SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 0-20987
Grand Premier Financial, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-4077455
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
486 West Liberty, Wauconda, IL 60084
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (847) 487-1818
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($.01 par value)
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by a check mark if disclosure of delinquent filers pursuant to
item 405 of Regulation S-K is not contained herein, and will not be contained
to the best of registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this form 10-K or any
amendment to form 10-K. X
The number of shares of the registrant's Common Stock outstanding on
February 28, 1997 was 20,002,563 shares. The aggregate market value of the
registrant's Common Stock held by nonaffiliates of the registrant as of
February 28, 1997, based upon the average bid and asked price at this date was
$108,398,291.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1996 Annual Report to Shareholders are incorporated by
reference into Part II of the Form 10-K. Portions of the Proxy Statement for
Registrant's 1997 Annual Meeting of Shareholders to be held May 28, 1997 have
been incorporated by reference into Part III of the Form 10-K.
No. of Pages Sequentially Numbered: 30
Exhibit Index is on Page 28
PART I
ITEM 1. BUSINESS
Grand Premier Financial, Inc. (the Company) is a registered bank
holding company organized in 1996 under Delaware law. The operations of the
Company and its subsidiaries consist primarily of those financial activities,
including trust and investment services, common to the commercial banking
industry. Unless the context otherwise requires, the term "Company" as used
herein includes the Company and its subsidiaries on a consolidated basis.
The primary function of the Company is to coordinate the policies and
operations of its subsidiaries in order to improve and expand their services
and effect economies in their operations by joint efforts in certain areas
such as auditing, training, marketing, and business development. The Company
also provides operational and data processing services for its subsidiaries.
All services and counsel to subsidiaries are provided on a fee basis, with
fees based upon fair market value.
The Company's banking subsidiaries include Grand National Bank (GNB),
First Bank North ("FBN"), First Bank South ("FBS"), First National Bank of
Northbrook ("Northbrook") and First Security Bank of Cary Grove ("FSBCG").
Although chartered as commercial banks, the offices of the banks serve as
general sales offices providing a full array of financial services and
products to individuals, businesses, local governmental units and
institutional customers throughout northern Illinois. Banking services
include those generally associated with the commercial banking industry such
as demand, savings and time deposits, loans to commercial, agricultural and
individual customers, cash management, electronic funds transfers and other
services tailored for the client. The Company has banking offices located in
Cary, Crete, Crystal Lake, DeKalb, Dixon, Freeport, Gurnee, Homewood, Island
Lake, Mokena, Mt. Carroll, Mundelein, Niles, Northbrook, Riverwoods, Polo,
Rockford, S. Chicago, Heights, Sterling, Stockton, Tinley Park, Warren,
Waukegan, Wauconda and Woodstock, Illinois.
Grand Premier Trust and Investment, Inc., ("Trust") a wholly owned
subsidiary of FBN, provides a full line of fiduciary and investment services
throughout the Company's general market area.
Grand Premier Insurance Services, Inc., a direct subsidiary of the
Company, is a full line casualty and life insurance agency. Grand Premier
Operating Systems, Inc., ("GPOS"), is also a direct subsidiary of the Company.
GPOS provides data processing and operational services to the Company and its
subsidiaries.
American Suburban Mortgage Corporation, (ASMC) a direct subsidiary of
the Company was established to engage in secondary mortgage operations. ASMC
is currently inactive, with secondary mortgage operations performed by the
banking subsidiaries.
Competition
Active competition exists in all principal areas where the Company and
its subsidiaries are engaged, not only with commercial banking organizations,
but also with savings and loan associations, finance companies, mortgage
companies, credit unions, brokerage houses and other providers of financial
services. The Company has seen the level of competition and number of
competitors in its markets increase in recent years and expects a continuation
of these aggressively competitive market conditions.
To gain a competitive market advantage, the Company relies on a
strategic marketing plan that is employed throughout the Company, reaching
every level of its sales force. The marketing plan includes the
identification of target markets and customers so that the Company's
resources, both financial and manpower, can be utilized where the greatest
opportunities for gaining market share exist. The differentiation between the
Company's approach to providing products and services to its customers and
that of the competition is in the individualized attention that the Company
devotes to the needs of its customers. This focus on fulfilling customer's
financial needs generally results in long-term customer relationships.
Banking deposits are well balanced, with a large customer base and no
dominant accounts in any category. The Company's loan portfolio is also
characterized by a large customer base, balanced between loans to individuals,
commercial and agricultural customers, with no dominant relationships. There
is no readily available source of information which delineates the market for
financial services, including services offered by non-bank competitors, in the
company's market area.
Supervision and Regulation
Bank holding companies, banks and financial institutions generally are
highly regulated, with numerous federal and state laws and regulations
governing their activities. The Company is a registered bank holding company
under and subject to the provisions of the Bank Holding Company Act (BHCA.)
As such, the Company is required to file with the Federal Reserve Board
periodic reports and such additional information as the Federal Reserve Board
may require. It also is subject to the supervision of, and examination by,
the Federal Reserve Board. The Company is also subject to regulation under
the Illinois Bank Holding Company Act of 1957, as amended (the "Illinois
BHCA").
Grand National Bank and First National Bank of Northbrook ("Northbrook")
are national banks chartered under the laws of the United States and are
subject to the supervision of, and examination by, the Office of the
Comptroller of the Currency (OCC), their primary regulator. The OCC
regularly examines such areas as reserves, loans, investments, management
practices and other aspects of Grand National Bank's and Northbrook's
operations. Grand National Bank and Northbrook must also furnish to the OCC
quarterly reports containing full and accurate statements of their affairs.
All national banks are members of the Federal Reserve System and subject to
the applicable provisions of the Federal Reserve Act and to regular
examination by the Federal Reserve Bank of their district, in this case the
Federal Reserve Bank of Chicago.
First Bank North, First Bank South and First Security Bank of Cary Grove
("Cary Grove") are Illinois state banks chartered under the Illinois Banking
Act and members of the Federal Reserve System. As such, they are subject to
the supervision of, and examination by, the Illinois Commissioner and the
Federal Reserve Board. The Illinois Commissioner and the Federal Reserve
Board regularly examine such areas as reserves, loans, investments, management
practices, and other aspects of the operations of First Bank North, First Bank
South and Cary Grove. First Bank North, First Bank South and Cary Grove must
also furnish to the Illinois Commissioner and the Federal Reserve Bank of
Chicago quarterly reports containing full and accurate statements of their
affairs. As an Illinois trust company, Premier Trust Services, Inc. is also
subject to the supervision of and examination by the Illinois Commissioner.
The deposits of all of the banks, subject to FDIC limitations are
insured by BIF of the FDIC. As a result, the banks are also subject to the
provisions of the Federal Deposit Insurance Act and to examination by the
FDIC. The examinations of the various regulatory agencies are designed for
the protection of bank depositors and not for stockholders of the banks or
their holding companies.
The following references to material statutes and regulations affecting
the Company and its subsidiaries are brief summaries thereof and are qualified
in their entirety by reference to such statutes and regulations. Any change
in applicable law or regulations may have a material effect on the business of
the Company and its subsidiary banks.
The BHCA requires prior Federal Reserve Board approval for, among other
things, the acquisition by a bank holding company of direct or indirect
ownership or control of more than five percent (5%) of the voting shares or
substantially all the assets of any bank, or for a merger or consolidation of
a bank holding company with another bank holding company. With certain
exceptions, the BHCA prohibits a bank holding company from acquiring direct or
indirect ownership or control of voting shares of any company which is not a
bank or bank holding company and from engaging directly or indirectly in any
activity other than banking or managing or controlling banks or performing
services for its authorized subsidiaries. A bank holding company may,
however, engage in or acquire an interest in a company that engages in
activities which the Federal Reserve Board has determined by regulation or
order to be so closely related to banking or managing or controlling banks as
to be a proper incident thereto.
