<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
CITIZENS FIRST FINANCIAL CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
CITIZENS FIRST FINANCIAL CORP.
301 BROADWAY
NORMAL, ILLINOIS 61761
(309) 452-1102
October 4, 1996
Fellow Shareholders:
You are cordially invited to attend the special meeting of shareholders
(the "Special Meeting") of Citizens First Financial Corp. (the "Company"),
the holding company for Citizens Savings Bank, F.S.B. (the "Bank"), Normal,
Illinois, which will be held on November 12, 1996, at 10:00 a.m., at The
Holiday Inn, 8 Traders Circle, Normal, Illinois.
The attached Notice of the Special Meeting and the Proxy Statement
describe the formal business to be transacted at the Special Meeting.
Directors and officers of Citizens First Financial Corp., will be present at
the Special Meeting to respond to any questions that our shareholders may
have regarding the business to be transacted.
The Board of Directors of Citizens First Financial Corp. has determined
that the matters to be considered at the Special Meeting are in the best
interests of the Company and its shareholders. FOR THE REASONS SET FORTH IN
THE PROXY STATEMENT, THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
EACH MATTER TO BE CONSIDERED.
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. YOUR
COOPERATION IS APPRECIATED SINCE A MAJORITY OF THE COMMON STOCK MUST BE
REPRESENTED, EITHER IN PERSON OR BY PROXY, TO CONSTITUTE A QUORUM FOR THE
CONDUCT OF BUSINESS.
On behalf of the Board of Directors and all of the employees of the
Company and the Bank, I thank you for your continued interest and support.
Sincerely yours,
/s/ C. William Landefeld
C. William Landefeld
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
CITIZENS FIRST FINANCIAL CORP.
301 BROADWAY
NORMAL, ILLINOIS 61761
__________________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 12, 1996
__________________________________
NOTICE IS HEREBY GIVEN that the special meeting of shareholders (the
"Special Meeting") of Citizens First Financial Corp. (the "Company") will be
held on November 12, 1996, at 10:00 a.m., at The Holiday Inn, 8 Traders
Circle, Normal, Illinois.
The purpose of the Special Meeting is to consider and vote upon the
following matters:
1. The approval of the Citizens First Financial Corp. 1996 Stock-Based
Incentive Plan; and
2. Such other matters as may properly come before the meeting and at
any adjournments thereof, including whether or not to adjourn the
meeting.
The Board of Directors has established September 26, 1996, as the record
date for the determination of shareholders entitled to receive notice of and
to vote at the Special Meeting and at any adjournments thereof. Only record
holders of the common stock of the Company as of the close of business on
such record date will be entitled to vote at the Special Meeting or any
adjournments thereof. In the event there are not sufficient votes for a
quorum or to approve the foregoing proposal at the time of the Special
Meeting, the Special Meeting may be adjourned in order to permit further
solicitation of proxies by the Company. A list of shareholders entitled to
vote at the Special Meeting will be available at Citizens First Financial
Corp., 301 Broadway, Normal, Illinois 61761, for a period of ten days prior
to the Special Meeting and will also be available at the Special Meeting
itself.
By Order of the Board of Directors
/s/ Richard F. Becker
Richard F. Becker
CORPORATE SECRETARY
Normal, Illinois
October 4, 1996
<PAGE>
CITIZENS FIRST FINANCIAL CORP.
_______________________
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
NOVEMBER 12, 1996
_______________________
SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is being furnished to shareholders of Citizens First
Financial Corp. (the "Company") in connection with the solicitation by the
Board of Directors ("Board of Directors" or "Board") of proxies to be used at
the special meeting of shareholders, to be held on November 12, 1996 (the
"Special Meeting"), and at any adjournments thereof. This Proxy Statement is
first being mailed to record holders on or about October 4, 1996.
The Company was formed and became a savings and loan holding company as
part of the mutual to stock conversion (the "Conversion") of Citizens Savings
Bank, F.S.B. (the "Bank"), which was completed on May 1, 1996.
Regardless of the number of shares of common stock owned, it is important
that record holders of a majority of the shares be represented by proxy or in
person at the Special Meeting. Shareholders are requested to vote by
completing the enclosed proxy card and returning it signed and dated in the
enclosed postage-paid envelope. Shareholders are urged to indicate their
vote in the spaces provided on the proxy card. PROXIES SOLICITED BY THE BOARD
OF DIRECTORS OF THE COMPANY WILL BE VOTED IN ACCORDANCE WITH THE DIRECTIONS
GIVEN THEREIN. WHERE NO INSTRUCTIONS ARE INDICATED, SIGNED PROXY CARDS WILL
BE VOTED FOR THE APPROVAL AND RATIFICATION OF THE SPECIFIC PROPOSAL PRESENTED
IN THIS PROXY STATEMENT.
Other than the matters listed on the attached Notice of Special Meeting
of Shareholders, the Board of Directors knows of no additional matters that
will be presented for consideration at the Special Meeting. EXECUTION OF A
PROXY, HOWEVER, CONFERS ON THE DESIGNATED PROXY HOLDERS DISCRETIONARY
AUTHORITY TO VOTE THE SHARES IN ACCORDANCE WITH THEIR BEST JUDGMENT ON SUCH
OTHER BUSINESS, IF ANY, THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING AND
AT ANY ADJOURNMENTS THEREOF, INCLUDING WHETHER OR NOT TO ADJOURN THE SPECIAL
MEETING.
A proxy may be revoked at any time prior to its exercise by filing a
written notice of revocation with the Corporate Secretary of the Company, by
delivering to the Company a duly executed proxy bearing a later date, or by
attending the Special Meeting and voting in person. However, if you are a
shareholder 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.
<PAGE>
The cost of solicitation of proxies on behalf of management will be borne
by the Company. In addition to the solicitation of proxies by mail,
Kissel-Blake, Inc., a proxy solicitation firm, will assist the Company in
soliciting proxies for the Special Meeting and will be paid a fee of $3,500,
plus out-of-pocket expenses. Proxies may also be solicited personally or by
telephone by directors, officers and other employees of the Company and its
subsidiary, the Bank, without additional compensation therefor. The Company
will also request persons, firms and corporations holding shares in their
names, or in the name of their nominees, which are beneficially owned by
others, to send proxy material to and obtain proxies from such beneficial
owners, and will reimburse such holders for their reasonable expenses in
doing so.
VOTING SECURITIES
The securities which may be voted at the Special Meeting consist of
shares of common stock of the Company ("Common Stock"), with each share
entitling its owner to one vote on all matters to be voted on at the Special
Meeting, except as described below.
The close of business on September 26, 1996, has been fixed by the Board
of Directors as the record date (the "Record Date") for the determination of
shareholders of record entitled to notice of and to vote at the Special
Meeting and at any adjournments thereof. The total number of shares of
Common Stock outstanding on the Record Date was 2,817,500 shares.
As provided in the Company's Certificate of Incorporation, record holders
of Common Stock who beneficially own in excess of 10% of the outstanding
shares of Common Stock (the "Limit") are not entitled to any vote in respect
of the shares held in excess of the Limit. A person or entity is deemed to
beneficially own shares owned by an affiliate of, as well as by persons
acting in concert with, such person or entity. The Company's Certificate of
Incorporation 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 to supply information to the Company to enable the
Board of Directors to implement and apply the Limit.
The presence, in person or by proxy, of the holders of at least a
majority of the total number of shares of Common Stock entitled to vote
(after subtracting any shares in excess of the Limit pursuant to the
Company's Certificate of Incorporation) is necessary to constitute a quorum
at the Special Meeting. In the event that there are not sufficient votes for
a quorum or to approve or ratify any proposal at the time of the Special
Meeting, the Special Meeting may be adjourned in order to permit the further
solicitation of proxies.
As to the matter being proposed for shareholder action set forth in
Proposal 1, the proxy card being provided by the Board of Directors enables a
shareholder to check the appropriate box on the proxy card to (i) vote "FOR"
the item, (ii) vote "AGAINST" the item, or (iii) "ABSTAIN" from voting on
such item. Under Delaware law, an affirmative vote of the holders of a
majority of the shares of Common Stock present at the Special Meeting, in
person or by proxy, and entitled to vote is required to constitute
shareholder approval of Proposal 1. Shares as to which the "ABSTAIN" box has
been selected on the proxy card with respect to Proposal 1 will be counted as
present and entitled to vote and have the effect of a vote against the matter
for which
2
<PAGE>
the "ABSTAIN" box has been selected. In contrast, shares underlying broker non-
votes or in excess of the Limit are not counted as present and entitled to
vote and have no effect on the vote on the matter presented. For further
information on the vote required to implement Proposal 1 during the first year
following Conversion, see the discussion under Proposal 1 herein.
Proxies solicited hereby will be returned to the Company's transfer
agent, Registrar and Transfer Company ("RTC"). The Board of Directors have
designated RTC to act as inspectors of election and tabulate the votes at the
Special Meeting. RTC is not otherwise employed by, or a director of, the
Company or any of its affiliates. After the final adjournment of the Special
Meeting, the proxies will be returned to the Company.
3
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to those persons believed
by management to be beneficial owners of more than 5% of the Company's
outstanding shares of Common Stock on the Record Date or as disclosed in
certain reports received to date regarding such ownership filed by such
persons with the Company and with the Securities and Exchange Commission
("SEC"), in accordance with Sections 13(d) and 13(g) of the Securities
Exchange Act of 1934, as amended ("Exchange Act"). Other than those persons
listed below, the Company is not aware of any person, as such term is defined
in the Exchange Act, that owns more than 5% of the Company's Common Stock as
of the Record Date.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP CLASS
- -------------- ---------------------------------------- ----------- ---------
<S> <C> <C> <C>
Common Stock Citizens Savings Bank, F.S.B. 225,400(1) 8.00%
Employee Stock Ownership Plan
("ESOP")
301 Broadway,
Normal, Illinois 61761
Common Stock Investors of America, Limited 182,650(2) 6.48%
Partnership
1504 Highway, #395 N #8-00508
Gardnerville, Nevada 89410
Common Stock Tidal Insurance Limited 25,700(2) .91%
c/o Global Corporate & Trust
Management, LTD
Zetlands, Nevis
West Indies
</TABLE>
- -------------------
(1) Shares of Common Stock were acquired by the ESOP in the Bank's Conversion.
The ESOP Committee administers the ESOP. First Bankers Trust, N.A. has
been appointed as the corporate trustee for the ESOP ("ESOP Trustee").
