder) or (B) any group (as such term is defined in
Section 13(d)(3) of the 1934 Act), other than a group of which only
Excluded Persons are members, shall have been formed that beneficially owns
25% or more of the shares of Common Stock then outstanding;
(iii) Any person other than Grantee or any Grantee Subsidiary shall have
made a bona fide proposal to Issuer or its shareholders by public
announcement or written communication that is or becomes the subject of
public disclosure to (A) engage in an Acquisition Transaction or (B)
commence a tender or exchange offer the consummation of which would result
in such person acquiring beneficial ownership of securities representing
25% or more of Issuer's voting power;
(iv) The Board of Directors of Issuer shall have failed to recommend to
its stockholders the adoption of the Merger Agreement or shall have
withdrawn, modified or changed its recommendation in a manner adverse to
Grantee;
(v) After a proposal is made by a third party (other than an Excluded
Person) to Issuer to engage in an Acquisition Transaction, Issuer shall
have intentionally and knowingly breached any representation, warranty,
covenant or agreement contained in the Merger Agreement and such breach (x)
would entitle Grantee to terminate the Merger Agreement pursuant to Section
4.4(e) therein (without regard to any grace period provided for therein)
and (y) shall not have been cured prior to the Notice Date (as defined
below); or
(vi) Any person other than Grantee or any Grantee Subsidiary, other than
in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Office
of Thrift Supervision ("OTS") or other federal or state bank regulatory
authority, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person other than an Excluded Person of
beneficial ownership of 25% or more of the then outstanding Common Stock;
or
(ii) The occurrence of the Initial Triggering Event described in
subparagraph (i) of subsection (b) of this Section 2.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of any
Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which is herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided
I-34
<PAGE>
that if prior notification to or approval of the OTS or any other regulatory
agency is required in connection with such purchase, the Holder shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required
notification periods have expired or been terminated or such approvals have
been obtained and any requisite waiting period or periods shall have passed.
Any exercise of the Option shall be deemed to occur on the Notice Date
relating thereto.
(f) At each closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the Securities Act of 1933,
as amended. A copy of such agreement is on file at the principal office of
Issuer and will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor. "
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933 ("1933 Act") in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
Holder shall have delivered to Issuer a copy of a letter from the staff of the
SEC, or an opinion of counsel, in form and substance satisfactory to Issuer,
to the effect that such legend is not required for purposes of the 1933 Act;
(ii) the reference to the provisions of this Agreement in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in compliance with the
provisions of this Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may
be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds,
the Holder shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer
books of Issuer shall then be closed or that certificates representing such
shares of Common Stock shall not then be actually delivered to the Holder.
Issuer shall pay all expenses, and any and all United States federal, state
and local taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2 in
the name of the Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to
time be required (including (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C.
I-35
<PAGE>
Section 18a and regulations promulgated thereunder and (y) in the event, under
the Home Owners' Loan Act, as amended ("HOLA"), or the Change in Bank Control
Act of 1978, as amended, or any state banking law, prior approval of or notice
to the OTS, or to any state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the OTS or such
state regulatory authority as they may require) in order to permit the Holder
to exercise the Option and Issuer duly and effectively to issue shares of
Common Stock pursuant hereto; and (iv) promptly to take all action provided
herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to
purchase, on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any Stock Option Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Agreement if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual obligation
on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, in the event of any change in Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions, or the like, the type and
number, and/or the price, of shares of Common Stock purchasable upon exercise
hereof shall be appropriately adjusted, and proper provision shall be made in
the agreements governing such transaction so that the Holder shall receive,
upon exercise of the Option, the number and class of shares or other
securities or property that Holder would have received in respect of the
Common Stock if the Option had been exercised immediately prior to such event,
or the record date therefor, as applicable.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to
an Exercise Termination Event, Issuer (including any successor thereto) shall,
at the request of the Holder delivered at the time of and together with a
written notice of exercise in accordance with Section 2(e) hereof (whether on
its own behalf or on behalf of any subsequent holder of this Option (or part
thereof) or any of the shares of Common Stock issued pursuant hereto),
promptly prepare, file and keep current a shelf registration statement under
the 1933 Act covering any shares issued or issuable pursuant to this Option
and shall use its best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition
of any shares of Common Stock issued upon total or partial exercise of this
Option ("Option Shares") in accordance with any plan of disposition requested
by the Holder. Issuer will use its best efforts to cause such registration
statement first to become effective and then to remain effective for such
period not in excess of 180 days from the day such registration statement
first becomes effective or such shorter time as may be reasonably necessary to
effect such sales or other dispositions. The Holder shall have the right to
demand not more than two such registrations under this Agreement and all other
agreements, for which this agreement may be exchanged pursuant to Section 4
hereof; provided, however, that Issuer shall be required to bear the expenses
related only to the first such registration, and the Holder shall bear such
expenses to the extent related to the second. The foregoing notwithstanding,
if, at the time of any request by the Holder for registration of Option Shares
as provided above, Issuer is in registration with respect to an underwritten
public offering of shares of Common Stock, and if in the good faith judgment
of the managing underwriter or managing underwriters, or, if none, the sole
underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares
otherwise to be covered in the registration statement contemplated hereby may
be reduced; and provided, however, that after any such required reduction the
number of Option Shares to be included in such offering for
I-36
<PAGE>
the account of the Holder shall constitute at least 25% of the total number of
shares to be issued by the Holder and Issuer in the aggregate; and provided
further, however, that if such reduction occurs, then the Issuer shall file a
registration statement for the balance as promptly as practical and no
reduction shall thereafter occur. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting agreements for the
Issuer. Upon receiving any request under this Section 6 from any Holder,
Issuer agrees to send a copy thereof to any other person known to Issuer to be
entitled to registration rights under this Section 6, in each case by promptly
mailing the same, postage prepaid, to the address of record of the persons
entitled to receive such copies.
7.(a) In the event that prior to an Exercise Termination Event, Issuer shall
enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer
and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise
transfer all or substantially all of its assets to any person, other than
Grantee or one of its Subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provision so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the shares of capital stock (or
similar equity interest) with the greatest voting power with respect of the
election of directors (or other persons similarly responsible for direction
of the business and affairs) of the issuer of the Substitute Option.
(3) "Assigned Value" shall mean the highest of (i) the price per share of
Common Stock at which a tender offer or exchange offer therefor has been
made, (ii) the price per share of Common Stock to be paid by any third
party pursuant to an agreement with Issuer, or (iii) in the event of a sale
of all or substantially all of Issuer's assets, the sum of the price paid
in such sale for such assets and the current market value of the remaining
assets of Issuer as determined by a nationally recognized investment
banking firm selected by the Holder, divided by the number of shares of
Common Stock of Issuer outstanding at the time of such sale. In determining
the market/offer price, the value of consideration other than cash shall be
determined by a nationally recognized investment banking firm selected by
the Holder.
(4) "Average Price" shall mean the average closing price of a share of
the Substitute Common Stock for the six months immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of Common Stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as the Holder
may elect.