A bank holding company is a legal entity separate and distinct from its
subsidiary bank or banks. Normally, the major source of a bank holding
company's revenue is the dividends it receives from its subsidiary banks. The
right of a bank holding company to participate as a stockholder in any
distribution of assets of its subsidiary banks upon their liquidation or
reorganization or otherwise is subject to the prior claims of creditors of
such subsidiary banks. The subsidiary banks are subject to claims by
creditors for long-term and short-term debt obligations, including substantial
obligations for federal funds purchased and securities sold under repurchase
agreements, as well as deposit liabilities. Under the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), in the event that the
FDIC suffers a loss in connection with a banking subsidiary of a bank holding
company, other banking subsidiaries of the same holding company may be held
liable for such loss.
Federal laws limit the transfer of funds by a subsidiary bank to its
holding company and the non-bank subsidiaries of the holding company
("affiliates") in the form of loans or extensions of credit, investments in
stock or other securities of the bank holding company or its other
subsidiaries or advances to any borrower collateralized by such stock or other
securities. Transfers of this kind are limited to 10 percent of a bank's
capital and surplus with respect to each affiliate and to 20 percent with
respect to all affiliates in the aggregate and are also subject to certain
collateral requirements. These transactions, as well as other transactions
between a subsidiary bank and its holding company and other affiliates, must
also be on terms substantially the same as, or at least as favorable as, those
prevailing at the time for comparable transactions with non-affiliated
companies or, in the absence of comparable transactions, on terms or under
circumstances, including credit standards, that would be offered to, or would
apply to, non-affiliated companies.
It is the policy of the Federal Reserve Board that a bank holding
company is expected to act as a source of financial strength to each of its
subsidiary banks and to commit resources to support each of its subsidiary
banks. The Federal Reserve Board takes the position that, in implementing
this policy, it may require bank holding companies to provide such support
when the holding company otherwise would not consider itself able to do so.
The Illinois BHCA permits bank holding companies domiciled in Illinois
to make acquisitions throughout the state. It also permits bank holding
companies located in any state of the United States to acquire banks or bank
holding companies within the State of Illinois, subject to certain conditions,
including a regulatory determination that the laws of the state in which the
acquiring bank holding company is located permit bank holding companies in
Illinois to acquire banks or bank holding companies in the acquiror's state
under qualifications and conditions that are not unduly restrictive when
compared to those imposed by Illinois law. Subject to these regulatory
determinations, the Company may acquire banks and bank holding companies in
such states, and bank holding companies in those states may acquire banks and
bank holding companies in Illinois.
The federal and state laws and regulations generally applicable to banks
regulate, among other things, the scope of a bank's business, allowable
investments, required reserves against deposits, loans and collateral,
establishment of branch offices and activities performed at such offices.
These laws and regulations are generally designed for the protection of bank
depositors and not the stockholders of the bank.
A national bank, such as Grand National Bank or Northbrook, may not pay
a dividend in any calendar year in excess of its net profits for the current
year plus its adjusted retained profits for the two prior years, unless it
obtains OCC approval. Net profits from which dividends may be paid must be
adjusted for losses and the amount of statutory bad debts in excess of the
balance of the bank's allowance for possible credit losses. "Bad debts" are
generally defined to include the principal amounts of loans which are in
arrears with respect to interest by six months or more unless such loans are
well secured and in the process of collection.
Under the Illinois Banking Act, state banks, such as First Bank North,
First Bank South, and Cary Grove may not declare dividends (I) except out of
the bank's net profits and (ii) unless the bank has transferred to surplus at
least one-tenth of its net profits since the date of the declaration of the
last preceding dividend, until the amount of its surplus is at least equal to
its capital. Net profits under the Illinois Banking Act must be adjusted for
losses and bad debts (i.e., debts owing to the bank on which interest is past
due and unpaid for a period of six months or more unless such debts are
secured and in the process of collection).
The Community Reinvestment Act (the "CRA") is intended to encourage
banks and thrifts to help meet the credit needs of their entire communities,
including low- and moderate-income neighborhoods, consistent with safe and
sound lending practices. Under the CRA, the federal banking agencies take
into account a financial institution's record of helping to meet the credit
needs of its entire community when evaluating various types of applications,
such as applications for branches, office relocations, mergers,
consolidations, and purchase and assumption transactions, and may deny or
condition approval of an application on the basis of an institution's record.
All depository institutions are reviewed and rated by their primary federal
bank regulator. In reviewing applications by bank holding companies, the
Federal Reserve Board takes into account the record of compliance of a holding
company's subsidiary banking institutions with the CRA.
The various federal bank regulators, including the Federal Reserve Board
and the OCC, have adopted risk-based capital requirements for assessing bank
holding company and bank capital adequacy. The capital standards (including
the definitions of Tier 1 Capital and Tier 2 Capital) established by the OCC
(for national banks such as Grand National Bank and Northbrook) and by the
Federal Reserve Board (for state member banks such as First Bank North, First
Bank South and Cary Grove) are substantially the same as those established by
the Federal Reserve Board for bank holding companies. These standards
significantly revise the definition of capital and establish minimum capital
standards in relation to assets and off-balance sheet exposures, as adjusted
for credit risks. Capital is classified into two tiers. For bank holding
companies, Tier 1 or "core" capital consists of common shareholders' equity,
perpetual preferred stock (subject to certain limitations) and minority
interests in the common equity accounts of consolidated subsidiaries and is
reduced by goodwill and certain investments in other corporations ("Tier 1
Capital"). Tier 2 capital consists of (subject to certain conditions and
limitations) the allowance for possible credit losses, perpetual preferred
stock, "hybrid capital instruments," perpetual debt and mandatory convertible
debt securities, and term subordinated debt and intermediate-term preferred
stock ("Tier 2 Capital").
Under the risk-adjusted capital standards, a minimum total capital to
total risk-weighted assets ratio of eight percent (8%) is required, and Tier 1
Capital must be at least 50 percent of total capital. The Federal Reserve
Board also has adopted a minimum leverage ratio of Tier 1 Capital to total
assets of three percent (3%). The three percent Tier 1 Capital to total
assets ratio constitutes the leverage standard for bank holding companies and
is used in conjunction with the risk-based ratio in determining the overall
capital adequacy of banking organizations.
The federal banking agencies have emphasized that the foregoing
standards are supervisory minimums and that an institution would be permitted
to maintain such minimum levels of capital only if it were rated in the
highest category under the regulatory rating systems for bank holding
companies and banks. All other bank holding companies and banks are required
to maintain a leverage ratio of 3 percent plus at least one to two percent (1%
to 2%) of additional capital. These rules further provide that banking
organizations experiencing internal growth or making acquisitions will be
expected to maintain capital positions substantially above the minimum
supervisory levels and comparable to peer group averages, without significant
reliance on intangible assets. The Federal Reserve Board continues to
consider a "tangible Tier 1 leverage ratio" in evaluating proposals for
expansion or new activities. The tangible Tier 1 leverage ratio is the ratio
of a banking organization's Tier 1 Capital, less all intangibles, to total
assets, less all intangibles.