The ESOP Trustee, subject to its fiduciary duty, must vote all allocated
shares held in the ESOP in accordance with the instructions of the
participants. At September 26, 1996, no shares had been allocated under
the ESOP. Each participant, however, will be deemed to have one share of
Common Stock in the ESOP allocated to such participant's account for the
purpose of providing voting instructions to the ESOP Trustee. Under the
ESOP, unallocated shares will be voted by the ESOP Trustee in a manner
calculated to most accurately reflect the instructions received from
participants regarding the allocated stock so long as such vote is in
accordance with the provisions of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
(2) Based upon information contained in Schedules 13D, dated August 7, 1996,
in which Investors of America, Limited Partnership ("Investors") and Tidal
Insurance Limited ("Tidal") disclosed that they had sole power to vote or
dispose of 182,650 and 22,700 shares of Common Stock, respectively.
Investors is the controlling shareholder of Tidal. Investors disclaimed
beneficial ownership of the Common Stock owned by Tidal in its
Schedule 13D. Tidal and Investors own an aggregate of 208,350 shares
of Common Stock or 7.39%.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of the Record Date as to
shares of Common Stock and the percent thereof beneficially owned by
directors and named executive officers (as defined herein) individually and
by all executive officers and directors as a group. Ownership information is
based upon information furnished by the respective individuals.
<TABLE>
<CAPTION>
SHARES OF
COMMON
STOCK
BENEFICIALLY PERCENT OF
NAME TITLE OWNED(1)(2) CLASS(3)
- --------------------- ------------------------------------------ ----------- ----------
<S> <C> <C> <C>
DIRECTORS
C. William Landefeld President and Chief Executive Officer 26,550 *
of the Company and the Bank
Bryce A. Sides Director 20,000 *
Jeffrey M. Solberg Director 6,000 *
Lowell M. Thompson Director 19,840 *
Donald L. Wainscott Chairman of the Board of the Company 26,450 *
and the Bank
NAMED EXECUTIVE
OFFICERS
Richard F. Becker Senior Vice President and Secretary of 13,263 *
the Company and the Bank
Dallas G. Smiley Senior Vice President, Treasurer and 12,654 *
Chief Financial Officer of the Company
and Senior Vice President and Treasurer
of the Bank
All directors and 124,757 4.4%
executive officers as a
group (7 persons)
</TABLE>
- ---------------------
* Does not exceed 1.0% of the Company's voting securities.
(1) Each person effectively exercises sole (or shares with spouse or other
immediate family member) voting and dispositive power as to shares
reported.
(2) Does not include options and awards intended to be granted under the
Citizens First Financial Corp. 1996 Stock-Based Incentive Plan (the
"Incentive Plan"), which is subject to stockholder approval. For a
discussion of the options and awards that are intended to be granted under
the Incentive Plan, see Proposal 1.
(3) As of the Record Date, there were 2,817,500 shares of Common Stock
outstanding.
5
<PAGE>
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Upon obtaining stockholder approval, the Company and the Bank intend to
grant to outside directors and selected officers and employees of the Bank
and the Company stock options and awards in the form of shares of Common
Stock under the Incentive Plan, being presented for approval in Proposal 1.
DIRECTORS' COMPENSATION
DIRECTORS' FEES. Members of the Board of Directors of the Bank currently
receive an annual retainer of $12,650. Directors do not receive any fees for
serving on the Board of the Company.
DIRECTOR EMERITUS RETIREMENT PLAN. The Bank maintains a Director
Emeritus Retirement Plan which provides retirement benefits to members of the
Bank's Board of Directors who retire (generally defined as retirement upon or
after attaining the age of sixty-five), and are appointed as a Director
Emeritus. The plan provides that in consideration for services and
consultation rendered as a Director Emeritus, the Director Emeritus will
receive annual cash benefits equal to the annual director's fees received at
the time of retirement, up to an annual maximum of $12,650 per participant in
this plan. Payments under the plan are generally through the Bank's purchase
of a single premium insurance annuity for each covered Director Emeritus.
Currently there are seven Directors Emeritus. The plan was amended recently
to limit eligibility to participate in this plan on an ongoing basis to
current members of the Bank's Board of Directors.
INCENTIVE PLAN. The Company is presenting to shareholders for approval
the Incentive Plan, under which all directors of the Company and the Bank are
eligible to receive awards. See Proposal 1 for a summary of the material
terms of the Incentive Plan.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table shows, for the years
ended December 31, 1995 and 1994, the cash compensation paid by the Bank, as
well as certain other compensation paid or accrued for those years, to the
Chief Executive Officer and other Executive Officers of the Company and the
Bank who earned and/or received salary and bonus in excess of $100,000 in
fiscal year 1995 ("Named Executive Officers"). No other executive officer of
the Company or the Bank earned and/or received salary and bonus in excess of
$100,000 in fiscal year 1995.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
------------------------------------------------- ---------------------------- -------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL COMPENSATION STOCK AWARDS OPTIONS/SARs PAYOUTS COMPENSATION
POSITIONS YEAR SALARY($) BONUS($) ($)(2) ($)(3) (#)(4) ($)(5) ($)(6)
- ------------------ ---- --------- -------- ------------ ------------ ------------ ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. William Landefeld 1995 $155,000 $30,840 -- -- -- -- $5,887
President and Chief 1994 140,200 20,832 -- -- -- -- 5,887
Executive Officer
Richard F. Becker 1995 93,720 16,057 -- -- -- -- 3,157
Senior Vice President 1994 89,250 11,424 -- -- -- -- 3,378
and Secretary
Dallas G. Smiley 1995 93,720 16,057 -- -- -- -- 2,927
Senior Vice President, 1994 89,250 11,424 -- -- -- -- 2,911
Treasurer and Chief
Financial Officer
</TABLE>
- --------------------
(1) Under Annual Compensation, the column titled "Salary" includes directors'
fees and amounts deferred by the Named Executive Officer pursuant to the
Bank's 401(k) Plan, pursuant to which employees may defer up to 15% of
their compensation, up to the maximum limits under the Internal Revenue
Code of 1986, as amended (the "Code").
(2) For 1995 and 1994, there were no (a) perquisites over the lesser of
$50,000 or 10% of the individual's total salary and bonus for the year;
(b) payments of above-market preferential earnings on deferred compensation;
(c) payments of earnings with respect to long-term incentive plans prior
to settlement or maturation; (d) tax payment reimbursements; or
(e) preferential discounts on stock. For 1995 and 1994, the Bank had no
restricted stock or stock related plans in existence.
(3) Does not include awards intended to be granted pursuant to the Incentive
Plan, subject to stockholder approval, as such awards were not earned,
vested or granted in fiscal 1995 or 1994. For a discussion of the terms
of the Incentive Plan, see "Proposal 1".
(4) Does not include options intended to be granted pursuant to the Incentive
Plan because such options were not earned or granted in 1995 or 1994.
For discussion of the terms of grants and vesting of options, see
"Proposal 1."
(5) For 1995 and 1994, there were no payouts or awards under any long-term
incentive plan.
(6) Includes employer contributions to the Bank's 401(k) plan for
Messrs. Becker and Smiley and, for Mr. Landefeld, employer contribution
to the Bank's 401(k) plan of $4,500 in each of 1995 and 1994 as well as
disability and life insurance premiums paid by the Bank of $1,387 in each
of 1995 and 1994.
7
<PAGE>
EMPLOYMENT AGREEMENTS
The Bank and the Company have entered into employment agreements
(collectively, the "employment agreements") with Messrs. Landefeld, Becker
and Smiley (individually, the "Executive"). These employment agreements are
intended to ensure that the Bank and the Company will be able to maintain a
stable and competent management base. The continued success of the Bank and
the Company depends to a significant degree on the skills and competence of
Messrs. Landefeld, Becker and Smiley.
The employment agreements provide for a three-year term. The Bank
employment agreements provide that, commencing on the first anniversary date
and continuing each anniversary date thereafter, the Board of the Bank may
extend the agreement for an additional year so that the remaining term shall
be three years, unless written notice of non-renewal is given by the Board of
the Bank after conducting a performance evaluation of the Executive. The
terms of the Company employment agreements shall be extended on a daily basis
unless written notice of non-renewal is given by the Board of the Company.
The current base salaries for Messrs Landefeld, Becker and Smiley are
$185,000, $110,000 and $110,000, respectively. In addition to the base
salary, the agreements provide for, among other things, participation in
stock benefits plans and other fringe benefits applicable to executive
personnel.
The employment agreements provide for termination by the Bank or the
Company for cause as defined in the agreements at any time. In the event the
Bank or the Company chooses to terminate the Executive's employment for
reasons other than for cause, or in the event of the Executive's resignation
from the Bank and the Company upon: (i) failure to re-elect the Executive to
his current offices; (ii) a material change in the Executive's functions,
duties or responsibilities; (iii) a relocation of the Executive's principal
place of employment by more than 25 miles; (iv) liquidation or dissolution of
the Bank or the Company; or (v) a breach of the agreement by the Bank or the
Company, the Executive or, in the event of death, his beneficiary would be
entitled to receive an amount equal to the remaining base salary payments due
to the Executive and the contributions that would have been made on the
Executive's behalf to any employee benefit plans of the Bank or the Company
during the remaining term of the agreement. The Bank and the Company would
also continue to pay for the Executive's life, health and disability coverage
for the remaining term of the agreement. Upon any termination of the
Executive, the Executive is subject to a one year non-competition agreement.
Under the employment agreements, if voluntary or involuntary termination
follows a change in control of the Bank or the Company (as defined in the
employment agreement), the Executive or, in the event of the Executive's
death, his beneficiary, would be entitled to a severance payment equal to the
greater of: (i) the payments due for the remaining terms of the employment
agreement; or (ii) three times the average of the five preceding taxable
years' annual compensation. The Bank and the Company would also continue the
Executive's life, health, and disability coverage for thirty-six months.
Notwithstanding that both the Bank and the Company employment agreements
provide for a severance payment in the event of a change in control, the
Executive would only be entitled to receive a severance payment under one
agreement. Based solely on the cash compensation paid to Messrs. Landefeld,
Becker and Smiley over the past five
8
<PAGE>
fiscal years and excluding any benefits under any employee plan which may be
payable, the total amount of payments due under the employment agreements
following a change in control would be approximately $1,215,000.
Payments to the Executive under the Bank's agreement will be guaranteed
by the Company in the event that payments or benefits are not paid by the
Bank. Payment under the Company's agreement would be made by the Company.
All reasonable costs and legal fees paid or incurred by the Executive
pursuant to any dispute or question of interpretation relating to the
agreements shall be paid by the Bank or Company, respectively, if the
Executive is successful on the merits pursuant to a legal judgment,
arbitration or settlement. The employment agreements also provide that the
Bank and Company shall indemnify the Executive to the fullest extent
allowable under federal and Delaware law, respectively.