(c) The Substitute Option shall have the same terms and conditions as the
Option, provided, that if any term or condition of the Substitute Option
cannot, for legal reasons, be the same as the Option, such term or condition
shall be as similar as possible and in no event less advantageous to the
Holder. The issuer of the
I-37
<PAGE>
Substitute Option shall also enter into an agreement with the then Holder or
Holders of the Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to (i) the product of (A) the Assigned
Value and (B) the number of shares of Common Stock for which the Option is
then exercisable, divided by (ii) the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal to
the Option Price multiplied by a fraction the numerator of which shall be the
number of shares of Common Stock for which the Option is then exercisable and
the denominator of which shall be the number of shares of Substitute Common
Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute
Option.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 7 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
8. The 180-day period for exercise of certain rights under Sections 2 and 6
shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
9. Repurchase at the Option of Holder. (a) At the request of Holder at any
time commencing upon the first occurrence of a Repurchase Event (as defined in
Section 9(d)) and ending 12 months immediately thereafter, Issuer shall
repurchase from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then
has beneficial ownership. The date on which Holder exercises its rights under
this Section 9 is referred to as the "Request Date". Such repurchase shall be
at an aggregate price (the "Section 9 Repurchase Consideration") equal to the
sum of:
(i) the aggregate Option Price paid by Holder for any shares of Issuer
Common Stock acquired pursuant to the Option with respect to which Holder
then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined below)
for each share of Common Stock over (y) the Option Price (subject to
adjustment pursuant to Sections 1 and 5), multiplied by the number of
shares of Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Option Price
(subject to adjustment pursuant to Sections 1 and 5) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Holder for each share of
Common Stock with respect to which the Option has been exercised and with
respect to which Holder then has beneficial ownership, multiplied by the
number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 9 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment, Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Common Stock purchased thereunder with
respect to which Holder then has beneficial ownership, and Holder shall
warrant that it has sole record and beneficial ownership of such shares and
that the same are then free and clear of all liens. Notwithstanding the
foregoing, to the extent that prior notification to or approval of any federal
or state regulatory authority is required in connection with the payment of
all or any portion of the Section 9 Repurchase Consideration, Holder shall
have the ongoing option to revoke its request for repurchase pursuant to
Section 9, in whole or in part, or to require that Issuer deliver from time to
time that portion of the Section 9 Repurchase Consideration that it is not
then so prohibited from paying and promptly file the required notice or
application for approval and expeditiously process the same (and each party
shall cooperate
I-38
<PAGE>
with the other in the filing of any such notice or application and the
obtaining of any such approval). If any federal or state regulatory authority
disapproves of any part of Issuer's proposed repurchase pursuant to this
Section 9, Issuer shall promptly give notice of such fact to Holder. If any
federal or state regulatory authority prohibits the repurchase in part but not
in whole, then Holder shall have the right (i) to revoke the repurchase
request or (ii) to the extent permitted by such regulatory authority,
determine whether the repurchase should apply to the Option and/or Option
Shares and to what extent to each, and Holder shall thereupon have the right
to exercise the Option as to the number of Option Shares for which the Option
was exercisable at the Request Date less the sum of the number of shares
covered by the Option in respect of which payment has been made pursuant to
Section 9(a)(ii) and the number of shares covered by the portion of the Option
(if any) that has been repurchased. Holder shall notify Issuer of its
determination under the preceding sentence within five (5) business days of
receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's rights
under this Section 9 shall terminate on the date of termination of this Option
pursuant to Section 2(a).
(c) For purposes of this Agreement, the "Applicable Price" means the highest
of (i) the highest price per share of Common Stock paid for any such share by
the person or groups described in Section 9(d)(i), (ii) the price per share of
Common Stock received by holders of Common Stock in connection with any merger
or other business combination transaction described in Section 7(a)(i),
7(a)(ii) or 7(a)(iii), or (iii) the highest closing sales price per share of
Issuer Common Stock quoted on the Nasdaq National Market System (or if Issuer
Common Stock is not quoted on the Nasdaq National Market System, the highest
bid price per share as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a recognized source
chosen by Holder) during the 40 business days preceding the Request Date;
provided, however, that in the event of a sale of less than all of Issuer's
assets, the Applicable Price shall be the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment banking firm selected by
Holder, divided by the number of shares of Common Stock outstanding at the
time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm selected by Holder
and reasonably acceptable to Issuer, which determination shall be conclusive
for all purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any person (other
than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 50% or
more of the then outstanding shares of Issuer Common Stock, or (ii) any of the
transactions described in Section 7(a)(i), 7(a)(ii) or 7(a)(iii) shall be
consummated.
10. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly
executed and delivered by Issuer. This Agreement is the valid and legally
binding obligation of Issuer.
(b) Issuer has taken all necessary corporate action to authorize and reserve
and to permit it to issue, and at all times from the date hereof through the
termination of this Agreement in accordance with its terms will have reserved
for issuance upon the exercise of the Option, that number of shares of Common
Stock equal to the maximum number of shares of Common Stock at any time and
from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
I-39
<PAGE>
(c) Issuer has taken all necessary action to exempt this Agreement, and the
transactions contemplated hereby and thereby from, and this Agreement and the
transactions contemplated hereby and thereby are exempt from, (i) any
applicable state takeover laws, (ii) any state laws limiting or restricting
the voting rights of stockholders and (iii) any provision in its or any of its
subsidiaries' articles of incorporation, certificate of incorporation, charter
or bylaws restricting or limiting stock ownership or the voting rights of
stockholders.
(d) The execution, delivery and performance of this Agreement does not or
will not, and the consummation by Issuer of any of the transactions
contemplated hereby will not, constitute or result in (i) a breach or
violation of, or a default under, its certificate of incorporation or bylaws,
or the comparable governing instruments of any of its subsidiaries, or (ii) a
breach or violation of, or a default under, any agreement, lease, contract,
note, mortgage, indenture, arrangement or other obligation of it or any of its
subsidiaries (with or without the giving of notice, the lapse of time or both)
or under any law, rule, ordinance or regulation or judgment, decree, order,
award or governmental or nongovernmental permit or license to which it or any
of its subsidiaries is subject, that would, in any case referred to in this
clause (ii), give any other person the ability to prevent or enjoin Issuer's
performance under this Agreement in any material respect.
11. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has full corporate power and authority to enter into this
Agreement and, subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) This Option is not being acquired with a view to the public distribution
thereof and neither this Option nor any Option Shares will be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under applicable federal and state securities laws and
regulations.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
(i) to any wholly-owned Subsidiary or (ii) that in the event a Subsequent
Triggering Event shall have occurred prior to an Exercise Termination Event,
Grantee, subject to the express provisions hereof, may assign in whole or in
part its rights and obligations hereunder to one or more transferees.
13. Each of Grantee and Issuer will use its best efforts to make all filings
with, and to obtain consents of all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement.
14. Notwithstanding anything to the contrary herein, in the event that the
Holder or any Related Person thereof is a person making an offer or proposal
to engage in an Acquisition Transaction (other than the transactions
contemplated by the Merger Agreement), then in the case of a Holder or any
Related Person thereof, the Option held by it shall immediately terminate and
be of no further force or effect. A Related Person of a Holder means any
Affiliate (as defined in Rule 12b-2 of the rules and regulations under the
1934 Act) of the Holder and any person that is the beneficial owner of 20% or
more of the voting power of the Holder.
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire the full number
of shares of Common Stock provided in
I-40
<PAGE>
Section 1(a) hereof (as adjusted pursuant to Section 1(b) or Section 5
hereof), it is the express intention of Issuer to allow the Holder to acquire
such lesser number of shares as may be permissible, without any amendment or
modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail
(postage prepaid, return receipt requested) at the respective addresses of the
parties set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel. Notwithstanding anything to the contrary contained
herein or in the Merger Agreement, in the event a Subsequent Triggering Event
shall occur prior to an Exercise Termination Event, Issuer shall pay to
Grantee upon demand the amount of the expenses incurred by Grantee in
connection with this Agreement and the Merger Agreement and the transactions
contemplated hereby and thereby.
21. Except as otherwise expressly provided herein, or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors and, as permitted herein, assignees, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
In Witness Whereof, each of the parties has caused this Agreement to be
executed on its behalf by its officers, all as of the date first above
written.