The Company and its banking subsidiaries meet or exceed the regulating capital
guidelines as currently defined. For additional information regarding the
capital ratios of the Company and its banking subsidiaries, see the Company's
1996 Annual Report page 20.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") imposed relatively detailed standards and mandated the development
of additional regulations governing nearly every aspect of the operations,
management and supervision of banks and bank holding companies. It also
significantly enhanced the authority of bank regulators to intervene in the
cases of deterioration of a bank's capital level. FDICIA requires that the
banking regulators take prompt corrective action with respect to depository
institutions that fall below certain capital levels and prohibits any
depository institution from making any capital distribution that would cause
it to be considered undercapitalized. Regulations adopted pursuant to FDICIA
established five capital categories: well-capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized and critically
undercapitalized. Institutions that are not adequately capitalized may be
subjected to a broad range of restrictions on their activities and will be
required to submit a capital restoration plan which, to be accepted by the
regulators, must be guaranteed in part by any company having control of the
institution. Only well-capitalized institutions and adequately capitalized
institutions receiving a waiver from the FDIC will be permitted to accept
brokered deposits, and only those institutions eligible to accept brokered
deposits may provide pass-through deposit insurance for participants in
employee benefit plans.
A range of other regulations adopted as a result of FDICIA have
established interagency guidelines standards for safety and soundness for
depository institutions and their holding companies; requirements relating to
annual audits of depository institutions; requirements applicable to closure
of branches; additional requirements for disclosures to depositors with
respect to terms and interest rates applicable to deposit accounts;
requirements for the banking agencies to adopt uniform regulations for
extensions of credit secured by real estate; modification of accounting
standards to conform to GAAP, including the reporting of off-balance sheet
items and supplemental disclosure of estimated fair market value of assets and
liabilities in financial statements filed with the banking regulators;
increased penalties for failing to file assessment reports with the FDIC;
greater restrictions on extensions of credit to directors, officers and
principal shareholders; and increased reporting requirements on agricultural
loans and loans to small businesses.
As required by FDICIA, the FDIC has established a risk-based assessment
system for deposit insurance provided to depositors at depository institutions
whereby assessments to each institution are calculated upon the probability
that the insurance fund will incur a loss with respect to the institution, the
likely amount of such loss, and the revenue needs of the insurance fund.
Under the system, deposit insurance premiums are based upon an institution's
assignment to one of three capital categories and a further assignment to one
of three supervisory subcategories within each capital category. The result
is a nine category assessment system. The classification of an institution
into a category depends, among other things, on the results of off-site
surveillance systems, capital ratio, and its CAMEL rating (a supervisory
rating of capital, asset quality, management, earnings and liquidity).
On September 29, 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Riegle-Neal Act") became law. Since September
29, 1995, the Riegle-Neal Act has permitted adequately capitalized and managed
bank holding companies to acquire banks across state lines, without regard to
whether the transaction is prohibited by state law, except that state law may
establish the minimum age of the banks in such state that are subject to
acquisition by out-of-state bank holding companies (not to exceed five years).
The acquiring bank holding company must maintain the acquired bank as a
separately chartered institution. Under the Riegle-Neal Act, the Federal
Reserve Board generally may not approve an acquisition if, upon consummation,
the applicant bank holding company would control more than 10% of the total
deposits of U.S. insured depository institutions or 30% or more of the
deposits in the state where the target bank is located. The Federal Reserve
Board could approve an acquisition, notwithstanding the 30% limit, if the
state waives the limit either by statute, regulation or order of the
appropriate state official. Since September 29, 1995, the Riegle-Neal Act has
also permitted any bank subsidiary of a bank holding company to receive
deposits, renew time deposits, close loans, service loans and receive payments
on loans and other obligations as agent for a bank or thrift affiliate,
whether such affiliate is located in a different state or in the same state.
Beginning on June 1, 1997, banks may, with the approval of the
appropriate Federal bank regulatory agency, merge with one another across
state lines and thereby create a main bank with branches in separate states.
After establishing branches in a state through an interstate merger
transaction, the bank could establish and acquire additional branches at any
location in the state where any bank involved in the merger could have
established or acquired branches under applicable federal or state law. The
responsible federal bank regulatory agency generally may not approve such a
merger, however, if, after the merger, the resulting entity would control more
than 10% of the total deposits of U.S. insured depository institutions or 30%
or more of the deposits in the state where the target bank is located, the
responsible federal bank regulatory agency may approve such a merger,
notwithstanding the 30% limit, if the state waives the limit either by
statute, regulation or order of the appropriate state official.
Under the Riegle-Neal Act, states may adopt legislation permitting
interstate mergers before June 1, 1997. Alternatively, states may adopt
legislation before June 1, 1997, subject to certain conditions, opting-out of
interstate branching. If a state opts out of interstate branching, no out-of-
state bank may establish a branch in that state through an acquisition or de
novo, and a bank whose home state opts-out may not participate in an
interstate merger transaction. Illinois has adopted legislation permitting
interstate mergers beginning June 1, 1997.
Subject to the limited exception described below, deposits of the banks
are insured by the FDIC under the BIF. The FDIC also maintains another
insurance fund, the Savings Association Insurance Fund (the "SAIF"), which
primarily insures savings association deposits. Applicable law requires that
the SAIF and BIF funds each achieve and maintain a ratio of insurance reserves
to total insured deposits equal to 1.25%. The BIF reached this 1.25% reserve
level in 1996, and the FDIC announced a reduction in BIF premiums for most
banks. Based on this reduction, the highest rated institutions (approximately
92 percent of the nearly 11,000 BIF-insured banks) will pay the statutory
annual minimum of $2,000 for FDIC insurance. Rates for all institutions were
reduced by $0.04 per $100 of deposits, leaving a premium range of $0.00 (in
which the statutory minimum applies) to $0.27 per $100 instead of the previous
$0.04 to $0.31 per $100. The banks, for deposit insurance assessment
purposes, are all classified in the highest category and pay the statutory
annual minimum of $2,000 for FDIC deposit insurance. First Bank North holds
approximately $11,250,000 of deposits acquired in connection with the
acquisition of a branch of a savings association. Those deposits are insured
by SAIF and will continue to be subject to the higher premiums due on SAIF-
insured deposits.
Monetary Policy and Economic Conditions
The earnings of commercial banks and bank holding companies are affected
not only by general economic conditions, but also by the policies of various
governmental regulatory authorities. In particular, the Federal Reserve Board
influences conditions in the money and capital markets, which affect interest
rates and growth in bank credit and deposits. Federal Reserve Board monetary
policies have had a significant effect on the operating results of commercial
banks in the past and are expected to in the future.In view of changing
conditions in the national economy and in the money markets, as well as the
effect of credit policies by monetary and fiscal authorities, including the
Federal Reserve System, no representation can be made as to possible future
changes in interest rates, deposit levels and loan demand, or their effect on
the business and earnings of the Company and its subsidiaries.
Employees
As of December 31, 1996 the Company and its subsidiaries had a total of
588 full-time and 102 part-time employees.
Item 2. Properties
The Company's corporate office is at 486 West Liberty Street, Wauconda,
Illinois in a building owned by GNB. The Company leases approximately 5,000
square feet.
The banking affiliates, as of December 31, 1996 occupied 35 offices in
25 different communities within northern Illinois, of which seven are leased
and 28 are owned.
In addition to the banking offices, Grand Premier Operating Systems, Inc.
(GPOS) conducts the majority of its operations from a 28,800 square foot,
one story office building located at 588 Lakeview Parkway, Vernon Hills,
Illinois. GPOS leases this building from an unaffiliated party (with an
option to purchase) through September, 2001. GPOS also conducts business in
Freeport, Illinois. The two story office building in Freeport consists of
approximately 13,000 square feet, and is located at 110 West Stephenson
Street, Freeport, Illinois. The building and underlying land are owned by
GPOS.