INCENTIVE PLAN. The Company is presenting to stockholders for approval
the Incentive Plan under which all employees of the Company and the Bank are
eligible to receive awards. See Proposal 1 for a summary of the material
terms of the Incentive Plan.
PROFIT SHARING AND SAVINGS PLAN. The Bank maintains the Profit Sharing
and Savings Plan (the "Savings Plan"), which is a tax-qualified profit
sharing and salary reduction plan under Sections 401(a) and 401(k) of the
Code. The Savings Plan provides participants with retirement benefits and
may also provide benefits upon death, disability or termination of employment
with the Bank. An employee who works at least 1,000 scheduled hours per year
is eligible to participate in the Savings Plan following the completion of
one year of service and attainment of age 21. A participant is always 100%
vested in his or her contributions. A participant must reach 1 year of
vesting service (total time employed) before attaining a vested interest in
the employer contribution, which commences following this 1 year period.
Participants become 20% vested in employer matching contribution after 1 year
of service, and increase the vested percentage by 20% for each year of
service completed thereafter, until attaining 100% vesting after 5 years of
service.
Participants may make salary reduction contributions to the Savings Plan
up to the lesser of 15% of annual base salary or the legally permissible
limit (currently $9,500). The Savings Plan provides that, with respect to
the first 2% contributed by the employee, the Bank will match 100% of such
contribution with funds to be invested at the direction of the employee and,
with respect to the next 2% contributed by the employee, the Bank will match
100% of such contribution with Common Stock. All participants receive a
quarterly detailed statement including information regarding market value of
the participant's investment and all contributions made on his or her behalf.
Any withdrawals prior to age 59 are subject to a 10% tax penalty.
Participants may borrow against the vested portion of their accounts.
The Savings Plan has a profit-sharing component in addition to the
matched employee contribution. The amount of the annual profit-sharing
contribution, which is invested solely in Company Common Stock, is at the
discretion of the Board of Directors.
9
<PAGE>
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST. The Bank established for
eligible employees an ESOP and related trust effective on May 1, 1996.
Employees employed with the Bank as of January 1, 1996 and employees of the
Company or the Bank employed after such date, who have been credited with at
least 1,000 hours during a twelve month period and who have attained the age
of 21 will become participants. The ESOP purchased 8% of the Common Stock
issued in the Conversion. In order to fund the ESOP's purchase of Common
Stock, the ESOP borrowed funds from the Company equal to 100% of the
aggregate purchase price of the Common Stock. The loan will be repaid
principally from the Company's or the Bank's contribution to the ESOP over a
period of seven years and the collateral for the loan will be Common Stock
purchased by the ESOP.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Bank has implemented a
non-qualified Supplemental Retirement Plan ("SERP") to provide certain
officers and highly compensated employees with additional retirement
benefits. The benefits provided under the SERP will make up the benefits
lost to the SERP participants due to application of limitations on
compensation and maximum benefits applicable to the Bank's tax qualified
401(k) Plan and ESOP. Benefits will be provided under the SERP at the same
time and in the same form as the related benefits will be provided under the
401(k) Plan and ESOP.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
The Bank's current policy provides that all loans made by the Bank to its
directors and executive officers are made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and do not involve more than the
normal risk of collectibility or present other unfavorable features.
PROPOSAL 1. APPROVAL OF THE
CITIZENS FIRST FINANCIAL CORP.
1996 STOCK-BASED INCENTIVE PLAN
The Board of Directors of the Company is presenting for stockholder
approval the Citizens First Financial Corp. 1996 Stock-Based Incentive Plan,
in the form attached hereto as Appendix A. The purpose of the Incentive Plan
is to attract and retain qualified personnel in key positions, provide
officers, employees and non-employee directors ("Outside Directors") with a
proprietary interest in the Company as an incentive to contribute to the
success of the Company and reward employees for outstanding performance. The
following is a summary of the material terms of the Incentive Plan which is
qualified in its entirety by the complete provisions of the Incentive Plan
document attached as Appendix A.
GENERAL
The Incentive Plan authorizes the granting of options to purchase Common
Stock ("Options"), option-related awards and awards of Common Stock ("Stock
Awards") (collectively, "Awards"). Subject to certain adjustments to prevent
dilution of Awards to participants, the
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<PAGE>
maximum number of shares reserved for Awards under the Incentive Plan is
394,450 shares, provided such number is not in excess of 14% of the
outstanding shares of the Common Stock as of the effective date of the
Incentive Plan. The maximum number of shares reserved for purchase pursuant
to the exercise of Options and Option-related Awards granted under the
Incentive Plan is 281,750 shares, provided such number is not in excess of
the 10% of the outstanding shares of Common Stock as of the effective date of
the Incentive Plan. The maximum number of the shares reserved for Stock
Awards is 112,700 shares, provided such number is not in excess of 4% of the
outstanding shares of Common Stock as of the effective date of the Incentive
Plan. All officers, other employees and Outside Directors of the Company and
its affiliates are eligible to receive Awards under the Incentive Plan. The
Incentive Plan will be administered by a committee (the "Committee")
consisting of members of the Board of Directors of the Company. Subject to
the regulations of the Office of Thrift Supervision ("OTS"), authorized but
unissued shares or shares previously issued and reacquired by the Company may
be used to satisfy Awards under the Incentive Plan, resulting in an increase
in the number of shares outstanding, and may have a dilutive effect on the
holdings of existing stockholders.
AWARDS
TYPES OF AWARDS. The Incentive Plan authorizes the grant of Awards in
the form of: (i) Options granted to employees intended to qualify as
incentive stock options under Section 422 of the Code (Options which afford
tax benefits to the recipients upon compliance with certain conditions and
which do not result in tax deductions to the Company), referred to as
"Incentive Stock Options"; (ii) Options that do not so qualify (Options which
do not afford income tax benefits to recipients, but which may provide tax
deductions to the Company), referred to as "Non-statutory Stock Options";
(iii) limited rights which are exercisable only upon a change in control of
the Company (as defined in the Incentive Plan) ("Limited Rights"); (iv) Stock
Awards, that provide a grant of Common Stock which vests over time (such
vesting may be contingent upon the attainment of stated performance goals);
(v) dividend equivalent rights which provide option holders with a cash
benefit in the event of the payment by the Company of an extraordinary
dividend (as defined below) to shareholders ("Dividend Equivalent Rights");
and (vi) equitable adjustment rights which provide option holders upon the
payment of an extraordinary dividend an equitable adjustment of the number of
shares and/or exercise price at the discretion of the Committee ("Equitable
Adjustment Rights").
OPTIONS. Under the Incentive Plan on the date of the Special Meeting,
assuming the requisite stockholder approval is obtained, the Board of
Directors intends to grant Options to employees (including executive
officers) for 197,240 shares (with Limited Rights and Dividend Equivalent
Rights or Equitable Adjustment Rights) and Options to Outside Directors for
84,510 shares (with Limited Rights and Dividend Equivalent Rights). The term
of all Options will be ten years unless otherwise determined by the Committee.
All Options granted to employees will be qualified as Incentive Stock
Options to the extent permitted under Section 422 of the Code. Incentive
Stock Options, at the discretion of the Committee with the concurrence of the
holder, may be converted into Non-Statutory Stock
12
<PAGE>
Options. Pursuant to the Incentive Plan, the Committee has the authority to
determine the date or dates on which each Option shall become exercisable;
PROVIDED, HOWEVER, under the terms of the Incentive Plan any Option granted
prior to May 1, 1997 may not vest in annual installments of greater than 20%
of the number of shares underlying the Options awarded commencing at least
one year from the date of grant, and the vesting of such options may not be
accelerated except in the case of death or disability. However, the
Committee may amend such Options subsequent to May 1, 1997, to provide for
acceleration of vesting, SEE "New Plan Benefits" below. The Committee may
also decide to make the vesting of future option awards contingent upon the
Company's, Bank's or grantee's attainment of performance goals set by the
Committee. The exercise price of all Incentive Stock Options must be 100% of
the fair market value of the underlying Common Stock at the time of grant,
except as provided below. The exercise price of any Option, whether an
Incentive Stock Option or Non-Statutory Stock Option, may be paid in cash or
in Common Stock at the discretion of the Committee. See "Payout
Alternatives" and "Alternative Option Payments."
Incentive Stock Options may only be granted to employees. In order to
qualify as Incentive Stock Options under Section 422 of the Code, the
exercise price must not be less than 100% of the fair market value on the
date of grant. Incentive Stock Options granted to any person who is the
beneficial owner of more than 10% of the outstanding voting stock may be
exercised only for a period of five years from the date of grant and the
exercise price must be at least equal to 110% of the fair market value of the
underlying Common Stock on the date of grant.
Unless otherwise determined by the Committee, upon termination of an
employee's services for any reason other than death, disability or
termination for cause, the Incentive Stock Options shall be exercisable for a
period of three months following termination. The Committee in its
discretion may redesignate Incentive Stock Options as Non-statutory Stock
Options, and extend this period. Notwithstanding the foregoing, in the event
of death or disability, Options will become fully vested and shall be
exercisable for up to one year thereafter.
LIMITED RIGHTS. Limited Rights are related to specific Options granted
and become exercisable in the event of a change in control of the Bank or the
Company. Upon exercise, the optionee will be entitled to receive in lieu of
purchasing the stock underlying the Option a lump sum cash payment equal to
the difference between the exercise price of the related Option and the fair
market value of the shares of Common Stock subject to the Option on the date
of exercise of the right less any applicable tax withholding.
DIVIDEND EQUIVALENT RIGHTS. Simultaneously with the grant of any Option,
the Committee may grant a Dividend Equivalent Right with respect to all or
some of the shares covered by such Option. The Dividend Equivalent Right
provides the grantee with a separate cash benefit equal to 100% of the amount
of any extraordinary dividend declared by the Company on shares of Common
Stock subject to an Option. Under the terms of the Incentive Plan, an
extraordinary dividend is any dividend paid on shares of Common Stock where
the rate of the dividend exceeds the Bank's weighted average cost of funds on
interest bearing liabilities for the current and preceding three quarters.
Upon the payment of an extraordinary dividend, the
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<PAGE>
holder of a Dividend Equivalent Right will receive, at the time of vesting of
the related Option, an amount of cash or some other payment as determined
under the Incentive Plan, equal to 100% of the extraordinary dividend paid on
shares of Common Stock, multiplied by the number of shares subject to the
underlying Option plus any earnings thereon minus any tax withholding
amounts. Payments shall be decreased by the amount of any applicable tax
withholding prior to distribution in accordance with the Incentive Plan. The
Dividend Equivalent Right is transferable only when the underlying Option is
transferable and under the same conditions.