Liberty Bancorp, Inc.
/s/ Fredric G. Novy
By: _________________________________
Fredric G. Novy
President and Chief Executive
Officer
Hinsdale Financial Corporation
/s/ Kenne P. Bristol
By: _________________________________
Kenne P. Bristol
President and Chief Executive
Officer
I-41
<PAGE>
EXHIBIT B
STOCK OPTION AGREEMENT
Stock Option Agreement, dated August 2, 1996, between Hinsdale Financial
Corporation, a Delaware corporation ("Issuer") and Liberty Bancorp, Inc., a
Delaware corporation ("Grantee").
W I T N E S S E T H:
Whereas, Grantee and Issuer have entered into an Agreement and Plan of
Merger dated August 2, 1996 (the "Merger Agreement"), which agreement has been
executed by the parties hereto prior to this Agreement; and
Whereas, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined):
Now, Therefore, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties
hereto agree as follows:
1.(a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to 535,340 fully
paid and nonassessable shares of its common stock, par value $0.01 per share
("Common Stock"), at a price of $23.25 per share (such price, as adjusted if
applicable, the "Option Price"); provided, however, that in the event Issuer
issues or agrees to issue any shares of Common Stock (other than as permitted
under the Merger Agreement) at a price less than $23.25 per share, such Option
Price shall be equal to such lesser price. The number of shares of Common
Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement), the number of shares of Common Stock subject to
the Option shall be increased so that, after such issuance, it equals 19.9% of
the number of shares of Common Stock then issued and outstanding without
giving effect to any shares subject or issued pursuant to the Option. Nothing
contained in this Section 1(b) or elsewhere in this Agreement shall be deemed
to authorize Issuer or Grantee to breach any provision of the Merger
Agreement.
2.(a) The holder or holders of the Option (including Grantee or any
subsequent transferee(s)) (the "Holder") may exercise the Option, in whole or
part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2)
within 180 days following the first such Subsequent Triggering Event. Each of
the following shall be an Exercise Termination Event: (i) the Company Merger
Effective Time (as defined in the Merger Agreement); (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event; or (iii) the
passage of twelve months after termination of the Merger Agreement if such
termination follows or occurs at the same time as the occurrence of an Initial
Triggering Event.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, and the rules and regulations thereunder
(the "1934 Act")) other than Grantee or any of its Subsidiaries (each a
"Grantee Subsidiary"). For purposes of this Agreement, "Acquisition
Transaction" shall mean (x) a merger or
I-42
<PAGE>
consolidation, or any similar transaction, involving Issuer or any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X
promulgated by the SEC) of Issuer, (y) a purchase, lease or other
acquisition of all or substantially all of the assets of Issuer or any
Significant Subsidiary of Issuer, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
beneficial ownership of securities representing 25% or more of the voting
power of Issuer or any Significant Subsidiary of Issuer, provided that the
term "Acquisition Transaction" does not include any internal merger or
consolidation involving only Issuer and/or Issuer Subsidiaries;
(ii)(A) Any person other than Grantee, or any Grantee Subsidiary, or any
Issuer Subsidiary acting in a fiduciary capacity (collectively, "Excluded
Persons"), alone or together with such person's affiliates and associates
(as such terms are defined in Rule 12b-2 under the 1934 Act) shall have
acquired beneficial ownership or the right to acquire beneficial ownership
of 25% or more of the outstanding shares of Common Stock (the term
"beneficial ownership" for purposes of this Option Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules
and regulations thereunder) or (B) any group (as such term is defined in
Section 13(d)(3) of the 1934 Act), other than a group of which only
Excluded Persons are members, shall have been formed that beneficially owns
25% or more of the shares of Common Stock then outstanding;
(iii) Any person other than Grantee or any Grantee Subsidiary shall have
made a bona fide proposal to Issuer or its shareholders by public
announcement or written communication that is or becomes the subject of
public disclosure to (A) engage in an Acquisition Transaction or (B)
commence a tender or exchange offer the consummation of which would result
in such person acquiring beneficial ownership of securities representing
25% or more of Issuer's voting power;
(iv) The Board of Directors of Issuer shall have failed to recommend to
its stockholders the adoption of the Merger Agreement or shall have
withdrawn, modified or changed its recommendation in a manner adverse to
Grantee;
(v) After a proposal is made by a third party (other than an Excluded
Person) to Issuer to engage in an Acquisition Transaction, Issuer shall
have intentionally and knowingly breached any representation, warranty,
covenant or agreement contained in the Merger Agreement and such breach (x)
would entitle Grantee to terminate the Merger Agreement pursuant to Section
4.4(e) therein (without regard to any grace period provided for therein)
and (y) shall not have been cured prior to the Notice Date (as defined
below); or
(vi) Any person other than Grantee or any Grantee Subsidiary, other than
in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Office
of Thrift Supervision ("OTS") or other federal or state bank regulatory
authority, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person other than an Excluded Person of
beneficial ownership of 25% or more of the then outstanding Common Stock;
or
(ii) The occurrence of the Initial Triggering Event described in
subparagraph (i) of subsection (b) of this Section 2.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of any
Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which is herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided
I-43
<PAGE>
that if prior notification to or approval of the OTS or any other regulatory
agency is required in connection with such purchase, the Holder shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required
notification periods have expired or been terminated or such approvals have
been obtained and any requisite waiting period or periods shall have passed.
Any exercise of the Option shall be deemed to occur on the Notice Date
relating thereto.
(f) At each closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the Securities Act of 1933,
as amended. A copy of such agreement is on file at the principal office of
Issuer and will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933 ("1933 Act") in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
Holder shall have delivered to Issuer a copy of a letter from the staff of the
SEC, or an opinion of counsel, in form and substance satisfactory to Issuer,
to the effect that such legend is not required for purposes of the 1933 Act;
(ii) the reference to the provisions of this Agreement in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in compliance with the
provisions of this Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may
be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds,
the Holder shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer
books of Issuer shall then be closed or that certificates representing such
shares of Common Stock shall not then be actually delivered to the Holder.
Issuer shall pay all expenses, and any and all United States federal, state
and local taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2 in
the name of the Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to
time be required (including (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. Section 18a
and regulations promulgated thereunder and (y) in the event, under the Home
Owners' Loan Act, as
I-44
<PAGE>
amended ("HOLA"), or the Change in Bank Control Act of 1978, as amended, or
any state banking law, prior approval of or notice to the OTS, or to any state
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices
and providing such information to the OTS or such state regulatory authority
as they may require) in order to permit the Holder to exercise the Option and
Issuer duly and effectively to issue shares of Common Stock pursuant hereto;
and (iv) promptly to take all action provided herein to protect the rights of
the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to
purchase, on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any Stock Option Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Agreement if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual obligation
on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, in the event of any change in Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions, or the like, the type and
number, and/or the price, of shares of Common Stock purchasable upon exercise
hereof shall be appropriately adjusted, and proper provision shall be made in
the agreements governing such transaction so that the Holder shall receive,
upon exercise of the Option, the number and class of shares or other
securities or property that Holder would have received in respect of the
Common Stock if the Option had been exercised immediately prior to such event,
or the record date therefor, as applicable.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to
an Exercise Termination Event, Issuer (including any successor thereto) shall,
at the request of the Holder delivered at the time of and together with a
written notice of exercise in accordance with Section 2(e) hereof (whether on
its own behalf or on behalf of any subsequent holder of this Option (or part
thereof) or any of the shares of Common Stock issued pursuant hereto),
promptly prepare, file and keep current a shelf registration statement under
the 1933 Act covering any shares issued or issuable pursuant to this Option
and shall use its best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition
of any shares of Common Stock issued upon total or partial exercise of this
Option ("Option Shares") in accordance with any plan of disposition requested
by the Holder. Issuer will use its best efforts to cause such registration
statement first to become effective and then to remain effective for such
period not in excess of 180 days from the day such registration statement
first becomes effective or such shorter time as may be reasonably necessary to
effect such sales or other dispositions. The Holder shall have the right to
demand not more than two such registrations under this Agreement and all other
agreements, for which this agreement may be exchanged pursuant to Section 4
hereof; provided, however, that Issuer shall be required to bear the expenses
related only to the first such registration, and the Holder shall bear such
expenses to the extent related to the second. The foregoing notwithstanding,
if, at the time of any request by the Holder for registration of Option Shares
as provided above, Issuer is in registration with respect to an underwritten
public offering of shares of Common Stock, and if in the good faith judgment
of the managing underwriter or managing underwriters, or, if none, the sole
underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares
otherwise to be covered in the registration statement contemplated hereby may
be reduced; and provided, however, that after any such required reduction the
number of Option Shares to be included in such offering for the account of the
Holder shall constitute at least 25% of the total number of shares to be
issued by the Holder
I-45
<PAGE>
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practical and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in such
underwriting agreements for the Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof to any other
person known to Issuer to be entitled to registration rights under this
Section 6, in each case by promptly mailing the same, postage prepaid, to the
address of record of the persons entitled to receive such copies.