Item 3. Legal Proceedings
Neither the Company nor its subsidiaries are a party to any material
legal proceedings, other than routine litigation incidental to the business of
the banks as of December 31, 1996.
Item 4. Submission of Matters to a Vote of Security Holders
No matters, through the solicitation of proxies or otherwise, have been
submitted to a vote of security holders for the quarter ended December 31,
1996.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
The approximate number of Holders of Common Stock as of 12/31/96 was as
follows:
Title of Class No. of Record Holders
Common Stock
($.01 Par Value) 1,231
Other information required by this item is incorporated herein by
reference to the Registrant's Annual Report to its shareholders for the year
ended December 31, 1996, which is included as an exhibit to this report.
Item 6. Selected Financial Data
Incorporated herein by reference to the Registrant's Annual Report to its
shareholders for the year ended December 31, 1996, which is included as an
exhibit to this report.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Incorporated by reference to the Registrant's Annual Report to its
shareholders for the year ended December 31, 1996, which is included as an
exhibit to this report.
Submitted herewith is the following supplementary financial information
of the registrant for each of the last three years (unless otherwise stated):
Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential
Changes in Interest Margin for each of the last two years
Investment Portfolio
Maturities of Investments, December 31, 1996
Loan Portfolio for each of the last five years
Loan Maturities and Sensitivity to Changes in Interest Rates,
December 31, 1996
Risk Elements in the Loan Portfolio for the last five years
Summary of Loan Loss Experience for the last five years
Deposits
Time Certificates and other Time Deposits of $100,000 or more as of
December 31, 1996
Return on Equity and Assets
Short Term Borrowings
Item 8. Financial Statements and Supplementary Data
The following consolidated financial statements of the Company, which
are included in the annual report of the registrant to its stockholders for
the year ended December 31, 1996, are submitted herewith as an exhibit, and
are incorporated by reference:
1. Consolidated Balance Sheets, December 31, 1996 and 1995
2. Consolidated Statements of Earnings, for the three years
ended December 31, 1996
3. Consolidated Statements of Changes in Stockholders' Equity
for the three years ended December 31, 1996
4. Consolidated Statements of Cash Flows for the three years
ended December 31, 1996
5. Notes to Consolidated Financial Statements
6. Independent Auditors' Report
7. Selected Quarterly Financial Information
Item 9. Change in and Disagreements with Accountants on Accounting
and Financial Disclosures
None
Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates
and Interest Differentials
The following table presents the average balances of major categories of
interest earning assets and interest bearing liabilities, the interest earned
or paid on such categories, and the average yield on such categories of
interest earning assets and the average rates paid on such categories of
interest bearing liabilities during each of the reported periods,
(in thousands)
<TABLE>
Year Ended December 31, 1996 1995 1994
<CAPTION>
Average Average Average Average Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate Balance Interest Yield/Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest earning assets
Interest bearing deposits in other banks $ 4,071 $ 244 5.99% $ 3,967 $ 219 5.52% $ 15,200 $ 656 4.32%
Investment securities (1)
Taxable 424,754 26,514 6.24 461,622 27,680 6.00 435,086 21,897 5.03
Tax exempt (2) 126,830 7,142 8.53 113,027 6,880 9.22 121,612 7,230 9.01
Federal funds sold 12,413 654 5.27 14,814 895 5.80 13,714 664 4.84
Loans (3) 915,107 79,816 8.72 810,527 73,108 9.02 742,129 61,719 8.32
Total int. earning assets/interest income 1,483,175 114,370 7.96 1,403,957 108,782 8.00 1,327,741 92,166 7.22
Cash and due from banks 52,745 52,768 54,756
Premises and equipment 35,945 36,578 37,067
Other assets 46,138 47,275 48,331
Securities valuation-available for sale (1) 10,879 2,301 518
Allowance for loan losses (9,743) (9,367) (10,293)
Total $1,619,139 $1,533,512 $1,458,120
Liabilities and Shareholders' Equity
Interest bearing liabilities
Demand deposits $289,698 8,357 2.88 $289,753 9,090 3.14 $244,864 5,700 2.33
Savings deposits 279,386 8,521 3.05 283,557 8,592 3.03 328,644 8,890 2.71
Other time deposits 613,910 35,380 5.76 537,652 30,566 5.69 468,804 20,609 4.40
Short-term borrowings 60,826 3,482 5.72 79,840 4,845 6.07 79,309 3,593 4.53
Long-term borrowings 12,758 818 6.41 6,555 448 6.83 2,148 136 6.33
Total interest bearing liabilities/
interest expense 1,256,578 56,558 4.50 1,197,357 53,541 4.47 1,123,769 38,928 3.46
Noninterest bearing deposits 189,645 181,177 191,959
Other liabilities 20,826 14,844 11,138
Shareholders' equity 152,090 140,134 131,254
Total $1,619,139 $1,533,512 $1,458,120
Net interest income $57,812 3.46% $55,241 3.53% $53,238 3.76%
Net yield on interest earning assets 4.15% 4.19% 4.29%
</TABLE>
(1) Investments are at amortized cost. The valuation from amortized cost to
market for available for sale securities is shown separately.
(2) Yields on tax exempt securities are full tax equivalent yields at
a 34% rate.
(3) Average volume includes nonaccrual loans.
CHANGES IN INTEREST MARGIN
GRAND PREMIER FINANCIAL, INC.
The following table sets forth the registrant's dollar amount of change
in interest earned on each major interest earning assets and the dollar
amount of change in interest paid on each major interest bearing liabilities,
as well as the portion of such changes attributable to changes in rate and
changes in volume for each of the last two years (Dollar figures in thousands):
Increase (Decrease)
1996 over 1995 1995 over 1994
Rate Volume Rate Volume
Changes in Interest Earned:
Interest Bearing Deposits $ 19 $ 6 $ 149 $(586)
Taxable Investment Securities 1,087 (2,253) 4,391 1,392
Non-taxable Investment Securities
(taxable equivalent) (868) 1,130 247 (597)
Fed Funds Sold (87) (154) 165 66
Loans (net of unearned discount) (3,608) 10,316 6,086 5,303
Total $(3,457) $ 9,045 $11,038 $5,578
Changes in Interest Paid:
Interest Bearing Deposits $ 888 $ 3,122 $10,593 $2,456
Short Term Borrowings ( 266) (1,097) 1,228 24
Long Term Borrowings (30) 400 12 300
Total $ 592 $ 2,425 $11,833 $2,780
Changes in Interest Margin $(4,049) $ 6,620 $ ( 795) $2,798
Changes attributable to rate/volume, i.e., changes in the interest margin
which occurred because of a combination rate/volume change and cannot be
attributed solely to a rate change or a volume change, are apportioned between
rate and volume as follows:
1. Percentage rate increases (decreases) in rate and in volume were
calculated for each major interest earning asset and interest bearing
liability based upon their year-to-year change.
2. The percentage rate changes in rate and in volume were then allocated
proportionately in relationship to 100%.
3. The proportionate allocations were applied to the total rate/volume
change.
INVESTMENT PORTFOLIO
GRAND PREMIER FINANCIAL, INC.