EQUITABLE ADJUSTMENT RIGHTS. Simultaneously with the grant of any
Option, in the alternative to a Dividend Equivalent Right, the Committee may
grant an Equitable Adjustment Right. Upon the payment of an extraordinary
dividend as described above, the Committee may adjust the number of shares
and/or the exercise price of the Options underlying the Equitable Adjustment
Right, as the Committee deems appropriate.
OPTION GRANTS. It is currently intended that the Options proposed to be
granted will include Limited Rights and Dividend Equivalent Rights or
Equitable Adjustment Rights and will vest and become exercisable on a
cumulative basis in equal installments over five (5) years commencing one
year from the date of grant; PROVIDED, HOWEVER, that all Options will be
immediately exercisable in the event the optionee's service is terminated due
to death or disability. The exercise price of all such Options will be 100%
of the fair market value of the underlying Common Stock at the time of grant,
which is intended to be the date of the Special Meeting. See "New Plan
Benefits Table" below for information concerning Options intended to be
granted under the Incentive Plan.
As of September 23, 1996, the closing price per share of Common Stock, as
reported on the American Stock Exchange was $11.50.
STOCK AWARDS. The Incentive Plan authorizes the granting of Stock
Awards. The Committee has the authority to determine the dates on which
Stock Awards granted will vest, PROVIDED HOWEVER, that any Stock Award
granted prior to May 1, 1997, may not vest at a rate greater than 20% per
year commencing at least one year from the date of grant and the vesting of
any Stock Award may not be accelerated except in the case of death or
disability. However, the Committee may amend such Stock Awards subsequent to
May 1, 1997 to provide for acceleration of vesting, SEE "New Plan Benefits"
below. All Stock Award grants will immediately vest upon termination of
service due to death or disability. Under the Incentive Plan, the vesting of
Stock Awards may also be contingent upon the attainment of certain
performance goals by the Company, Bank or grantee. Such performance goals
would, if any, be established by the Committee. An agreement setting forth
the terms of the Stock Award ("Stock Award Agreement") shall set forth the
vesting period and performance goals, if any, which must be attained. The
performance goals may be set by the Committee on an individual basis, for all
Stock Awards made during a given period of time, or for all Stock Awards for
indefinite periods. A Stock Award may only be granted from the shares
reserved and available for grant under the Incentive Plan. No Stock Award
that is subject to a performance goal is to be distributed to the employee
until the Committee confirms that the underlying performance goal has been
achieved.
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<PAGE>
Stock Awards are generally nontransferable and nonassignable as provided
in the Incentive Plan. However, the Committee has the power, under the
Incentive Plan, to permit transfers. When Common Stock is distributed in
accordance with the Incentive Plan, the recipients will also receive amounts
equal to accumulated cash and stock dividends (if any) with respect thereto
plus earnings thereon minus any required tax withholding amounts. Prior to
vesting, recipients of Stock Awards may direct the voting of shares of Common
Stock granted to them and held in a trust established in connection with the
Incentive Plan. Shares of Common Stock held by the Incentive Plan trust
which have not been allocated or for which voting has not been directed are
voted by the trustee in the same proportion as the awarded shares are voted
in accordance with the directions given by all recipients of Stock Awards.
TAX TREATMENT
STOCK OPTIONS. An optionee will generally not be deemed to have
recognized taxable income upon grant or exercise of any Incentive Stock
Option, provided that shares transferred in connection with the exercise are
not disposed of by the optionee for at least one year after the date the
shares are transferred in connection with the exercise of the Incentive Stock
Option and two years after the date of grant of such Option. If the holding
periods are satisfied, upon disposal of the shares, the aggregate difference
between the per share option exercise price and the fair market value of the
Common Stock is recognized as income taxable at long term capital gains
rates. No compensation deduction may be taken by the Company as a result of
the grant or exercise of Incentive Stock Options, assuming these holding
periods are met.
In the case of the exercise of a Non-statutory Stock Option, an optionee
will be deemed to have received ordinary income upon exercise of the stock
option in an amount equal to the aggregate amount by which the per share
exercise price is exceeded by the fair market value of the Common Stock. In
the event that a Non-statutory Stock Option is exercised during a period that
previously would have subjected the optionee to liability under Section 16(b)
of the Exchange Act (I.E., within six months of the date of grant), the
optionee will not be deemed to have recognized income until such period of
liability has expired, unless the optionee makes a Section 83(b) election
under the Code. In the event shares received through the exercise of an
Incentive Stock Option are disposed of prior to the satisfaction of the
holding periods (a "disqualifying disposition"), the exercise of the option
will be treated as the exercise of a Non-statutory Stock Option, except that
the optionee will recognize the ordinary income for the year in which the
disqualifying disposition occurs. The amount of any ordinary income deemed
to have been received by an optionee upon the exercise of a Non-statutory
Stock Option or due to a disqualifying disposition will be a deductible
expense of the Company for tax purposes.
In the case of Limited Rights, the Option holder would have to include
the amount paid to him upon exercise in his gross income for federal income
tax purposes in the year in which the payment is made and the Company would
be entitled to a deduction for federal income tax purposes of the amount
paid. Equitable Adjustment Rights have the same tax treatment as other
Non-statutory Stock Options. The employee will recognize taxable income for
the amount of cash received under the Dividend Equivalent Right for the year
such amounts are paid. The Company may take a compensation deduction for
such amount.
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<PAGE>
STOCK AWARDS. When shares of Common Stock, as Stock Awards, are
distributed, the recipient is deemed to receive ordinary income equal to the
fair market value of such shares at the date of distribution plus any
dividends and earnings on such shares (provided such date is more than six
months after the date of grant) and the Company is permitted a commensurate
compensation expense deduction for income tax purposes.
PAYOUT ALTERNATIVES
The Committee has the sole discretion to determine what form of payment
it shall use in distributing payments for all Awards. If the Committee
requests any or all participants to make an election as to form of payment,
it shall not be considered bound by the election. Any shares of Common Stock
tendered in payment of an obligation arising under the Incentive Plan or
applied to tax withholding amounts shall be valued at the fair market value
of the Common Stock. The Committee may use treasury stock, authorized but
unissued stock or may direct the market purchase of such Common Stock to
satisfy its obligations under the Incentive Plan.
ALTERNATE OPTION PAYMENTS
The Committee also has the sole discretion to determine the form of
payment for the exercise of an Option. The Committee may indicate acceptable
forms in the Award Agreement covering such options or may reserve its
decision to the time of exercise. No Option is to be considered exercised
until payment in full is accepted by the Committee. The Committee may permit
the following forms of payment for Options: (a) in cash or by certified
check; (b) through borrowed funds, to the extent permitted by law; or (c) by
tendering previously acquired shares of Common Stock. Any shares of Common
Stock tendered in payment of the exercise price of an Option shall be valued
at the fair market value of the Common Stock on the date prior to the date of
exercise.
AMENDMENT OF THE INCENTIVE PLAN
The Board of Directors may amend the Incentive Plan in any respect, at
any time, provided that no amendment required to maintain incentive stock
treatment for Options intended to be Incentive Stock Options will be approved
by stockholders. In addition, no amendment may adversely affect the rights
of an Award recipient without his or her permission.
ADJUSTMENTS
In the event of any change in the outstanding shares of Common Stock of
the Company by reason of any stock dividend or split, recapitalization,
merger, consolidation, spin-off, reorganization, combination or exchange of
shares, or other similar corporate change, or other increase or decrease in
such shares without receipt or payment of consideration by the Company, the
Committee will make such adjustments to previously granted Awards, to prevent
dilution or enlargement of the rights of the Award recipient.
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<PAGE>
No such adjustments may, however, materially change the value of benefits
available to an Award recipient under a previously granted Award. All Awards
under this Incentive Plan shall be binding upon any successors or assigns of
the Company.
NONTRANSFERABILITY
Unless determined otherwise by the Committee, no award under the
Incentive Plan shall be transferable by the Award recipient other than by
will or the laws of intestate succession or pursuant to a qualified domestic
relations order. With the consent of the Committee, an Award recipient may
designate a person or his or her estate as beneficiary of any award to which
the recipient would then be entitled, in the event of the death of the
employee.
STOCKHOLDER APPROVAL
Pursuant to OTS regulations, the Incentive Plan may not be implemented
during the first year after the Bank's Conversion unless the affirmative vote
of the holders of a majority of the total votes eligible to be cast at the
Special Meeting is received. If such approval is not obtained, but the
Incentive Plan receives the affirmative vote of a majority of the shares
present at the meeting and eligible to be cast, the Incentive Plan will not
become effective at this time, but will become effective following a period
of one year after the Conversion without further stockholder approval. The
Board of Directors also may determine that the Incentive Plan become
effective one year after the Conversion if the Incentive Plan does not
receive the requisite affirmative vote of stockholders at this meeting. In
the absence of stockholder approval, the option awards under the Incentive
Plan would not qualify as incentive stock options under the Code.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED
PROXY CARD, IF EXECUTED AND RETURNED, WILL BE VOTED "FOR" THE APPROVAL OF THE
CITIZENS FIRST FINANCIAL CORP. 1996 STOCK-BASED INCENTIVE PLAN.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
CITIZENS FIRST FINANCIAL CORP. 1996 STOCK-BASED INCENTIVE PLAN.
NEW PLAN BENEFITS
The following table provides certain information with respect to all
Awards which will be granted immediately, assuming stockholder approval is
obtained, under the Incentive Plan, specifying the amounts to be granted
immediately to the Named Executive Officers individually, all current
executive officers as a group, all current directors who are not executive
officers as a group, and all employees, including all current officers who
are not executive officers, as a group.
16
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All Awards granted to the officers and directors of the Company and the
Bank reflected in the table below become exercisable in equal annual
installments of 20% each year commencing one year from the date of grant.