7.(a) In the event that prior to an Exercise Termination Event, Issuer shall
enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer
and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise
transfer all or substantially all of its assets to any person, other than
Grantee or one of its Subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provision so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the shares of capital stock (or
similar equity interest) with the greatest voting power with respect of the
election of directors (or other persons similarly responsible for direction
of the business and affairs) of the issuer of the Substitute Option.
(3) "Assigned Value" shall mean the highest of (i) the price per share of
Common Stock at which a tender offer or exchange offer therefor has been
made, (ii) the price per share of Common Stock to be paid by any third
party pursuant to an agreement with Issuer, or (iii) in the event of a sale
of all or substantially all of Issuer's assets, the sum of the price paid
in such sale for such assets and the current market value of the remaining
assets of Issuer as determined by a nationally recognized investment
banking firm selected by the Holder, divided by the number of shares of
Common Stock of Issuer outstanding at the time of such sale. In determining
the market/offer price, the value of consideration other than cash shall be
determined by a nationally recognized investment banking firm selected by
the Holder.
(4) "Average Price" shall mean the average closing price of a share of
the Substitute Common Stock for the six months immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of Common Stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as the Holder
may elect.
(c) The Substitute Option shall have the same terms and conditions as the
Option, provided, that if any term or condition of the Substitute Option
cannot, for legal reasons, be the same as the Option, such term or condition
shall be as similar as possible and in no event less advantageous to the
Holder. The issuer of the
I-46
<PAGE>
Substitute Option shall also enter into an agreement with the then Holder or
Holders of the Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to (i) the product of (A) the Assigned
Value and (B) the number of shares of Common Stock for which the Option is
then exercisable, divided by (ii) the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal to
the Option Price multiplied by a fraction the numerator of which shall be the
number of shares of Common Stock for which the Option is then exercisable and
the denominator of which shall be the number of shares of Substitute Common
Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute
Option.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 7 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
8. The 180-day period for exercise of certain rights under Sections 2 and 6
shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
9. Repurchase at the Option of Holder. (a) At the request of Holder at any
time commencing upon the first occurrence of a Repurchase Event (as defined in
Section 9(d)) and ending 12 months immediately thereafter, Issuer shall
repurchase from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then
has beneficial ownership. The date on which Holder exercises its rights under
this Section 9 is referred to as the "Request Date". Such repurchase shall be
at an aggregate price (the "Section 9 Repurchase Consideration") equal to the
sum of:
(i) the aggregate Option Price paid by Holder for any shares of Issuer
Common Stock acquired pursuant to the Option with respect to which Holder
then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined below)
for each share of Common Stock over (y) the Option Price (subject to
adjustment pursuant to Sections 1 and 5), multiplied by the number of
shares of Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Option Price
(subject to adjustment pursuant to Sections 1 and 5) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Holder for each share of
Common Stock with respect to which the Option has been exercised and with
respect to which Holder then has beneficial ownership, multiplied by the
number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 9 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment, Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Common Stock purchased thereunder with
respect to which Holder then has beneficial ownership, and Holder shall
warrant that it has sole record and beneficial ownership of such shares and
that the same are then free and clear of all liens. Notwithstanding the
foregoing, to the extent that prior notification to or approval of any federal
or state regulatory authority is required in connection with the payment of
all or any portion of the Section 9 Repurchase Consideration, Holder shall
have the ongoing option to revoke its request for repurchase pursuant to
Section 9, in whole or in part, or to require that Issuer deliver from time to
time that portion of the Section 9 Repurchase Consideration that it is not
then so prohibited from paying and promptly file the required notice or
application for approval and expeditiously process the same (and each party
shall cooperate
I-47
<PAGE>
with the other in the filing of any such notice or application and the
obtaining of any such approval). If any federal or state regulatory authority
disapproves of any part of Issuer's proposed repurchase pursuant to this
Section 9, Issuer shall promptly give notice of such fact to Holder. If any
federal or state regulatory authority prohibits the repurchase in part but not
in whole, then Holder shall have the right (i) to revoke the repurchase
request or (ii) to the extent permitted by such regulatory authority,
determine whether the repurchase should apply to the Option and/or Option
Shares and to what extent to each, and Holder shall thereupon have the right
to exercise the Option as to the number of Option Shares for which the Option
was exercisable at the Request Date less the sum of the number of shares
covered by the Option in respect of which payment has been made pursuant to
Section 9(a)(ii) and the number of shares covered by the portion of the Option
(if any) that has been repurchased. Holder shall notify Issuer of its
determination under the preceding sentence within five (5) business days of
receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's rights
under this Section 9 shall terminate on the date of termination of this Option
pursuant to Section 2(a).
(c) For purposes of this Agreement, the "Applicable Price" means the highest
of (i) the highest price per share of Common Stock paid for any such share by
the person or groups described in Section 9(d)(i), (ii) the price per share of
Common Stock received by holders of Common Stock in connection with any merger
or other business combination transaction described in Section 7(a)(i),
7(a)(ii) or 7(a)(iii), or (iii) the highest closing sales price per share of
Issuer Common Stock quoted on the Nasdaq National Market System (or if Issuer
Common Stock is not quoted on the Nasdaq National Market System, the highest
bid price per share as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a recognized source
chosen by Holder) during the 40 business days preceding the Request Date;
provided, however, that in the event of a sale of less than all of Issuer's
assets, the Applicable Price shall be the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment banking firm selected by
Holder, divided by the number of shares of Common Stock outstanding at the
time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm selected by Holder
and reasonably acceptable to Issuer, which determination shall be conclusive
for all purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any person (other
than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 50% or
more of the then outstanding shares of Issuer Common Stock, or (ii) any of the
transactions described in Section 7(a)(i), 7(a)(ii) or 7(a)(iii) shall be
consummated.
10. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly
executed and delivered by Issuer. This Agreement is the valid and legally
binding obligation of Issuer.
(b) Issuer has taken all necessary corporate action to authorize and reserve
and to permit it to issue, and at all times from the date hereof through the
termination of this Agreement in accordance with its terms will have reserved
for issuance upon the exercise of the Option, that number of shares of Common
Stock equal to the maximum number of shares of Common Stock at any time and
from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable,
I-48
<PAGE>
and will be delivered free and clear of all claims, liens, encumbrance and
security interests and not subject to any preemptive rights.