The following table sets forth the registrant's book values of investments
in obligations of the U.S. Treasury Government Agencies and Corporations, State
and Political Subdivisions (U.S.), and other securities for each of the last
three years (dollar figures in thousands):
1994 1995 1996
U.S. Treasury and U.S. Agency
Securities $393,005 $385,256 $348,877
Obligations of States and
Political Subdivisions 114,174 137,175 134,633
Other Securities 64,156 76,139 52,177
Total $571,335 $598,570 $535,687
The following table sets forth the registrant's book values of investments
in obligations of the U.S. Treasury, U.S. Government Agencies and
Corporations, State and Political Subdivisions (U.S.), and other securities
as of December 31, 1996 by maturity and also sets forth the weighted average
yield for each range of maturities.
Obligations of
U.S. Treasury States and Weighted
and U.S. Agency Political Other Average
Book Value: Securities Subdivision Securities Yield
One Year or Less $ 33,559 $ 10,304 $ 5,777 6.69%
After One Year to Five Years 71,636 34,023 4,886 7.13%
After Five Years to Ten Years 77,575 23,617 2,048 7.30%
Over Ten Years 166,107 66,689 39,466 7.44%
Total $ 348,877 $134,633 $52,177 7.28%
(1) Weighted Average Yields were calculated as follows:
1. The weighted average yield for each category in the portfolio was
calculated based upon the maturity distribution shown in the table above.
2. The yields determined in step 1 were weighted in relation to the
total investments in each maturity range shown in the table above.
(2) Yields on tax exempt securities are full tax equivalent yields at
a 34% rate.
(3) At December 31, 1996 the Company did not own any Obligation of a State
or Political Subdivision or Other Security which was greater than 10%
of its total equity capital.
LOAN PORTFOLIO
GRAND PREMIER FINANCIAL, INC.
The following table sets forth the registrant's Loan Portfolio by major
category for each of the last five years (dollar figures in thousands):
Year Ended December 31
1992 1993 1994 1995 1996
Commercial, financial and
agricultural Loans $201,746 $242,342 $200,178 $229,589 $229,700
Real Estate -
Construction 44,728 44,717 46,150 45,098 42,772
Mortgage 335,115 417,028 450,271 530,636 625,364
Loans to Individuals 42,609 65,685 68,453 71,010 68,488
Total $624,198 $769,772 $765,052 $876,333 $966,324
The following tables set forth the registrant's loan maturity distribution for
certain major categories of loans as of December 31, 1996 (dollar figures in
thousands).
AMOUNT DUE IN
1 Year or Less 1-5 Years After 5 Years
Commercial, financial and
agricultural loans $132,394 $ 78,875 $ 18,431
Real Estate - Construction 37,040 5,299 433
Total $169,434 $ 84,174 $ 18,864
As of December 31, 1996 loans totaling $61,272,000, which are due after one
year have predetermined interest rates, while $41,766,000 of loans due after
one year have floating interest rates.
RISK ELEMENTS IN THE LOAN PORTFOLIO
GRAND PREMIER FINANCIAL, INC.
The Company's financial statements are prepared on the accrual basis of
accounting, and substantially all of the loans currently accruing interest
are accruing at the rate contractually agreed upon when the loan was
negotiated. When in the judgement of management the timely receipt of
interest payments on a loan is doubtful, it is the Company's policy to
cease the accrual of interest thereon and to recognize income on a cash basis
when payments are received, unless there is adequate collateral or other
substantial basis for continued accrual of interest. An exception is made in
the case of consumer installment and charge card loans; such loans are not
placed on a cash basis and all interest accrued thereon is charged against
income at the time a loan is charged off. At the time a loan is placed in
non-accrual status all interest accrued in the current year but not yet
collected is reversed against current interest income. Troubled debt
restructurings (renegotiated loans) are loans on which interest is being
accrued at less than the original contractual rate of interest because of the
inability of the borrower to service the obligation under the original terms
of the agreement. Income is accrued at the renegotiated rate so long as the
borrower is current under the revised terms and conditions of the agreement.
Other Real Estate is real estate, sales contracts, and other assets acquired
because of the inability of the borrower to serve the obligation of a previous
loan collateralized by such assets.
The following table sets forth the registrant's non-accrual, past due, and
renegotiated loans, for each of the last five years (dollar figures in
thousands):
Year Ended December 31
1992 1993 1994 1995 1996
Non-accrual Loans $ 11,923 $ 10,343 $ 8,911 $ 6,118 $ 4,718
Loans Past Due 90 days
or More 922 5,273 703 539 1,946
Renegotiated Loans 4,580 4,697 3,395 551 510
Total $ 17,425 $ 20,313 $13,009 $ 7,208 $7,174
The following table sets forth interest information for certain
non-performing loans for the year ended December 31, 1996 (dollar figures in
thousands):
Non-Accrual Loans Renegotiated Loans
Balance December 31, 1996 $ 4,718 $ 510
Gross interest income that would
have been recorded if the loans
had been current in accordance
with their original terms 557 32
Amount of interest included in
net earnings. 188 39
SUMMARY OF LOAN LOSS EXPERIENCE
GRAND PREMIER FINANCIAL, INC.
The Company and its subsidiary banks have historically evaluated the
adequacy of their Allowance for Possible Loan Losses on an overall basis, and
the resulting provision charged to expense has similarly been determined in
relation to management's evaluation of the entire loan portfolio. In
determining the adequacy of its Allowance for Possible Loan Losses, management
considers such factors as the size, composition and quality of the
loan portfolio, historical loss experience, current loan losses, current
potential risks, economic conditions, and other risks inherent in the loan
portfolio.
Because the Company has historically evaluated its Allowance for Loan Losses
on an overall basis, the Allowance has not been allocated by category. The
allocation shown in the table below, encompassing the major segments of the
loan portfolio judged most informative by management, represents only an
estimate for each category of loans based upon historical loss experience and
management's judgement of amounts deemed reasonable to provide for the
possibility of losses being incurred within each category. The following
table sets forth the registrant's loan loss experience for each of the last
five years (dollar figures in thousands):
Year Ended December 31,
1996 1995 1994 1993 1992
Balance at beginning of year $9,435 $9,738 $10,595 $8,160 $7,926
Charge-offs:
Commercial, financial and
agricultural 1,896 1,707 1,437 2,367 3,895
Real estate construction - - 55 - -
Real estate mortgage 91 235 140 875 432
Installment loans to individuals 778 912 706 367 343
2,766 2,854 2,338 3,609 4,670
Recoveries:
Commercial, financial and
agricultural 286 865 578 560 269
Real estate construction - - - - -
Real estate mortgage 26 28 15 - 30
Installment loans to individuals 259 223 333 151 106
572 1,116 926 711 405
Net charge-offs 2,194 1,738 1,412 2,898 4,265
Allowance from acquired entities - - - 2,351 -
Operating expense provision 2,875 1,435 555 2,982 4,499
Balance at end of year $10,116 $9,435 $9,738 $10,595 $8,160
Ratio of net charge-offs during the
year to average loans .24% .21% .19% .42% .70%
<TABLE>
Allocation of the Allowance for Loan Losses
(In thousands of dollars)
Year End December 31,
<CAPTION>
1996 1995 1994 1993 1992
% of Loans % of Loans % of Loans % of Loans % of Loans
in Each in Each in Each in Each in Each
Category to Category to Category to Category to Category to
Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural $3,343 23.8% 2,475 26.2% $2,964 26.2% $4,460 31.5% $3,253 32.3%
Real estate-construction 445 4.4 445 5.1 186 6.0 69 5.8 628 7.2
Real estate-mortgage 5,628 64.7 5,693 60.6 5,396 58.9 5,318 54.2 3,966 53.7
Installment loans
to individuals 700 7.1 822 8.1 1,192 8.9 748 8.5 313 6.8
$10,116 100.0% $9,435 100.0% $9,738 100.0% $10,595 100.0% $8,160 100.0%
</TABLE>
The amount of the additions to the allowance for possible loan losses
charged to expense for the periods indicated were based on a variety of
factors, including actual charge-offs during the year, historical loss
experience, character of portfolio, specific loan allocations, industry
guidelines and an evaluation of current and prospective economic conditions
in the Bank's market areas.