All Option Awards will have a term of 10 years. All Awards reflected in the
following table will immediately vest upon termination of employment due to
death or disability. Additionally, on or after May 1, 1997, the Board of
Directors intends to amend the Awards reflected below to provide for
acceleration of the vesting of such Awards upon a change in control of the
Company or the Bank (as defined in the Incentive Plan). The Incentive Plan
generally defines that a change in control will be deemed to occur when a
person or group of persons acting in concert acquires beneficial ownership of
20% or more of any class of equity security, such as the Common Stock of the
Company or the Bank, or in the event of a tender offer or exchange offer,
merger or other form of business combination, sale of assets or contested
election of directors which results in a change in control of a majority of
the incumbent Board of Directors of the Company or the Bank.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
STOCK OPTION AWARDS STOCK AWARDS
-------------------------- -------------------------
DOLLAR NUMBER DOLLAR NUMBER
NAME AND POSITION VALUE (1) OF UNITS (2) VALUE (3) OF UNITS (2)
- ----------------- --------- ------------ --------- ------------
<S> <C> <C> <C> <C>
C. William Landefeld -- 70,400 $324,013 28,175
President and Chief Executive Officer
Richard F. Becker -- 42,200 194,350 16,900
Senior Vice President and Secretary
Dallas G. Smiley -- 42,200 194,350 16,900
Senior Vice President, Treasurer and Chief
Financial Officer
All other current executive officers as a group -- 42,440 194,695 16,930
(6 persons)
All current directors of the Company -- 84,510 388,643 33,795
and Bank (who are not executive
officers) as a group (9 persons)
</TABLE>
- ---------------------
(1) The "dollar value" for options to be granted pursuant to the Incentive
Plan on the date of grant will be zero, as the exercise price for such
options will be the fair market value on the date of grant which is
intended to be the date stockholder approval is obtained.
(2) No Stock Option Awards and no Stock Awards remain unallocated under
the Incentive Plan.
(3) Based upon $11.50, the closing price of the Common Stock, as reported on
the American Stock Exchange on September 23, 1996
17
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ADDITIONAL INFORMATION
SHAREHOLDER PROPOSALS
To be considered for inclusion in the Company's proxy statement and form
of proxy relating to the 1997 Annual Meeting of Shareholders, which has been
scheduled to be held on April 21, 1997, a shareholder proposal must be
received by the Secretary of the Company at the address set forth on the
Notice of Special Meeting of Shareholders not later than November 21, 1996
except that if such annual meeting is held on a date more than 30 calendar
days from April 21, 1997, a stockholder proposal must be received by a
reasonable time before the proxy solicitation for such annual meeting is
made. Any such proposal will be subject to 17 C.F.R. Section 240.14a-8 of
the Rules and Regulations under the Exchange Act.
NOTICE OF BUSINESS TO BE CONDUCTED AT AN ANNUAL MEETING
The Bylaws of the Company set forth the procedures by which a shareholder
may properly bring business before a meeting of shareholders. Pursuant to
the Bylaws, only business brought by or at the direction of the Board of
Directors may be conducted at a special meeting. The Bylaws of the Company
provide an advance notice procedure for a shareholder to properly bring
business before an annual meeting. The shareholder must give written advance
notice to the Secretary of the Company not less than ninety (90) days before
the date originally fixed for such meeting; PROVIDED, HOWEVER, that in the
event that less than one hundred (100) days notice or prior public disclosure
of the date of the meeting is given or made to shareholders, notice by the
shareholder to be timely must be received not later than the close of
business on the tenth day following the date on which the Company's notice to
shareholders of the annual meeting date was mailed or such public disclosure
was made. The advance notice by shareholders must include the shareholder's
name and address, as they appear on the Company's record of shareholders, a
brief description of the proposed business, the reason for conducting such
business at the annual meeting, the class and number of shares of the
Company's capital stock that are beneficially owned by such shareholder and
any material interest of such shareholder in the proposed business. In the
case of nominations to the Board of Directors, certain information regarding
the nominee must be provided. Nothing in this paragraph shall be deemed to
require the Company to include in its proxy statement or the proxy relating
to any special meeting any shareholder proposal which does not meet all of
the requirements for inclusion established by the SEC in effect at the time
such proposal is received.
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors knows of no business which will be presented for
consideration at the Meeting other than as stated in the Notice of Special
Meeting of Shareholders. If, however, other matters are properly brought
before the Special Meeting, it is the intention of the persons named in the
accompanying proxy to vote the shares represented thereby on such matters in
accordance with their best judgment.
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<PAGE>
Whether or not you intend to be present at the Special Meeting, you are
urged to return your proxy card promptly. If you are then present at the
Special Meeting and wish to vote your shares in person, your original proxy
may be revoked by voting at the Special Meeting.
By Order of the Board of Directors
/s/ Richard F. Becker
Richard F. Becker
CORPORATE SECRETARY
Normal, Illinois
October 4, 1996
YOU ARE CORDIALLY INVITED
TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING,
YOU ARE REQUESTED TO SIGN,
DATE AND PROMPTLY RETURN
THE ACCOMPANYING PROXY CARD
IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
19
<PAGE>
APPENDIX A
CITIZENS FIRST FINANCIAL CORP.
1996 STOCK-BASED INCENTIVE PLAN
1. DEFINITIONS.
-----------
(a) "Affiliate" means (i) a member of a controlled group of corporations
of which the Holding Company is a member or (ii) an unincorporated trade or
business which is under common control with the Holding Company as determined
in accordance with Section 414(c) of the Code and the regulations issued
thereunder. For purposes hereof, a "controlled group of corporations" shall
mean a controlled group of corporations as defined in Section 1563(a) of the
Code determined without regard to Section 1563(a)(4) and (e)(3)(C).
(b) "Alternate Option Payment Mechanism" refers to one of several
methods available to a Participant to fund the exercise of a stock option set
out in Section 13 hereof. These mechanisms include: broker assisted cashless
exercise and stock for stock exchange.
(c) "Award" means a grant of one or some combination of one or more
Non-statutory Stock Options, Incentive Stock Options and Stock Awards under
the provisions of this Plan.
(d) "Bank" means Citizens Savings Bank, F.S.B.
(e) "Board of Directors" or "Board" means the board of directors of the
Holding Company.
(f) "Change in Control" means a change in control of the Bank or Holding
Company of a nature that; (i) would be required to be reported in response to
Item 1 of the current report on Form 8-K, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Exchange Act; or (ii) results in a
Change in Control within the meaning of the Home Owners' Loan Act of 1933, as
amended ("HOLA") and the Rules and Regulations promulgated by the Office of
Thrift Supervision ("OTS") (or its predecessor agency), as in effect on the
date hereof (provided, that in applying the definition of change in control
as set forth under such rules and regulations the Board shall substitute its
judgment for that of the OTS); or (iii) without limitation such a Change in
Control shall be deemed to have occurred at such time as (A) any "person" (as
the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Bank or the Holding
Company representing 20% or more of the Bank's or the Holding Company's
outstanding securities except for any securities of the Bank purchased by the
Holding Company and any securities purchased by any tax qualified employee
benefit plan of the Bank; or (B) individuals who constitute the Board on the
date hereof (the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to the date hereof whose election was approved by a vote of at
least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Holding Company's stockholders was
approved by the same Nominating Committee serving under an Incumbent Board,
shall be, for purposes of this clause (B), considered as though he were
A-1
<PAGE>
a member of the Incumbent Board; or (C) a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of the Bank or the
Holding Company or similar transaction occurs in which the Bank or Holding
Company is not the resulting entity; or (D) a solicitation of shareholders of
the Holding Company, by someone other than the current management of the
Holding Company, seeking stockholder approval of a plan of reorganization,
merger or consolidation of the Holding Company or Bank or similar transaction
with one or more corporations, as a result of which the outstanding shares of
the class of securities then subject to the plan are exchanged for or
converted into cash or property or securities not issued by the Bank or the
Holding Company; or (E) a tender offer is made for 20% or more of the voting
securities of the Bank or the Holding Company.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" means a committee consisting of the entire Board of
Directors or consisting solely of two or more members of the Board of
Directors who are defined as Non-Employee Directors as such term is defined
under Rule 16b-3(b)(3)(i) under the Exchange Act as promulgated by the
Securities and Exchange Commission.
(i) "Common Stock" means the Common Stock of the Holding Company, par
value, $.01 per share or any stock exchanged for shares of Common Stock
pursuant to Section 17 hereof.
(j) "Date of Grant" means the effective date of an Award.
(k) "Disability" means the permanent and total inability by reason of
mental or physical infirmity, or both, of a Participant to perform the work
customarily assigned to him or, in the case of a Director, to serve on the
Board. Additionally, a medical doctor selected or approved by the Board of
Directors must advise the Committee that it is either not possible to
determine when such Disability will terminate or that it appears probable
that such Disability will be permanent during the remainder of said
Participant's lifetime.
(l) "Dividend Equivalent Rights" means the right to receive an amount of
cash based upon the terms set forth in Section 10 hereof.
(m) "Effective Date" means ________________, the effective date of the
Plan.
(n) "Employee" means any person who is currently employed by the Holding
Company or an Affiliate, including officers, but such term shall not include
Outside Directors.
(o) "Employee Participant" means an Employee who holds an outstanding
Award under the terms of the Plan.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(q) "Exercise Price" means the purchase price per share of Common Stock
deliverable upon the exercise of each Option in order for the option to be
exchanged for shares of Common Stock.
A-2
<PAGE>
(r) "Fair Market Value" means, when used in connection with the Common
Stock on a certain date, the average of the high and low bid prices of the
Common Stock as reported by the American Stock Exchange ("AMEX") or the New
York Stock Exchange ("NYSE") or the average of the high and low sale prices
of the Common Stock as reported by Nasdaq Stock Market ("NASDAQ") each as
published in the Wall Street Journal, if published, on such date or, if the
Common Stock was not traded on such date, on the next preceding day on which
the Common Stock was traded thereon or the last previous date on which a sale
is reported. If the Common Stock is not reported on the AMEX, NASDAQ or the
NYSE, the Fair Market Value of the Common Stock is the value so determined by
the Board in good faith.
(s) "Holding Company" means Citizens First Financial Corp.
(t) "Incentive Stock Option" means an Option granted by the Committee to
a Participant, which Option is designated by the Committee as an Incentive
Stock Option pursuant to Section 7 hereof and is intended to be such under
Section 422 of the Code.
(u) "Limited Right" means the right to receive an amount of cash based
upon the terms set forth in Section 8 hereof.
(v) "Non-statutory Stock Option" means an Option to a Participant
pursuant to Section 6 hereof, which is not designated by the Committee as an
Incentive Stock Option or which is redesignated by the Committee as a
Non-statutory Stock Option or which is designated an Incentive Stock Option
under Section 7 hereof, but does not meet the requirements of such under
Section 422 of the Code.
(w) "Option" means the right to buy a fixed amount of Common Stock at
the Exercise Price within a limited period of time designated as the term of
the option as granted under Section 6 or 7 hereof.
(x) "Outside Director" means a member of the Board of Directors of the
Holding Company or its Affiliates, who is not also an Employee.
(y) "Outside Director Participant" means an Outside Director who holds
an outstanding Award under the terms of the Plan.