(c) Issuer has taken all necessary action to exempt this Agreement, and the
transactions contemplated hereby and thereby from, and this Agreement and the
transactions contemplated hereby and thereby are exempt from, (i) any
applicable state takeover laws, (ii) any state laws limiting or restricting
the voting rights of stockholders and (iii) any provision in its or any of its
subsidiaries' articles of incorporation, certificate of incorporation, charter
or bylaws restricting or limiting stock ownership or the voting rights of
stockholders.
(d) The execution, delivery and performance of this Agreement does not or
will not, and the consummation by Issuer of any of the transactions
contemplated hereby will not, constitute or result in (i) a breach or
violation of, or a default under, its certificate of incorporation or bylaws,
or the comparable governing instruments of any of its subsidiaries, or (ii) a
breach or violation of, or a default under, any agreement, lease, contract,
note, mortgage, indenture, arrangement or other obligation of it or any of its
subsidiaries (with or without the giving of notice, the lapse of time or both)
or under any law, rule, ordinance or regulation or judgment, decree, order,
award or governmental or nongovernmental permit or license to which it or any
of its subsidiaries is subject, that would, in any case referred to in this
clause (ii), give any other person the ability to prevent or enjoin Issuer's
performance under this Agreement in any material respect.
11. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has full corporate power and authority to enter into this
Agreement and, subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) This Option is not being acquired with a view to the public distribution
thereof and neither this Option nor any Option Shares will be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under applicable federal and state securities laws and
regulations.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
(i) to any wholly-owned Subsidiary or (ii) that in the event a Subsequent
Triggering Event shall have occurred prior to an Exercise Termination Event,
Grantee, subject to the express provisions hereof, may assign in whole or in
part its rights and obligations hereunder to one or more transferees.
13. Each of Grantee and Issuer will use its best efforts to make all filings
with, and to obtain consents of all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement.
14. Notwithstanding anything to the contrary herein, in the event that the
Holder or any Related Person thereof is a person making an offer or proposal
to engage in an Acquisition Transaction (other than the transactions
contemplated by the Merger Agreement), then in the case of a Holder or any
Related Person thereof, the Option held by it shall immediately terminate and
be of no further force or effect. A Related Person of a Holder means any
Affiliate (as defined in Rule 12b-2 of the rules and regulations under the
1934 Act) of the Holder and any person that is the beneficial owner of 20% or
more of the voting power of the Holder.
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the
I-49
<PAGE>
terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected,
impaired or invalidated. If for any reason such court or regulatory agency
determines that the Holder is not permitted to acquire the full number of
shares of Common Stock provided in Section 1(a) hereof (as adjusted pursuant
to Section 1(b) or Section 5 hereof), it is the express intention of Issuer to
allow the Holder to acquire such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail
(postage prepaid, return receipt requested) at the respective addresses of the
parties set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel. Notwithstanding anything to the contrary contained
herein or in the Merger Agreement, in the event a Subsequent Triggering Event
shall occur prior to an Exercise Termination Event, Issuer shall pay to
Grantee upon demand the amount of the expenses incurred by Grantee in
connection with this Agreement and the Merger Agreement and the transactions
contemplated hereby and thereby.
21. Except as otherwise expressly provided herein, or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors and, as permitted herein, assignees, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
In Witness Whereof, each of the parties has caused this Agreement to be
executed on its behalf by its officers, all as of the date first above
written.
Hinsdale Financial Corporation
/s/ Kenne P. Bristol
BY: _________________________________
Kenne P. Bristol
President and Chief Executive
Officer
Liberty Bancorp, Inc.
/s/ Fredric G. Novy
BY: _________________________________
Fredric G. Novy
President and Chief Executive
Officer
I-50
<PAGE>
EXHIBIT 1.1
PLAN OF MERGER
OF
LIBERTY FEDERAL SAVINGS BANK
INTO
HINSDALE FEDERAL BANK FOR SAVINGS
Plan of Merger, dated as of the 2nd day of August, 1996 by and between
Hinsdale Federal Bank for Savings, a savings bank chartered under the laws of
the United States of America (the "Bank" or the "Resulting Bank"), and Liberty
Federal Savings Bank, a savings association chartered under the laws of the
United States of America ("Liberty Federal"), such institutions being
sometimes hereinafter called the "Constituent Associations" or, individually,
"Constituent Association".
WITNESSETH:
Whereas, all of the outstanding capital stock of the Bank is owned directly
or indirectly by Hinsdale Financial Corporation ("HFC");
Whereas, HFC, parent corporation of the Bank, and Liberty Bancorp, Inc.
("LBI"), parent corporation of Liberty Federal, have entered into an Agreement
and Plan of Merger ("Merger Agreement") pursuant to which, following the
merger of LBI with and into HFC, Liberty Federal shall be merged with and into
the Bank.
Whereas, the Boards of Directors of the Bank and Liberty Federal each
believe that it is in the best interests of their institutions and their
stockholders to merge the Bank and Liberty Federal into a single federally
chartered savings bank in order that (i) the merged institution may operate
with an improved competitive position and operating efficiency and (ii) the
parent company of the Bank, HFC, will retain the advantage of a unitary
savings and loan holding company status.
Now, Therefore, in consideration of the mutual covenants, agreements and
provisions hereinafter contained, and for the purpose of prescribing the terms
and conditions of said merger and mode of carrying the same into effect, the
Bank and Liberty Federal have agreed and do hereby agree and covenant as
follows:
1. Plan of Merger. The merger provided for herein shall be effected as
follows:
(a) The execution and delivery of this Agreement by the Bank and Liberty
Federal shall have been duly approved by at least a two-thirds ( 2/3) vote
of the Board of Directors of the Bank and Liberty Federal, respectively.
(b) The Office of Thrift Supervision or any successor thereto ("OTS")
shall have approved the merger.
(c) The merger shall be approved by the shareholder of the Bank and by
the shareholder of Liberty Federal.
(d) Thereupon Liberty Federal shall be merged with and into the Bank.
2. Effect of Merger. When this Plan of Merger shall become effective in
accordance with the laws and regulations of the United States of America:
(a) The separate existence of Liberty Federal shall cease and Liberty
Federal shall be merged into the Bank, which shall be the savings bank
resulting from the merger and shall continue its existence under the name
"Liberty Federal Bank." The date on which such merger becomes effective is
hereinafter called the "Bank Merger Effective Time".
(b) The Charter and Bylaws of the Bank, as then in effect, shall be
amended to conform to the agreements of HFC and LBI as reflected in Section
6.5 of the Merger Agreement and such Charter and
I-51
<PAGE>
Bylaws, as so amended, shall be the Charter and Bylaws of the Resulting
Bank and may thereafter be amended in accordance with applicable law.
(c) The Directors of the Resulting Bank from and after the Bank Merger
Effective Time shall be nine (9) in number, to be determined in accordance
with Sections 6.4 and 6.5 of the Merger Agreement, and shall be those
persons whose name, residence address and terms of office are identified in
Exhibit 1 hereto. The directors of the Bank following the Bank Merger
Effective Time shall be elected in accordance with the procedures set forth
in Section 6.5 of the Merger Agreement. Notwithstanding anything to the
contrary, none of the persons who serve as directors of Liberty Federal
shall be subject to an age restriction relating to service as a director of
the Bank and the Bank shall take all necessary corporate action to
effectuate this agreement of the parties. Those provisions of this Section
2(c) intended to survive the Bank Merger Effective Time shall survive the
Bank Merger Effective Time and remain in effect until the fourth
anniversary thereof.