DEPOSITS
GRAND PREMIER FINANCIAL, INC.
The following table sets forth the classification of average deposits for
the indicated periods, in thousands of dollars:
Year ended December 31,
1996 1995 1994
Noninterest bearing demand deposits $189,645 $181,177 $191,959
Interest bearing demand deposits 289,698 289,753 244,864
Savings deposits 279,386 283,557 328,644
Time deposits 613,910 537,652 468,804
The following table sets forth the average rates paid on deposits for the
indicated periods:
Year Ended December 31,
1996 1995 1994
Interest bearing demand deposits 2.88% 3.14% 2.33%
Savings deposits 3.05 3.03 2.71
Time deposits 5.76 5.69 4.40
The following table sets forth the maturities of time deposits of $100,000
or more, in thousands of dollars, for the period indicated:
Year Ended
December 31,
1996
Three months or less $ 66,042
Over three months to six months 42,918
Over six months to twelve months 58,912
Over twelve months 26,087
Total $193,959
RETURN ON EQUITY AND ASSETS
GRAND PREMIER FINANCIAL, INC.
The following table presents certain ratios relating to the Registrant's
equity and assets:
Year Ended December 31,
1996 1995 1994
Return on average equity 8.76% 12.15% 10.17%
Return on average assets .82 1.11 .92
Dividend payout ratio 43.55 24.05 30.00
Average total shareholders' equity
to average total assets 9.39 9.14 9.00
SHORT TERM BORROWINGS
GRAND PREMIER FINANCIAL, INC.
The following table sets forth a summary of the registrant's short-term
borrowings for each of the last three years (dollar figures in thousands):
Year Ended December 31
1996 1995 1994
Balance at End of Period:
Federal Funds Purchased $ - $ 25,225 $13,975
Securities Sold Under
Repurchase Agreements 23,486 49,757 53,638
Notes Payable to Banks - 13,250 15,235
Other - - -
TOTAL $23,486 $ 88,232 $82,848
Weighted Average Interest
Rate at the end of Period:
Federal Funds Purchased - 5.75% 5.75%
Securities Sold Under
Repurchase Agreements 4.33% 5.30% 5.11%
Notes Payable to Banks - 7.43% 8.00%
Other - - -
Highest Amount Outstanding
at Any Month-End:
Federal Funds Purchased $42,469 $ 25,735 $ 15,076
Securities Sold Under
Repurchase Agreements 54,952 57,293 53,638
Notes Payable to Banks 13,953 17,070 17,580
Other - 3,000 1,000
Average Outstanding During
the Year:
Federal Funds Purchased $ 10,101 $ 11,671 $5,506
Securities Sold Under
Repurchase Agreements 39,550 55,814 58,496
Notes Payable to Banks 11,175 12,355 15,106
Other - 107 201
Weighted Average Interest
Rate During the Year:
Federal Funds Purchased 5.25% 6.50% 4.80%
Securities Sold Under
Repurchase Agreements 5.13% 5.54 3.81
Notes Payable to Banks 8.27% 8.02 7.25
Other - 6.25 3.98
PART III
Item 10. Directors and Executive Officers of the Registrant
Incorporated herein by reference to the Registrant's Proxy Statement
dated March 31,1997 in connection with its annual meeting to be held
on May 28, 1997.
Item 405 of Regulation S-K calls for disclosure of any known late filing
or failure by an insider to file a report required by Section 16 of the
Exchange Act. This disclosure is contained in the Registrant's Proxy
Statement dated March 31, 1997 on page 18 under the Section "Compliance
with Section 16 (a) of the Exchange Act" and is incorporated herein by
reference in this Annual Report on Form 10-K.
Item 11. Executive Compensation
Incorporated herein by reference to the Registrant's Proxy Statement
dated March 31,1997, in connection with its annual meeting to be held
on May 28, 1997.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated herein by reference to the Registrant's Proxy Statement
dated March 31,1997, in connection with its annual meeting to be held
on May 28, 1997.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference to the Registrant's Proxy Statement
dated March 31, 1997 in connection with its annual meeting to be held
on May 28, 1997.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
1. The following documents are filed as a part of this report:
A. Consolidated Financial Statements of the Company which are
included in the annual report of the registrant to its stock-
holders for the year ended December 31, 1996 as follows:
1. Consolidated Balance Sheets, December 31, 1996 and 1995
2. Consolidated Statements of Earnings, for the three years
ended December 31, 1996.
3. Consolidated Statements of Cash Flows, for the three years
ended December 31, 1996.
4. Consolidated Statements of Changes in Stockholders'
Equity, for the three years ended December 31, 1996.
5. Independent Auditors' Report.
6. Notes to Consolidated Financial Statements.
B. Financial Statement Schedules as follows:
1. Selected Quarterly Financial Information on page 25 of
Registrant's 1996 Annual Report.
2. Independent Auditors' Report.
The Board of Directors
Northern Illinois Financial Corporation
We have audited the accompanying consolidated balance sheets of Northern
Illinois Financial Corporation and subsidiaries as of December 31, 1995 and
the related consolidated statements of income, changes in shareholders equity
and cash flows for each of the two years in the period ended December 31, 1995.
These consolidated financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above (not
presented separately herein) present fairly, in all material respects, the
consolidated financial position of Northern Illinois Financial Corporation and
subsidiaries as of December 31, 1995 and the results of their operations and
their cash flows for each of the two years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the Consolidated Financial Statements, the Company
changed its method of accounting for impairment of loans in 1995, to conform
to pronouncements of the Financial Accounting Standards Board.
Hutton Nelson and McDonald LLP
Oakbrook Terrace, Illinois
January 31, 1996
C. Exhibits as follows:
The following exhibits are filed with, or incorporated by reference
in, this report. Each management contract or compensatory plan or
arrangement required to be filed as an exhibit to this report has
been marked with an asterisk.
2.1 Agreement and Plan of Merger, dated January 22, 1996, among
Northern Illinois Financial Corporation, Premier Financial
Services, Inc and the Company (incorporated by referenced
to Exhibit 2.1 to the Company's Registration Statement on
Form S-4, as amended, File No. 333-03327), as amended by
the First Amendment thereto, dated March 18, 1996
(incorporated by reference to Exhibit 2.2 to the Company's
Registration Statement on Form S-4, as amended, File No.
333-03327), and the Second Amendment thereto, incorporated
by reference to Exhibit 2.3 to the Company's Current Report
on Form 8-K, dated August 22, 1996, Commission File No. 0-
20987).
3.1 Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Appendix F to the
final proxy-statement prospectus included in the Company's
Registration Statement on Form S-4, as amended, File No.
333-03327).
3.2 By-laws of the Company (incorporated by reference to
Exhibit 3.4 to the Company's Registration Statement on Form
S-4, as amended, File No. 333-03327).
4 Rights Agreement, dated as of July 8, 1996, between Grand
Premier Financial, Inc. and Premier Trust Services, Inc.
(incorporated by reference to the Company's Registration
Statement on Form S-4, as amended, File No. 333-03327).
10.1* Form of Change in Control Agreement, dated October (2)/(8),
1996, entered into between the Company and each of Richard
L. Geach, David L. Murray, Kenneth A. Urban, Steven E.
Flahaven and Scott Dixon (incorporated by reference of Form
10-Q dated September 30, 1996 Commission file No. 0-20987.)