(z) "Participant(s)" means collectively an Employee Participant and/or
an Outside Director Participant who hold(s) outstanding Awards under the
terms of the Plan.
(aa) "Retirement" with respect to an Employee means termination of
employment which constitutes retirement under any tax qualified plan
maintained by the Bank. However, "Retirement" will not be deemed to have
occurred for purposes of this Plan if a Participant continues to serve as a
consultant to or on the Board of Directors of the Holding Company or its
Affiliates even if such Employee Participant is receiving retirement benefits
under any retirement plan of the Holding Company or its Affiliates. With
respect to an Outside Director, "Retirement" means the termination of service
from the Board of Directors of the Holding Company or its Affiliates
following written notice to the Board as a whole of such Outside Director's
intention
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to retire, except that an Outside Director shall not be deemed to
have "retired" for purposes of the Plan in the event he continues to serve as
a consultant to the Board or as an advisory director.
(bb) "Stock Awards" are Awards of Common Stock which may vest
immediately or over a period of time. Vesting of Stock Awards under Section
9 hereof may be contingent upon the occurrence of specified events or the
attainment of specified performance goals as determined by the Committee.
(cc) "Termination for Cause" shall mean, in the case of an Outside
Director, removal from the Board of Directors, or, in the case of an
Employee, termination of employment, in both such cases as determined by the
Board of Directors, because of a material loss to the Holding Company or one
of its Affiliates caused by the Participant's intentional failure to perform
stated duties, personal dishonesty, willful violation of any law, rule,
regulation, (other than traffic violations or similar offenses) or final
cease and desist order. No act, or the failure to act, on Participant's part
shall be "willful" unless done, or omitted to be done, not in good faith and
without reasonable belief that the action or omission was in the best
interest of the Holding Company or its Affiliates.
(dd) "Trust" means a trust established by the Board in connection with
this Plan to hold Plan assets for the purposes set forth herein.
(ee) "Trustee" means that person or persons and entity or entities
approved by the Board to hold legal title to any of the Trust assets for the
purposes set forth herein.
2. ADMINISTRATION.
--------------
(a) The Plan shall be administered by the Committee. The Committee is
authorized, subject to the provisions of the Plan, to grant awards to
Employees and Outside Directors and establish such rules and regulations as
it deems necessary for the proper administration of the Plan and to make
whatever determinations and interpretations in connection with the Plan it
deems necessary or advisable. All determinations and interpretations made by
the Committee shall be binding and conclusive on all Employee Participants
and Outside Director Participants in the Plan and on their legal
representatives and beneficiaries.
(b) Actual transference of the Award requires no, nor allows any,
discretion by the Trustee.
3. TYPES OF AWARDS AND RELATED RIGHTS.
----------------------------------
The following Awards and related rights as described below in Paragraphs
6 through 11 hereof may be granted under the Plan:
(a) Non-statutory Stock Options
(b) Incentive Stock Options
(c) Limited Right
(d) Stock Awards
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(e) Dividend Equivalent Right
(f) Equitable Adjustment Right
4. STOCK SUBJECT TO THE PLAN.
-------------------------
Subject to adjustment as provided in Section 17 hereof, the maximum
number of shares reserved for Awards under the Plan is 394,450 which number
may not be in excess of 14% of the outstanding shares of the Common Stock
determined immediately as of the Effective Date. Subject to adjustment as
provided in Section 17 hereof, the maximum number of shares reserved hereby
for purchase pursuant to the exercise of Options and Option-related Awards
granted under the Plan is 281,750, which number is not in excess of the 10%
of the outstanding shares of Common Stock as of the Effective Date. The
maximum number of the shares reserved for award as Stock Awards is 112,700,
which number shall not exceed 4% of the outstanding shares of Common Stock as
of the Effective Date. These shares of Common Stock may be either authorized
but unissued shares or authorized shares previously issued and reacquired by
the Holding Company. To the extent that Options and Stock Awards are granted
under the Plan, the shares underlying such Awards will be unavailable for any
other use including future grants under the Plan except that, to the extent
that Stock Awards or Options terminate, expire, or are forfeited or are
cancelled without having been exercised (in the case of Limited Rights,
exercised for cash), new Awards may be made with respect to these shares.
5. ELIGIBILITY.
-----------
Subject to the terms herein, all Employees and Outside Directors shall be
eligible to receive Awards under the Plan.
6. NON-STATUTORY STOCK OPTIONS.
---------------------------
The Committee may, subject to the limitations of the Plan and the
availability of shares reserved but unawarded in the Plan, from time to
time, grant Non-statutory Stock Options to Employees and Outside Directors,
upon such terms and conditions as the Committee may determine in exchange for
and upon surrender of previously granted Awards under this Plan.
Non-statutory Stock Options granted under this Plan are subject to the
following terms and conditions:
(a) Exercise Price. The Exercise Price of each Non-statutory Stock
Option shall be determined by the Committee on the date the option is
granted. Such Exercise Price shall not be less than 100% of the Fair Market
Value of the Common Stock on the Date of Grant. Shares of Common Stock
underlying a Non-statutory Stock Option may be purchased only upon full
payment of the Exercise Price or upon operation of an Alternate Option
Payment Mechanism set out in Section 13 hereof.
(b) Terms of Non-statutory Stock Options. The term during which each
Non-statutory Stock Option may be exercised shall be determined by the
Committee, but in no event shall a Non-statutory Stock Option be exercisable
in whole or in part more than 10 years from the Date of Grant. The Committee
shall determine the date on which each Non-statutory Stock Option
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shall become exercisable. The shares of Common Stock underlying each
Non-statutory Stock Option installment may be purchased in whole or in part
by the Participant at any time during the term of such Non-statutory Stock
Option after such installment becomes exercisable. The Committee may, in its
sole discretion, accelerate the time at which any Non-statutory Stock Option
may be exercised in whole or in part. The acceleration of any Non-statutory
Stock Option under the authority of this paragraph shall create no right,
expectation or reliance on the part of any other Participant or that certain
Participant regarding any other unaccelerated Non-statutory Stock Options.
Unless determined otherwise by the Committee and except in the event of the
Participant's death or pursuant to a domestic relations order, a
Non-statutory Stock Option is not transferable and may be exercisable in his
lifetime only by the Participant to whom it is granted. Upon the death of a
Participant, a Non-statutory Stock Option is transferable by will or the laws
of descent and distribution.
(c) NSO Agreement. The terms and conditions of any Non-statutory Stock
Option granted shall be evidenced by an agreement (the "NSO Agreement") which
shall be subject to the terms and conditions of the Plan.
(d) Termination of Employment or Service. Unless otherwise determined
by the Committee, upon the termination of a Participant's employment or
service for any reason other than Disability, death or Termination for Cause,
the Participant's Non-statutory Stock Options shall be exercisable only as to
those shares that were immediately exercisable by the Participant at the date
of termination and only for a period of three months following termination.
Notwithstanding any provisions set forth herein or contained in any NSO
Agreement relating to an award of a Non-statutory Stock Option, in the event
of termination of the Participant's employment or service for Disability or
death, all Non-statutory Stock Options held by such Participant shall
immediately vest and be exercisable for one year after such termination of
service, and, in the event of a Termination for Cause, all rights under the
Participant's Non-statutory Stock Options shall expire immediately upon such
Termination for Cause.
7. INCENTIVE STOCK OPTIONS.
-----------------------
The Committee may, subject to the limitations of the Plan and the
availability of shares reserved but unawarded in the Plan, from time to
time, grant Incentive Stock Options to Employees. Incentive Stock Options
granted pursuant to the Plan shall be subject to the following terms and
conditions:
(a) Exercise Price. The Exercise Price of each Incentive Stock Option
shall be not less than 100% of the Fair Market Value of the Common Stock on
the Date of Grant. However, if at the time an Incentive Stock Option is
granted to an Employee Participant, the Employee Participant owns Common
Stock representing more than 10% of the total combined voting securities of
the Holding Company (or, under Section 424(d) of the Code, is deemed to own
Common Stock representing more than 10% of the total combined voting power of
all classes of stock of the Holding Company, by reason of the ownership of
such classes of stock, directly or indirectly, by or for any brother, sister,
spouse, ancestor or lineal descendent of such Employee Participant, or by or
for any corporation, partnership, estate or trust of which such Employee
Participant is a shareholder, partner or beneficiary), ("10% Owner"), the
Exercise Price per share
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of Common Stock deliverable upon the exercise of each Incentive Stock Option
shall not be less than 110% of the Fair Market Value of the Common Stock on
the Date of Grant. Shares may be purchased only upon payment of the full
Exercise Price or upon operation of an Alternate Option Payment Mechanism set
out in Section 13 hereof.
(b) Amounts of Incentive Stock Options. Incentive Stock Options may be
granted to any Employee in such amounts as determined by the Committee;
provided that the amount granted is consistent with the terms of Section 422
of the Code. In the case of an Option intended to qualify as an Incentive
Stock Option, the aggregate Fair Market Value (determined as of the time the
Option is granted) of the Common Stock with respect to which Incentive Stock
Options granted are exercisable for the first time by the Employee
Participant during any calendar year (under all plans of the Employee
Participant's employer corporation and its parent and subsidiary
corporations) shall not exceed $100,000. The provisions of this Section 7(b)
shall be construed and applied in accordance with Section 422(d) of the Code
and the regulations, if any, promulgated thereunder. To the extent an Award
of an Incentive Stock Option under this Section 7 exceeds this $100,000
limit, the portion of the Award in excess of such limit shall be deemed a
Non-statutory Stock Option. The Committee shall have discretion to
redesignate Options granted as Incentive Stock Options as Non-Statutory Stock
Options. Such Non-statutory Stock Options shall be subject to Section 6
hereof.
(c) Terms of Incentive Stock Options. The term during which each
Incentive Stock Option may be exercised shall be determined by the Committee,
but in no event shall an Incentive Stock Option be exercisable in whole or in
part more than 10 years from the Date of Grant. If at the time an Incentive
Stock Option is granted to an Employee Participant who is a 10% Owner, the
Incentive Stock Option granted to such Employee Participant shall not be
exercisable after the expiration of five years from the Date of Grant. No
Incentive Stock Option is transferable except by will or the laws of descent
and distribution and is exercisable in his lifetime only by the Employee
Participant to whom it is granted. The designation of a beneficiary does not
constitute a transfer.