(d) The executive officers of the Bank following the Bank Merger
Effective Time shall be: Fredric G. Novy--Chairman; Kenne P. Bristol--
President and Chief Executive Officer.
(e) All savings accounts of Liberty Federal shall be and become savings
accounts in the Resulting Bank without change in their respective terms,
maturity, minimum required balances or withdrawal value. Each savings
account of Liberty Federal shall, as of the Bank Merger Effective Time, be
considered, for purpose of interest declared by the Resulting Bank
thereafter, as if it had been a savings account of the Resulting Bank at
the time said savings account was opened in Liberty Federal and at all
times thereafter until such account ceases to be a savings account of the
Resulting Bank. Appropriate evidence of savings account ownership interest
in the Resulting Bank shall be provided, as necessary, after consummation
of the merger by the Resulting Bank to each savings account holder of
Liberty Federal.
(f) All savings accounts of the Bank prior to consummation of the merger
shall continue to be savings accounts in the Resulting Bank after
consummation of the merger without any change whatsoever in any of the
provisions of such savings accounts, including, without limitation, their
respective terms, maturity, minimum required balances or withdrawal value.
(g) All of the assets, properties, obligations and liabilities of every
kind and character, real, personal and mixed, tangible and intangible,
choses in action, rights, and credits then owned by either the Bank or
Liberty Federal, or which would inure or be subject to either of them,
shall immediately by operation of law and without any conveyance or
transfer and without any further act or deed, be vested in and become the
property and obligations of the Resulting Bank which shall have, hold and
enjoy the same in its own right as fully and to the same extent as the same
were possessed, held and enjoyed by the Bank and Liberty Federal
immediately prior to the consummation of the merger. The Resulting Bank
shall be deemed to be and shall be a continuation of the entity and
identity both of the Bank and of Liberty Federal and the rights and
obligations of the Bank and of Liberty Federal shall remain unimpaired; and
the Resulting Bank, upon the consummation of the merger, shall succeed to
all of such rights and obligations and the duties and liabilities connected
therewith.
(h) The main office of the Bank at One Grant Square, Hinsdale, Illinois,
shall be the main office of the Resulting Bank and branch offices thereof
will be located at the locations set forth in Exhibit 2 hereof.
(i) The liquidation account of Liberty Federal as in effect as of the
Bank Merger Effective Time shall be assumed in full by the Resulting Bank.
3. Disposition of Shares:
(a) All of the shares of Liberty Federal capital stock issued and
outstanding on the Bank Merger Effective Time, and all rights in respect
thereof, shall be cancelled.
(b) The shares of capital stock of the Bank outstanding immediately prior
to consummation of the merger shall constitute the only outstanding shares
of capital stock of the Resulting Bank following consummation of the
merger.
I-52
<PAGE>
4. Effective Time of Merger. The merger provided for herein shall become
effective on the date of endorsement of the Articles of Combination by the
Secretary of the OTS (the "Bank Merger Effective Time"). The merger shall not
be effective unless and until approved by the OTS. The merger shall also not
be effective until after the effective time of the merger of LBI with and into
HFC as set forth in the Merger Agreement by and between LBI and HFC.
5. Action by Shareholders: The shareholders of the Bank and Liberty Federal,
respectively, shall take appropriate action to vote to approve this Plan of
Merger.
6. Condition of Closing: The obligations of the parties hereto to consummate
the transactions contemplated herein shall be subject to approval by the OTS
and fulfillment or wavier (as may be applicable) of the conditions set forth
in Article IV of the Merger Agreement.
7 Amendment: This Agreement may be amended or modified at any time by a
written instrument signed by the Bank and Liberty Federal.
8. Paragraph Headings: The paragraph headings in this Plan of Merger are for
convenience only; they form no part of this Plan of Merger and shall not
affect its interpretation.
9. Governing Law: This Plan of Merger shall be governed by the laws of the
State of Illinois, except to the extent federal law governs.
10. Termination. This Plan of Merger shall automatically terminate without
any further action of the parties hereto upon termination of the Merger
Agreement.
11. Miscellaneous: This Plan of Merger may be executed in counterparts, each
of which shall be deemed an original and all of which constitute one and the
same instrument.
In Witness Whereof, the parties hereto have caused this Plan of Merger to be
executed on their behalf by their duly authorized representatives as of the
day and year first above written.
Liberty Federal Savings Bank Hinsdale Federal Bank for Savings
/s/ Fredric G. Novy /s/ Kenne P. Bristol
By: _________________________________ By: _________________________________
Fredric G. Novy Kenne P. Bristol
President and Chief Executive President and Chief Executive
Officer Officer
I-53
<PAGE>
APPENDIX II
PROPOSED AMENDMENTS TO THE CERTIFICATE OF INCORPORATION
OF
HINSDALE FINANCIAL CORPORATION
FIRST: The name of the Corporation is Alliance Bancorp (hereinafter sometimes
referred to as the "Corporation").
FOURTH: A. The total number of shares of all classes of stock which the
Corporation Shall have authority to issue is twelve million five hundred
thousand (12,500,000) consisting of:
1. one million five hundred thousand (1,500,000) shares of Preferred
Stock, par value one cent ($.01) per share (the "Preferred Stock"); and
2. eleven million (11,000,000) shares of Common Stock, par value one cent
($.01) per share (the "Common Stock").
II-1
<PAGE>
APPENDIX III
October 17, 1996
Board of Directors
Hinsdale Financial Corporation
One Grant Square
Hinsdale, IL 60521
Gentlemen:
Hinsdale Financial Corporation (the "Company") proposes to enter into an
Agreement and Plan of Merger (the "Agreement") with Liberty Bancorp, Inc.
("Liberty"), pursuant to which, Liberty will be merged with and into the
Company (the "Merger"), with the surviving corporation to be named Alliance
Bancorp ("Alliance"). At the Effective Time (as defined in the Agreement) of
the Merger, each outstanding share of common stock, par value $0.01 per share
("Liberty Common Stock") of Liberty (other than shares owned by the Company,
Liberty or any of their respective subsidiaries other than in a fiduciary
capacity) will be converted solely into the right to receive 1,054 shares of
common stock, par value $0.01 per share, of Alliance (the "Exchange Ratio").
You have requested our opinion as to the fairness of the Exchange Ratio, from
a financial point of view, to the holders of the outstanding shares of
Hinsdale Financial Common Stock, par value $0.01 per share (the "Hinsdale
Financial Common Stock").
Robert W. Baird & Co. Incorporated ("Baird"), as part of its investment
banking business, is engaged in the evaluation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes.