10.2* Form of Change in Control Agreement, dated October (2)/(8),
1996, entered into between the Company and each of Robert
Hinman, Alan Emerick, Jack Emerick, Joseph Esposito,
William Theobald, Reid French, Larry O'Hara and Ralph Zicco
(incorporated by reference on Form 10-Q dated September 30,
1996 Commission file No. 0-20987.)
10.3* Grand Premier Financial, Inc. 1996 Non-Qualified Stock
Option Plan (incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-8, File
No. 333-11663).
10.4* Premier Financial Services, Inc. 1996 Non-Qualified Stock
Option Plan (incorporated by reference to Exhibit 4.2 to
Post-Effective Amendment No. 1 on Form S-8 to the Company's
Registration Statement on Form S-4, File No. 333-03327).
10.5* Premier Financial Services, Inc. 1988 Non-Qualified Stock
Option Plan (incorporated by reference to Exhibit 4.3 to
Post-Effective Amendment No. 1 on Form S-8 to the Company's
Registration Statement on For S-4, File No. 333-03327).
10.6* Premier Financial Services, Inc. Senior Leadership and
Directors Deferred Compensation Plan, as amended
(incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-8, File No. 333-11645).
10.7* Consulting Agreement, dated February, 17, 1995, between
Howard A. McKee and Grand National Bank (incorporated by
reference to Exhibit 10.1 to the Company's Registration
Statement on Form S-4, as amended, File No. 333-03327).
10.8* Grand Premier Financial, Inc. Deferred Compensation Plan
10.9* Grand Premier Financial, Inc. Savings and Stock Plan and Trust
11. Statement re computation of per share earnings (see Note 1 to
the Consolidated Financial Statements for the year ended
December 31, 1996).
13. Grand Premier Financial, Inc. 1996 Annual Report to
Stockholders
21. Subsidiaries of the Registrant
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Hutton, Nelson and McDonald LLP
27. Article 9 Financial Data Schedule for the Fiscal Year Ended
December 31, 1996
99a Premier Financial Services, Inc. Stock and Savings Plan Form
11-K Annual Report for the Fiscal Year ended December 31, 1996.
99b. Premier Financial Services, Inc. Senior Leadership and
Directors Deferred Compensation Plan Form 11-K Annual Report
for the Fiscal Year ended December 31, 1996.
2. Reports on Form 8-K
The registrant has not filed a report on Form 8-K during the quarter
ended December 31, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Grand Premier Financial, Inc.
By:/s/ Richard L. Geach
Richard L. Geach, Chief Executive
Officer
Date:February 24, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Robert W. Hinman /s/ D.L. Murray
By: Robert W. Hinman, President and By: D. L. Murray, Executive Vice
Director President, Chief Financial
Officer and Director
Date:February 24, 1997 Date:February 24, 1997
/s/ Alan J. Emerick /s/ Jean M. Barry
By: Alan J. Emerick By: Jean M. Barry
Date:February 24, 1997 Date:February 24, 1997
/s/ Joseph C. Piland /s/ Frank J. Callero
By: Joseph C. Piland By: Frank J. Callero
Date:February 24, 1997 Date:February 24, 1997
/s/ R. Gerald Fox /s/ Howard A. McKee
By: R. Gerald Fox By: Howard A. McKee
Date:February 24, 1997 Date:February 24, 1997
SIGNATURES CONTINUED
/s/ Stephen J. Schostok /s/ Brenton J. Emerick
By: Stephen J. Schostok By: Brenton J. Emerick
Date:February 24, 1997 Date:February 24, 1997
/s/ James Esposito /s/ Edward G. Maris
By: James Esposito By: Edward G. Maris
Date: February 24, 1997 Date: February 24, 1997
EXHIBIT INDEX TO FORM 10-K
The following exhibits are filed herewith or incorporated herein by
reference. All documents incorporated by reference to prior filings have been
filed under Commission File No. 0-20987. Each management contract or
compensatory plan or arrangement required to be filed as an exhibit to this
report has been marked with an asterisk.
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated January 22, 1996,
among Northern Illinios Financial Corporation, Premier
Financial Services, Inc. and the Company (incorporated
by referenced to Exhibit 2.1 to the Company's
Registration Statement on Form S-4, as amended, File No.
333-03327), as amended by the First Amendment thereto,
dated March 18, 1996 (incorporated by referenced to
Exhibit 2.2 to the Company's Registration Statement on
Form S-4, as amended, File No. 333-03327), and the
second Amendment thereto, incorporated by reference to
Exhibit 2.3 to the Company's Current Report on Form 8-K,
dated August 22, 1996, Commission File No. 0-20987.
3.1 Amended and Restated Certificated of Incorporation of
the Company (incorporated by reference to Appendix F to
the final proxy-statement prospectus included in the
Company's Registration Statement on Form S-4, as
amended, File No. 333-03327).
3.2 By-laws of the Company (incorporated by reference to
Exhibit 3.4 to the Company's Registration Statement on
Form S-4, as amended, File No. 333-03327).
4 Rights Agreement, dated as of July 8, 1996, between
Grand Premier Financial, Inc. and Premier Trust Services,
Inc. (incorporated by reference to the Company's
Registration Statement on Form S-4, as amended,
File No.333-03327).
10.1* Form of Change in Control Agreement, dated October
(2)/(8), 1996, entered into between the Company and each
of Richard L. Geach, David L. Murray, Kenneth A. Urban,
Steven E. Flahaven and Scott Dixon (incorporated by
reference on Form 10-Q dated September 30, 1996
Commission file No. 0-20987.)
10.2* Form of Change in Control Agreement, dated October
(2)/(8), 1996, entered into between the Company and each
of Robert Hinman, Alan Emerick, Jack Emerick, Joseph
Esposito, William Theobald, Reid French, Larry O'Hara
and Ralph Zicco(incorporated by reference on Form 10-Q
dated September 30, 1996 Commission file No. 0-20987.)
EXHIBIT INDEX TO FORM 10-K CONTINUED
10.3* Grand Premier Financial, Inc. 1996 Non-Qualified Stock
Option Plan (incorporated by reference to Exhibit 4.1 to
the Company's Registration Statement on Form S-8, File
No. 333-11663).
10.4* Premier Financial Services, Inc. 1996 Non-Qualified
Stock Option Plan (incorporated by
reference to Exhibit 4.2 to Post-Effective Amendment No.
1 on Form S-8 to the Company's Registration Statement on
Form S-4, File No. 333-03327).
10.5* Premier Financial Services, Inc. 1988 Non-Qualified
Stock Option Plan (incorporated by reference to Exhibit
4.3 to Post-Effective Amendment No. 1 on Form S-8 to the
Company's Registration Statement on Form S-4, File No.
333-03327).
10.6* Premier Financial Services, Inc. Senior Leadership and
Directors Deferred Compensation Plan, as amended
(incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-8, File No.
333-11645).
10.7* Consulting Agreement, dated February, 17, 1995, between
Howard A. McKee and Grand National Bank (incorporated by
reference to Exhibit 10.1 to the Company's Registration
Statement on Form S-4, as amended, File No. 333-03327).
10.8* Grand Premier Financial, Inc. Deferred Compensation Plan.
10.9* Grand Premier Financial, Inc. Savings and Stock Plan and
Trust.
11. Statement re computation of per share earnings (see Note
1 to the Consolidated Financial Statements for the year
ended December 31, 1996).
13. Grand Premier Financial, Inc. 1996 Annual Report to
Stockholders.