The Committee shall determine the date on which each Incentive Stock
Option shall become exercisable. The Committee may also determine as of the
Date of Grant any other specific conditions or specific performance goals
which must be satisfied prior to the Incentive Stock Option becoming
exercisable. The shares comprising each installment may be purchased in
whole or in part at any time during the term of such Incentive Stock Option
after such installment becomes exercisable. The Committee may, in its sole
discretion, accelerate the time at which any Incentive Stock Option may be
exercised in whole or in part. The acceleration of any Incentive Stock
Option under the authority of this paragraph shall not create a right,
expectation or reliance on the part of any other Participant or that certain
Participant regarding any other unaccelerated Incentive Stock Options.
(d) ISO Agreement. The terms and conditions of any Incentive Stock
Option granted shall be evidenced by an agreement (the "ISO Agreement") which
shall be subject to the terms and conditions of the Plan.
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(e) Termination of Employment. Unless otherwise determined by the
Committee, upon the termination of an Employee Participant's employment for
any reason other than Disability, death or Termination for Cause, the
Employee Participant's Incentive Stock Options shall be exercisable only as
to those shares that were immediately exercisable by the Participant at the
date of termination and only for a period of three months following
termination. Notwithstanding any provisions set forth herein or contained in
any ISO Agreement relating to an award of an Incentive Stock Option, in the
event of termination of the Employee Participant's employment for Disability
or death, all Incentive Stock Options held by such Employee Participant shall
immediately vest and be exercisable for one year after such termination, and,
in the event of Termination for Cause, all rights under the Employee
Participant's Incentive Stock Options shall expire immediately upon
termination.
(f) Compliance with Code. The Incentive Stock Options granted under
this Section 7 are intended to qualify as "incentive stock options" within
the meaning of Section 422 of the Code, but the Holding Company makes no
warranty as to the qualification of any Option as an incentive stock option
within the meaning of Section 422 of the Code. All Options that do not so
quality shall be treated as Non-statutory Stock Options.
8. LIMITED RIGHT.
-------------
Simultaneously with the grant of any Option to an Employee, the Committee
may grant a Limited Right with respect to all or some of the shares covered
by such Option. Limited Rights granted under this Plan are subject to the
following terms and conditions:
(a) Terms of Rights. In no event shall a Limited Right be exercisable
in whole or in part before the expiration of six months from the Date of
Grant of the Limited Right. A Limited Right may be exercised only in the
event of a Change in Control.
The Limited Right may be exercised only when the underlying Option is
eligible to be exercised, and only when the Fair Market Value of the
underlying shares on the day of exercise is greater than the Exercise Price
of the underlying Option.
Upon exercise of a Limited Right, the underlying Option shall cease to be
exercisable. Upon exercise or termination of an Option, any related Limited
Rights shall terminate. The Limited Rights may be for no more than 100% of
the difference between the purchase price and the Fair Market Value of the
Common Stock subject to the underlying option. The Limited Right is
transferable only when the underlying option is transferable and under the
same conditions.
(b) Payment. Upon exercise of a Limited Right, the holder shall
promptly receive from the Holding Company an amount of cash equal to the
difference between the Exercise Price of the underlying option and the Fair
Market Value of the Common Stock subject to the underlying Option on the date
the Limited Right is exercised, multiplied by the number of shares with
respect to which such Limited Right is being exercised. Payments shall be
less any applicable tax withholding as set forth in Section 18 hereof.
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9. STOCK AWARD.
-----------
The Committee may, subject to the limitations of the Plan, from time to
time, make an Award of some number of shares of Common Stock to Employees and
Outside Directors. The Awards shall be made subject to the following terms
and conditions:
(a) Payment of the Stock Award. The Stock Award may only be made in
whole shares of Common Stock. Stock Awards may only be granted from shares
reserved under the Plan but unawarded at the time the new Stock Award is made.
(b) Terms of the Stock Awards. The Committee shall determine the dates
on which Stock Awards granted to a Participant shall vest and any specific
conditions or performance goals which must be satisfied prior to the vesting
of any installment or portion of the Stock Award. Notwithstanding other
paragraphs in this Section 9, the Committee may, in its sole discretion,
accelerate the vesting of any Stock Award. The acceleration of any Stock
Award under the authority of this paragraph shall create no right,
expectation or reliance on the part of any other Participant or that certain
Participant regarding any other unaccelerated Stock Awards.
(c) Stock Award Agreement. The terms and conditions of any Stock Award
shall be evidenced by an agreement (the "Stock Award Agreement") which such
Stock Award Agreement will be subject to the terms and conditions of the
Plan. Each Stock Award Agreement shall set forth:
(i) the period over which the Stock Award will vest;
(ii) the performance goals, if any, which must be satisfied prior
to the vesting of any installment or portion of the Stock Award.
The performance goals may be set by the Committee on an
individual level, for all Participants, for all Awards made
during a given period of time, or for all Awards for indefinite
periods;
(d) Certification of Attainment of the Performance Goal. No Stock Award
or portion thereof that is subject to a performance goal is to be distributed
to the Participant until the Committee certifies that the underlying
performance goal has been achieved.
(e) Termination of Employment or Service. Unless otherwise determined
by the Committee, upon the termination of a Participant's employment or
service for any reason other than Disability, death or Termination for Cause,
the Participant's unvested Stock Awards as of the date of termination shall
be forfeited and any rights the Participant had to such unvested Stock Awards
shall become null and void. Notwithstanding any provisions set forth herein
or contained in any Stock Award Agreement relating to an award of a Stock
Award, in the event of termination of the Participant's service due to
Disability or death, all unvested Stock Awards held by such Participant shall
immediately vest and, in the event of the Participant's Termination for
Cause, the Participant's unvested Stock Awards as of the date of such
termination shall be forfeited and any rights the Participant had to such
unvested Stock Awards shall become null and void.
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(f) Non-Transferability. Except to the extent permitted by the Code,
the rules promulgated under Section 16(b) of the Exchange Act or any
successor statutes or rules:
(i) The recipient of a Stock Award shall not sell, transfer,
assign, pledge, or otherwise encumber shares subject to the Stock Award until
full vesting of such shares has occurred. For purposes of this section, the
separation of beneficial ownership and legal title through the use of any
"swap" transaction is deemed to be a prohibited encumbrance.
(ii) Unless determined otherwise by the Committee and except in the
event of the Participant's death or pursuant to a domestic relations order, a
Stock Award is not transferable and may be earned in his lifetime only by the
Participant to whom it is granted. Upon the death of a Participant, a Stock
Award is transferable by will or the laws of descent and distribution. The
designation of a beneficiary does not constitute a transfer.
(iii) If a recipient of a Stock Award is subject to the provisions
of Section 16 of the Exchange Act, shares of Common Stock subject to such
Stock Award may not, without the written consent of the Committee (which
consent may be given in the Stock Award Agreement), be sold or otherwise
disposed of within six months following the date of grant of the Stock Award.
(g) Accrual of Dividends. Whenever shares of Common Stock underlying a
Stock Award are distributed to a Participant or beneficiary thereof under the
Plan, such Participant or beneficiary shall also be entitled to receive, with
respect to each such share distributed, a payment equal to any cash dividends
and the number of shares of Common Stock equal to any stock dividends,
declared and paid with respect to a share of the Common Stock if the record
date for determining shareholders entitled to receive such dividends falls
between the date the relevant Stock Award was granted and the date the
relevant Stock Award or installment thereof is issued. There shall also be
distributed an appropriate amount of net earnings, if any, of the Trust with
respect to any dividends paid out.
(h) Voting of Stock Awards. After a Stock Award has been granted but
for which the shares covered by such Stock Award have not yet been earned and
distributed to the Participant pursuant to the Plan, the Participant shall be
entitled to direct the Trustee as to the voting of such shares of Common
Stock which the Stock Award covers subject to the rules and procedures
adopted by the Committee for this purpose. All shares of Common Stock held
by the Trust as to which Participants are not entitled to direct, or have not
directed, the voting, shall be voted by the Trustee in the same proportion as
the Common Stock covered by Stock Awards which have been awarded is voted.
10. DIVIDEND EQUIVALENT RIGHT.
-------------------------
Simultaneously with the grant of any Option to a Participant, the
Committee may grant a Dividend Equivalent Right with respect to all or some
of the shares covered by such Option. Dividend Equivalent Rights granted
under this Plan are subject to the following terms and conditions:
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(a) Terms of Rights. The Dividend Equivalent Right provides the
Employee with a cash benefit per share for each share underlying the
unexercised portion of the related Option equal to the amount of any
extraordinary dividend (as defined in this Section 10 (c)) per share of
Common Stock declared by the Holding Company. The terms and conditions of
any Dividend Equivalent Right shall be evidenced in the agreement for the
Option (NSO Agreement or ISO Agreement) and shall be subject to the terms and
conditions of the Plan. The Dividend Equivalent Right is transferable only
when the related Option is transferable and under the same conditions.
(b) Payment. Upon the payment of an extraordinary dividend, the
Participant holding a Dividend Equivalent Right with respect to Options or
portions thereof which have vested shall promptly receive from the Holding
Company the amount of cash or some alternative payment option as provided in
Section 13, equal to the amount of the extraordinary dividend per share of
Common Stock, multiplied by the number of shares of Common Stock underlying
the unexercised portion of the related Option. With respect to Options or
portions thereof which have not vested, the amount that would have been
received pursuant to the Dividend Equivalent Right with respect to the shares
underlying such unvested Option or portion thereof shall be paid to the
Participant holding such Dividend Equivalent Right together with earnings
thereon, on such date as the Option or portion thereof becomes vested.
Payments shall be decreased by the amount of any applicable tax withholding
prior to distribution to the Participant as set forth in Section 18.
(c) Extraordinary Dividend. For purposes of this Section 10, an
extraordinary dividend is any dividend paid on shares of Common Stock where
the rate of the dividend exceeds the Bank's weighted average cost of funds on
interest-bearing liabilities for the current and preceding three quarters.
11. EQUITABLE ADJUSTMENT RIGHT.
--------------------------
Simultaneously with the grant of any Option under this Plan, in the
alternative to a Dividend Equivalent Right, the Committee may grant an
Equitable Adjustment Right with respect to all or some of the shares covered
by such Option
Upon the payment of an extraordinary dividend (as such term is defined in
Section 10(c)), the Committee may adjust the number of shares and/or the
Exercise Price of the related Option, as the Committee deems appropriate as
provided in Section 17 hereof.
The terms and conditions of any Equitable Adjustment Right shall be
evidenced in the agreement for the Option (NSO Agreement or ISO Agreement)
and shall be subject to the terms and conditions of the Plan. The Equitable
Adjustment Right shall be transferable to the extent that the related Option
is transferable.