In conducting our investigation and analysis and in arriving at our opinion
herein, we have reviewed such information and taken into account such
financial and economic factors as we have deemed relevant under the
circumstances. In that connection, we have, among other things: (i) reviewed
certain internal information, primarily financial in nature, including
projections, concerning the business and operations of Liberty furnished to us
for purposes of our analysis, as well as publicly available information
including but not limited to Liberty's consolidated financial statements for
recent years and interim periods and other filings with the Securities and
Exchange Commission (the "SEC"); (ii) reviewed certain internal information,
primarily financial in nature, concerning the business and operations of the
Company furnished to us by or on behalf of the Company for purposes of the
analysis, as well as publicly available information including but not limited
to the Company's consolidated financial statements for recent years and
interim periods and other filings with the SEC; (iii) reviewed the draft of
the Agreement in the form presented to the Company's Board of Directors; (iv)
compared the historical market prices and trading activity of the common
stock, par value $0.01 ("Company Common Stock") of the Company and the Liberty
Common Stock with such price and trading histories with those of certain other
publicly traded companies including transactions which Baird deemed to be
merger of equals; (v) compared the financial position and operating results of
the Company and Liberty with those of other publicly traded companies we
deemed relevant; (vi) compared the proposed financial terms of the Merger with
the financial terms of certain other business combinations we deemed relevant;
and (vii) reviewed the potential pro forma effects of the Merger on the
Company. We have held discussions with certain members of the Company's and
Liberty's senior management concerning the Company's and Liberty's respective
historical and current financial condition and operating results, as well as
the future prospects of the Company and Liberty, respectively and have
consulted with the Company's counsel and special counsel concerning the
Company's supervisory goodwill lawsuit. We have also considered such other
information, financial studies, analysis and investigations and financial,
economic and market criteria which we deemed relevant for the preparation of
this opinion.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of all of the financial and other information provided us by or
on behalf of the Company and Liberty, or publicly available,
III-1
<PAGE>
and have not attempted independently to verify any such information. We have
also assumed, with your consent, that (i) all material assets and liabilities
(contingent or otherwise, known or unknown) of the Company and Liberty are as
set forth in the consolidated financial statements of the Company and Liberty,
respectively; and (ii) the strategic and operating benefits currently
contemplated by senior management of the Company to result from the Merger
will be realized. We have assumed that the projections examined by us have
been reasonably prepared and represent the best available estimates and good
faith judgments of the senior managements of the company and Liberty,
respectively, as to future performance of their respective companies. In
conducting our review, we have not made nor obtained an independent evaluation
or appraisal of any of the assets or liabilities (contingent or otherwise) of
the Company or Liberty nor have we made a physical inspection of the
properties or facilities of the Company or Liberty. We express no opinion
concerning the merits of, or ultimate recovery from, the Company's supervisory
goodwill lawsuit. Our opinion necessarily is based upon economic, monetary and
market conditions as they exist and can be evaluated on the date hereof, and
does not predict or take into account any changes which may occur, or
information which may become available, after the date hereof.
Our opinion has been prepared solely for the information of the Company's
Board of Directors, and shall not be used for any other purpose or disclosed
to or relied upon by any other party without the prior written consent of
Baird; provided, however, that this letter may be reproduced in full in the
Joint Proxy Statement/Prospectus relating to the Merger. This opinion does not
address the relative merits of the Merger and any other potential transactions
or business strategies considered by the Company's Board of Directors, and
does not constitute a recommendation to any shareholder of the Company as to
how any such shareholder should vote with respect to the Merger. Baird will
receive a fee for rendering this opinion.
In the ordinary course of our business, we may from time to time trade the
securities of the Company or Liberty for our own account or the accounts of
our customers and accordingly, may at any time hold long or short positions in
such securities.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Exchange Ratio is fair, from a financial point of view,
to the holders of the Hinsdale Financial Common Stock.
Very truly yours,
Robert W. Baird & Co. Incorporated
III-2
<PAGE>
APPENDIX IV
October 17, 1996
Board of Directors
Liberty Bancorp, Inc.
5700 North Lincoln Avenue
Chicago, Illinois 60659
Gentlemen:
You have requested our opinion as the fairness, from a financial point of
view, to the shareholders of Liberty Bancorp, Inc. ("LBI") of the
consideration to be received by such shareholders pursuant to the terms of the
Agreement and Plan of Merger dated as of August 2, 1996, between LBI and
Hinsdale Financial Corporation ("HFC") providing for the combination of their
respective businesses through a "merger-of-equals," by which LBI will be
merged with and into HFC with HFC as the surviving corporation, which
effective upon consummation of the transactions contemplated hereby, will
amend its certificate of incorporation to, among other things, operate under
the name "Alliance Bancorp" (the "Agreement").
Pursuant to the Agreement, at the effective time, each share of LBI common
stock outstanding immediately prior to the effective time, will be converted
into 1.054 shares of Alliance Bancorp ("Exchange Ratio") and each share of HFC
common stock outstanding immediately prior to the effective time, will remain
outstanding, representing one share of Alliance Bancorp.
Chicago Capital, Inc., as part of its investment banking business, is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions and other transactions. In the
ordinary course of our business as a broker-dealer, we may from time to time
purchase securities from, and sell securities to, LBI and HFC, and as a market
maker in securities we may from time to time have a long or short position in,
and buy or sell, equity securities of LBI and HFC for our own account and for
the accounts of our customers.
In arriving at our opinion, we have reviewed, including, among other things,
the following: (i) the Agreement and certain related documents; (ii) Annual
Reports on Form 10-K for the three years ended December 31, 1995 of LBI and
those for the three years ended September 30, 1995 of HFC; (iii) certain
Quarterly Reports on Form 10-Q of LBI and HFC; (iv) other financial and
operating data concerning LBI and HFC provided by their management, including
certain internal financial analyses and forecasts for LBI and HFC prepared by
the senior management of or representatives for the companies; (v) certain
publicly available information concerning market prices and historical trading
activity of LBI and HFC Common Stock; and (vi) certain publicly available
information with respect to certain other financial institutions and the
nature and terms of certain other transactions that we consider relevant to
our inquiry. In addition, we have held discussions with senior management of
LBI and HFC regarding factors that might affect each entity's business and
conversations with LBI's senior management and its representatives regarding
recent developments and management's financial projections for LBI and HFC. We
have also conducted such other studies, analyses, and examinations as we
deemed appropriate.
In preparing our opinion, we have relied upon and assumed without
independent verification the accuracy and completeness of all information
supplied or otherwise made available to us by LBI, HFC and their respective
representatives as well as the publicly available information that was
reviewed by us. We have relied upon the management of LBI and HFC and their
respective representatives as to the reasonableness and achievability of the
financial and operating forecasts (and the assumptions and bases therefor)
provided to us, and we have assumed that such forecasts reflect the best
currently available estimates and judgments of such management. We have
assumed, without independent verification, that the aggregate allowances for
loan losses for LBI and HFC are adequate to cover such losses. We have not
conducted a physical inspection of any of the properties or
IV-1
<PAGE>
facilities of LBI or HFC, independently undertaken or obtained any independent
evaluation or appraisal of the assets, liabilities or prospects of LBI or HFC,
and have not examined any loan credit files.
Our opinion is based solely upon the information available to us and the
economic, market, and other circumstances as they exist as of the date hereof.
Our opinion as expressed herein is limited to the fairness of the Exchange
Ratio, from a financial point of view, to the shareholders of LBI and does not
constitute a recommendation to any shareholders as to how such shareholder
should vote with respect to the proposed transaction.
It is further understood that this opinion is not to be quoted or referred
to, in whole or part, in a registration statement, prospectus or proxy
statement, or in any other document used in connection with the offering or
sale of securities, nor shall this letter be used for any other purposes,
without our prior written consent. We hereby consent to the inclusion of this
opinion in any registration statement or proxy statement used in connection
with the merger so long as the opinion is quoted in full in such registration
statement or proxy statement.
Based on and subject to the foregoing and after considering such other
matters as we have deemed relevant, we are of the opinion that the Exchange
Ratio is fair, from a financial point of view, to the shareholders of LBI.
Very truly yours,
Chicago Capital, Inc.
IV-2
<PAGE>
APPENDIX V
October 17, 1996
Board of Directors
Liberty Bancorp, Inc.
5700 N. Lincoln Avenue
Chicago, Illinois 60659
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of Liberty Bancorp, Inc. (the "Company") of the
Exchange Ratio in connection with its proposed merger with Hinsdale Financial
Corporation ("Hinsdale") (the "Transaction") pursuant to and in accordance
with the terms of that certain Agreement and Plan of Merger (the "Agreement")
entered into by and between Hinsdale and the Company. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to them in
the Agreement.
You have advised us that, pursuant to the Agreement, Hinsdale and Liberty
are combining their respective holding companies through a tax-free, stock-
for-stock transaction structured as a merger of equals. The Company will be
merged with and into Hinsdale, with Hinsdale as the surviving corporation (the
"Company Merger"). The surviving corporation will be named Alliance Bancorp.
Immediately following consummation of the Company Merger, Liberty Federal
Savings Bank ("Liberty Federal") will be merged with and into Hinsdale Federal
Bank for Savings ("Hinsdale Federal"), with Hinsdale Federal as the surviving
financial institution (the "Bank Merger"). Upon effectiveness of the Bank
Merger, the charter of Hinsdale Federal will be amended to, among other
things, change the name of the bank to Liberty Federal Bank. The Agreement
provides that each share of the Company's Common Stock issued and outstanding
at the Company Merger Effective Time will be converted into and represent
1.054 shares of Common Stock of Alliance Bancorp. Each share of Hinsdale's
Common Stock issued and outstanding immediately before the Company Merger
Effective Time will remain an outstanding share of Common Stock of Alliance
Bancorp as the surviving corporation. At the Company Merger Effective Time,
all of the Company's outstanding options will continue outstanding as options
to purchase the number of shares of Common Stock of Alliance Bancorp that
would have been received in the Transaction if the options were exercised in
full.
Morgan Keegan & Company, Inc. ("Morgan Keegan"), as part of its investment
banking business, is regularly engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for various purposes. We have been retained by the Board of
Directors of the Company for the purpose of, and will receive a fee for,
rendering this opinion. We have not advised any party in connection with the
Transaction other than the Company and we make no recommendation to the
shareholders of the Company.
In connection with our opinion, we have (1) reviewed the Agreement; (which,
for purposes of our analysis, we have assumed that any further revisions,
including the filling in of blank spaces and the attachment of final exhibits
and appendices, will not materially alter the terms and provisions of such
documents and that such documents will be executed as finalized); (2) held
discussions with various members of management and representatives of the
Company and Hinsdale concerning each company's historical and current
operations, financial condition and prospects; (3) reviewed historical
consolidated financial and operating data that was publicly available or
furnished to us by the Company and Hinsdale; (4) reviewed internal financial
analyses, financial and operating forecasts, reports and other information
prepared by officers and representatives of the Company and Hinsdale; (5)
reviewed certain publicly available information with respect to certain other
companies that we believe to be comparable to the Company and Hinsdale and the
trading markets for such other companies' securities; (6) reviewed certain
publicly available information concerning the terms of certain other
transactions that we deemed relevant to our inquiry; (7) considered the
potential pro forma financial implications
V-1
<PAGE>
of the Merger on the Company's stockholders; (8) considered the relative
contributions of the Company and Hinsdale to the combined company; and (9)
conducted such other financial studies, analyses and investigations as we
deemed appropriate for the purposes of this opinion.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and
other information provided us or publicly available and have assumed and
relied upon the representations and warranties of the Company and Hinsdale
contained in the Agreement. We have not been engaged to, and have not
independently attempted to, verify any of such information. We have also
relied upon the managements of the Company and Hinsdale as to the
reasonableness and achievability of the financial and operating projections
and the assumptions and bases therefor provided to us and, with your consent,
we have assumed that such projections reflect the best currently available
estimates and judgments of such respective managements of the Company and
Hinsdale and that such projections and forecasts will be realized in the
amounts and time periods currently estimated by the managements of the Company
and Hinsdale. We have not been engaged to assess the achievability of such
projections or the assumptions on which they were based and express no view as
to such projections or assumptions. In addition, we have not conducted a
physical inspection or appraisal of any of the assets, properties or
facilities of either the Company or Hinsdale nor have we been furnished with
any such evaluation or appraisal. We have also assumed that the conditions to
the Transaction as set forth in the Agreement would be satisfied; and that the
Transaction would be consummated on a timely basis in the manner contemplated
in the Agreement. Our opinion is based upon analyses of the foregoing factors
in light of our assessment of general economic, financial and market
conditions as they exist and can be evaluated by us as of the date hereof. We
express no opinion as to the price or trading range at which shares of the
Company's or Hinsdale's Common Stock will trade following the date hereof, or
the price or trading range at which Alliance Bancorp's Common Stock will trade
upon completion of the Transaction.
Morgan Keegan has not previously provided investment banking services to the
Company.
It is understood that this opinion is not to be quoted or referred to, in
whole or in part (including excerpts or summaries), in any filing, report,
document, release or other communication used in connection with the
Transaction (unless required to be quoted or referred to by applicable
regulatory requirements), nor shall this opinion be used for any other
purposes, without our prior written consent, which consent shall not be
unreasonably withheld. Furthermore, our opinion is directed to the Board of
Directors of the Company and does not constitute a recommendation to any
shareholder of the Company as to how such shareholder should vote at the
shareholders' meeting held in connection with the Transaction.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that, as of the date hereof, the
Exchange Ratio is fair, from a financial point of view, to the Company and its
shareholders.
Yours very truly,
Morgan Keegan & Company, Inc.
V-2
<PAGE>
PROXY PROXY
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF LIBERTY BANCORP, INC.
FOR A SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 26, 1996.
The undersigned stockholder of Liberty Bancorp, Inc. ("Liberty Bancorp")
hereby appoints Edward J. Burns, H. Verne Loeppert and Fredric G. Novy, or any
of them, with full powers of substitution, as attorneys-in-fact and agents for
and in the name of the undersigned, to vote such votes as the undersigned may
be entitled to vote at the Special Meeting of Stockholders of Liberty Bancorp
to be held on Tuesday, November 26, 1996, at the Chicago Marriott O'Hare, 8535
West Higgins Road, Chicago, Illinois, at 2:00 p.m., Chicago time, and at any
and all adjournments thereof, as follows:
(1) The approval of an Agreement and Plan of Merger (the "Merger Agreement"),
dated as of August 2, 1996, by and between Liberty Bancorp and Hinsdale
Financial Corporation ("Hinsdale Financial") and the transactions
contemplated thereby, including the merger of Liberty Bancorp into
Hinsdale Financial, pursuant to which each outstanding share of Liberty
Bancorp Common Stock would be converted into 1.054 shares of Hinsdale
Financial (to be called "Alliance Bancorp" following the Merger) Common
Stock (with cash paid in lieu of fractional share interests), and the
merger of Liberty Federal Savings Bank into Hinsdale Federal Bank for
Savings, to operate under the name "Liberty Federal Bank."
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE PROPOSITION STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY THE PROXYHOLDERS IN THEIR
BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE SPECIAL MEETING.
PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE
<PAGE>
LIBERTY BANCORP, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [DARKENED
0 APPEARS
HERE]
[ ]
1. Approval of the Agreement and Plan
of Merger by and between Hinsdale FOR AGAINST ABSTAIN
Financial and Liberty Bancorp, Inc. 0 0 0
Votes will be cast in accordance with the Proxy. Should the undersigned be
present and elect to vote at the Special Meeting or adjournment thereof and
after notification to the Secretary of the Association at said meeting of the
stockholder's decision to terminate this Proxy, then the power of said
attorney-in-fact or agents shall be deemed terminated and of no further force
and effect.
The undersigned acknowledges receipt of a Notice of Special Meeting of Stock-
holders and a Proxy Statement dated October 17, 1996, prior to the execution of
this Proxy.
Date: ___________________________________________________________________ , 1996
Signature ______________________________________________________________________
NOTE: ONLY ONE SIGNATURE IS REQUIRED IN THE CASE OF JOINT OWNERSHIP.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE.