12. PAYOUT ALTERNATIVES.
-------------------
Payments due to a Participant upon the exercise or redemption of an
Award, may be made subject to the following terms and conditions:
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(a) Discretion of The Committee. The Committee has the sole discretion
to determine what form of payment (whether monetary, Common Stock, a
combination of payout alternatives or otherwise) it shall use in making
distributions of payments for all Awards. If the Committee requests any or
all Participants to make an election as to form of distribution or payment,
it shall not be considered bound by the election.
(b) Payment in the Form of Common Stock. Any shares of Common Stock
tendered in satisfaction of an obligation arising under this Plan shall be
valued at the Fair Market Value of the Common Stock on the day preceding the
date of the issuance of such stock to the Participant. The Committee may use
Common Stock in the form of treasury Common Stock, authorized but unissued
Common Stock or may direct the Trustee to purchase such Common Stock in
market transactions to satisfy the Holding Company's obligations under this
Plan.
13. ALTERNATE OPTION PAYMENT MECHANISM.
----------------------------------
The Committee has sole discretion to determine what form of payment it
will accept for the exercise of an Option. The Committee may indicate
acceptable forms in the ISO or NSO Agreement covering such Options or may
reserve its decision to the time of exercise. No Option is to be considered
exercised until payment in full is accepted by the Committee or its agent.
(a) Cash Payment. The exercise price may be paid in cash or by
certified check.
(b) Borrowed Funds. To the extent permitted by law, the Committee may
permit all or a portion of the exercise price of an Option to be paid through
borrowed funds.
(c) Exchange of Common Stock.
(i) The Committee may permit payment by the tendering of
previously acquired shares of Common Stock. This includes the use of
"pyramiding transactions" whereby some number of Options are exercised; then
the shares gained through the exercise are tendered back to the Holding
Company as payment for a greater number of Options. This transaction may be
repeated as needed to exercise all of the Options available.
(ii) Any shares of Common Stock tendered in payment of the exercise
price of an Option shall be valued at the Fair Market Value of the Common
Stock on the date prior to the date of exercise.
14. RIGHTS OF A SHAREHOLDER: NONTRANSFERABILITY.
-------------------------------------------
No Participant shall have any rights as a shareholder with respect to any
shares of Common Stock covered by an Option until the date of issuance of a
stock certificate for such shares. Nothing in this Plan or in any Award
granted confers on any person any right to continue in the employ or service
of the Holding Company or its Affiliates or interferes in any way with the
right of the Holding Company or its Affiliates to terminate a Participant's
services as an officer or other employee at any time.
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Except as permitted under the Code (with respect to Incentive Stock
Options) and the rules promulgated pursuant to Section 16(b) of the Exchange
Act or any successor statutes or rules, no Award under the Plan shall be
transferable by the Participant other than by will or the laws of intestate
succession or pursuant to a domestic relations order or unless determined
otherwise by the Committee.
15. AGREEMENT WITH GRANTEES.
-----------------------
Each Award will be evidenced by a written agreement(s) (whether
constituting an NSO Agreement, ISO Agreement, Stock Award Agreement or any
combination thereof), executed by the Participant and the Holding Company or
its Affiliates that describes the conditions for receiving the Awards
including the date of Award, the Exercise Price if any, the terms or other
applicable periods, and other terms and conditions as may be required or
imposed by the Plan, the Committee, the Board of Directors, tax law
considerations or applicable securities law considerations.
16. DESIGNATION OF BENEFICIARY.
--------------------------
A Participant may, with the consent of the Committee, designate a person
or persons to receive, in the event of death, any Award to which the
Participant would then be entitled. Such designation will be made upon forms
supplied by and delivered to the Holding Company and may be revoked in
writing. If a Participant fails effectively to designate a beneficiary, then
the Participant's estate will be deemed to be the beneficiary.
17. DILUTION AND OTHER ADJUSTMENTS.
------------------------------
In the event of any change in the outstanding shares of Common Stock by
reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares,
or other similar corporate change, or other increase or decrease in such
shares without receipt or payment of consideration by the Holding Company,
the Committee will make such adjustments to previously granted Awards, to
prevent dilution or enlargement of the rights of the Participant, including
any or all of the following:
(a) adjustments in the aggregate number or kind of shares of Common
Stock or other securities that may underlie future Awards under
the Plan;
(b) adjustments in the aggregate number or kind of shares of Common
Stock or other securities underlying Awards already made
under the Plan;
(c) adjustments in the purchase price of outstanding Incentive and/or
Non-statutory Stock Options, or any Limited Rights attached to such
Options.
No such adjustments may, however, materially change the value of benefits
available to a Participant under a previously granted Award. All awards under
this Plan shall be binding upon any successors or assigns of the Holding
Company.
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18. TAX WITHHOLDING.
---------------
Awards under this Plan shall be subject to tax withholding to the extent
required by any governmental authority. Any withholding shall comply with
Rule 16b-3 or any amendment or successive rule. Shares of Common Stock
withheld to pay for tax withholding amounts shall be valued at their Fair
Market Value on the date the Award is deemed taxable to the Participant.
19. AMENDMENT OF THE PLAN.
---------------------
The Board of Directors may at any time, and from time to time, modify or
amend the Plan in any respect, prospectively or retroactively; provided
however, that provisions governing grants of Incentive Stock Options, unless
permitted by the rules and regulations or staff pronouncements promulgated
under the Code shall be submitted for shareholder approval to the extent
required by such law, regulation or interpretation.
Failure to ratify or approve amendments or modifications by shareholders
shall be effective only as to the specific amendment or modification
requiring such ratification. Other provisions, sections, and subsections of
this Plan will remain in full force and effect.
No such termination, modification or amendment may adversely affect the
rights of a Participant under an outstanding Award without the written
permission of such Participant.
20. EFFECTIVE DATE OF PLAN.
----------------------
The Plan shall become effective upon being presented to shareholders for
ratification for purposes of: (i) obtaining favorable treatment under
Section 16(b) of the Securities Exchange Act; and (ii) obtaining preferential
tax treatment for Incentive Stock Options. The failure to obtain shareholder
ratification for such purposes will not effect the validity of the Plan and
the Options thereunder, provided, however, that if the Plan is not ratified,
the Plan shall remain in full force and effect, and any Incentive Stock
Options granted under the Plan shall be deemed to be Non-statutory Stock
Options.
21. TERMINATION OF THE PLAN.
-----------------------
The right to grant Awards under the Plan will terminate upon the earlier
of: (i) ten (10) years after the Effective Date; (ii) the issuance of a
number of shares of Common Stock pursuant to the exercise of Options or the
distribution of Stock Awards which together with the exercise of Limited
Rights is equivalent to the maximum number of shares reserved under the Plan
as set forth in Section 4. The Board of Directors has the right to suspend
or terminate the Plan at any time, provided that no such action will, without
the consent of a Participant, adversely affect a Participant's vested rights
under a previously granted Award.
22. APPLICABLE LAW.
--------------
The Plan will be administered in accordance with the laws of the State of
Delaware and applicable federal law.
A-14
<PAGE>
23. COMPLIANCE WITH OTS CONVERSION REGULATIONS.
------------------------------------------
Notwithstanding any other provision contained in this Plan:
(a) unless the Plan is approved by a majority vote of the outstanding
shares of the Holding Company eligible to be cast at a meeting of
stockholders to consider the Plan, as determined by Delaware law,
the Plan shall not become effective or implemented prior to May 1,
1997;
(b) no Award granted prior to May 1, 1997 shall become vested or
exercisable at a rate in excess of 20% of the total number Stock
Awards or Options (whichever may be the case) granted to such
Participant, provided, that Awards shall become fully vested or
immediately exercisable in the event of a Participant's termination
of service due to death or Disability and, provided further, that
the Committee may determine to modify the terms of any Award after
May 1, 1997 to provide for acceleration of the vesting or
exercisability of such Award, including a modification or amendment
to provide that such Award shall become fully vested or immediately
exercisable in the event of a Change in Control;
(c) no Award granted to any individual employee prior to May 1, 1997 may
exceed 25% of the total amount of Awards which may be granted under
the Plan;
(d) no Award granted to any individual Outside Director prior to May 1,
1997 may exceed 5% of the total amount of Awards which may be granted
under the Plan; and
(e) the aggregate amount of Awards granted to all Outside Director prior
to May 1, 1997 may not exceed 30% of the total amount of Awards which
may be granted under the Plan.
24. DELEGATION OF AUTHORITY.
-----------------------
The Committee may delegate all authority for: the determination of forms
of payment to be made by or received by the Plan; the execution of Award
agreements; the determination of Fair Market Value; the determination of all
other aspects of administration of the plan to the executive officer(s) of
the Holding Company or the Bank. The Committee may rely on the descriptions,
representations, reports and estimate provided to it by the management of the
Holding Company or the Bank for determinations to be made pursuant to the
Plan, including the attainment of performance goals. However, only the
Committee or a portion of the Committee may certify the attainment of a
performance goal.
A-15
<PAGE>
REVOCABLE PROXY
CITIZENS FIRST FINANCIAL CORP.
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
SPECIAL MEETING OF STOCKHOLDERS
NOVEMBER 12, 1996
10:00 A.M., NORMAL, ILLINOIS TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE SPECIAL
MEETING OF STOCKHOLDERS ON NOVEMBER 12, 1996.
The undersigned hereby appoints the official proxy committee of the Board
of Directors of Citizens First Financial Corp. (the "Company"), each with
full power of substitution, to act as proxies for the undersigned, and to
vote all shares of Common Stock of Citizens First Financial Corp. which the
undersigned is entitled to vote at the Special Meeting of Stockholders, to be
held on November 12, 1996 at 10:00 a.m., Normal, Illinois Time, at The
Holiday Inn, 8 Traders Circle, Normal, Illinois and at any and all
adjournments thereof as indicated.
For Against Abstain
1. The ratification of the Citizens First / / / / / /
Financial Corp. 1996 Stock-Based
Incentive Plan.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" EACH OF THE LISTED PROPOSALS.
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSAL LISTED
ABOVE. IF ANY OTHER BUSINESS IS PRESENTED AT THE SPECIAL MEETING, THIS PROXY
WILL BE VOTED BY THOSE NAMED IN THIS PROXY AS DIRECTED BY THE BOARD OF
DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE SPECIAL MEETING.
IMPORTANT: The undersigned acknowledges receipt from the Company prior to
the execution of this proxy of a Notice of Special Meeting of Stockholders
and of a Proxy Statement dated October 4, 1996.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one
signature is required.
PLEASE BE SURE TO SIGN AND DATE Date
THIS PROXY IN THE BOX BELOW --------------------------
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STOCKHOLDER SIGN ABOVE Co-holder (if any) sign above
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DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
CITIZENS FIRST FINANCIAL CORP.
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PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
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