21. Subsidiaries of the Registrant.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Hutton, Nelson and McDonald LLP.
27. Article 9 Financial Data Schedule for the Fiscal Year Ended
December 31, 1996.
99a. Premier Financial Services, Inc. Stock and Savings Plan
Form 11-K Annual Report for the Fiscal Year ended
December 31,1996. Pursuant to paragraph 232.311 of
Regulation S-T, Grand Premier Financial, Inc. is
submitting on paper under cover of Form SE the financial
statements of the Plan which are included in the annual
report of the Plan to its participants for the year
ended December 31, 1996.
99b. Premier Financial Services, Inc. Senior Leadership and
Directors Deferred Compensation Plan Form 11-K Annual
Report for the Fiscal Year ended December 31, 1996.
Pursuant to paragraph 232.311 of Regulation S-T, Grand
Premier Financial, Inc. is submitting on paper under
cover of Form SE the financial statements of the Plan
which are included in the annual report of the Plan to
its participants for the year ended December 31, 1996.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 49,441,000
<INT-BEARING-DEPOSITS> 3,114,000
<FED-FUNDS-SOLD> 13,400,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 535,687,000
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 965,482,000
<ALLOWANCE> 10,116,000
<TOTAL-ASSETS> 1,642,538,000
<DEPOSITS> 1,417,394,000
<SHORT-TERM> 23,486,000
<LIABILITIES-OTHER> 13,569,000
<LONG-TERM> 30,000,000
0
9,250,000
<COMMON> 200,000
<OTHER-SE> 148,639,000
<TOTAL-LIABILITIES-AND-EQUITY> 1,642,538,000
<INTEREST-LOAN> 79,816,000
<INTEREST-INVEST> 33,656,000
<INTEREST-OTHER> 898,000
<INTEREST-TOTAL> 114,370,000
<INTEREST-DEPOSIT> 52,258,000
<INTEREST-EXPENSE> 56,558,000
<INTEREST-INCOME-NET> 57,812,000
<LOAN-LOSSES> 2,875,000
<SECURITIES-GAINS> 3,838,000
<EXPENSE-OTHER> 54,051,000
<INCOME-PRETAX> 18,602,000
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,317,000
<EPS-PRIMARY> .62
<EPS-DILUTED> .62
<YIELD-ACTUAL> 7.96
<LOANS-NON> 4,718,000
<LOANS-PAST> 1,946,000
<LOANS-TROUBLED> 510,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 9,435,000
<CHARGE-OFFS> 2,766,000
<RECOVERIES> 572,000
<ALLOWANCE-CLOSE> 10,116,000
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
GRAND PREMIER FINANCIAL, INC.
SAVINGS AND STOCK PLAN AND TRUST
(As Amended and Restated Effective January 1, 1997)
TABLE OF CONTENTS
Page
ARTICLE I Purpose, Intent and Effective Date 1
1.01 Purpose 1
1.02 Intent. 1
1.03 Effective Date 2
1.04 Participation in the NIFCO Plan 2
ARTICLE II Definitions and Construction 3
2.01 Definitions 3
Accounts 3
Affiliate 3
Annual Valuation Date 3
Beneficiary 3
Board 3
Code 4
Committee 4
Company 4
Company Stock 4
Company Stock Fund 4
Compensation 4
Eligible Rollover Distribution 5
Eligibility Year of Service 6
Employee 6
Employer 6
Employer Discretionary Account 6
Employer Discretionary Contribution 6
Employer Profit Sharing Account 6
Employer Profit Sharing Contribution 7
Employment 7
Entry Date 7
ERISA 7
ESOP Account 7
Extended Break in Service 7
Forfeiture 7
Fund 8
Hour of Service 8
Investment Fund 8
Investment Manager 8
Matching Contribution 9
Maternity Absence 9
Net Gain" or "Net Loss 9
One-Year Break in Service 9
Normal Retirement Date 10
Participant 10
Permanent Disability or Permanently Disabled 10
Plan 10
Plan Year 10
Retirement, Retired or Retires 10
Rollover Account 10
Rollover Contribution 11
Salary Savings Account 11
Salary Savings Contribution 11
Trust 11
Trustee 12
Valuation 12
Valuation Date 12
Voluntary Contribution 12
Voluntary Contribution Account 12
Years of Service 12
2.02 Construction 12
ARTICLE III Eligibility 13
3.01 Participation 13
3.02 Enrollment 13
3.03 Duration 14
ARTICLE IV Contributions 15
4.01 Salary Savings Contributions 15
4.02. Employer Matching Contributions 16
4.03 Employer Profit Sharing Contributions. 16
4.04 Employer Discretionary Contributions 16
4.05 Employers Contribution of Participants Salary
Savings Amounts 16
4.06 Voluntary Contributions 16
4.07 Rollover Contributions 17
4.08 Condition on Employer Contributions 18
4.09 Time of Contributions 18
4.10 Form of Contributions 18
4.11 Employer Contribution of Unused Vacation Pay 19
ARTICLE V Accounts 20
5.01 Accounts of Participants 20
5.02 Plan Accounting 21
5.03 Determination of Net Gain or Net Loss 21
5.04 Accounting for Company Stock 21
5.05 Allocation of Contributions. 22
5.06 Participant Statements 22
5.07 Valuation by the Trustee Conclusive 22
5.08 Errors in Valuation 23
ARTICLE VI Company Stock 24
6.01 Voting Company Stock 24
6.02 Contingent Put Option to Sell Company Stock 24
ARTICLE VII Distributions 27
7.01 Distributions upon Termination of Employment 27
7.02 Termination by Death, Retirement or Disability
27
7.03 Termination by Resignation or Dismissal 27
7.04 Treatment of Forfeitures 28
7.05 Re-Employment of Participants Returning Before
an Extended Break in Service 29
7.06 Manner of Distribution 29
7.07 Timing of Distribution 30
7.08 Mode of Distribution 32
7.09 Distributions to Qualified Participants 33
7.10 In-Service Withdrawals 33
7.11 Dividend Pass Through 34
7.12 Direct Rollover Option 34
7.13 Designation of Beneficiary 35
7.14 Distributions Pursuant a Domestic Relations Order
36
7.15 Hardship Withdrawals. 37
ARTICLE VIII Loans 40
8.01 Loan Program 40
8.02 Amounts of Loans 40
8.03 Effect on Account Balances 41
8.04 Loan Terms 41
ARTICLE IX Limits on Contributions 42
9.01 Special Definitions 42
9.02 General Limitation on Annual Additions 45
9.03 Combined Limitation on Annual Additions 45
9.04 Excess Annual Additions 46
9.05 Limitation on Elective Deferrals 47
9.06 Limit on Voluntary Contributions and Employer
Matching Contributions 48
9.07 Limitation on Multiple Use 50
9.08 Aggregation of Plans 50
9.09 Qualified Nonelective Contributions 51
ARTICLE X Required Top-Heavy Plan Provisions 53
10.01 Special Rules Where Plan Is Top-Heavy 53
10.02 Special Definitions 53
Accrued Benefit 53
Aggregated Plan 54
Determination Date 54
Key Employee 54
Top-Heavy Plan Year 55
Top-Heavy Ratio 55
10.03 Minimum Allocation in Top-Heavy Plan Years
55
ARTICLE XI The Trust and Trustee 57
11.01 The Trust 57
11.02 The Trustee 57
11.03 The Fund 57
11.04 Investment Funds 57
11.05 Participant Investments 58
11.06 Powers of Trustee 59
11.07 Compensation and Expenses 61
11.08 Accounts 61
11.09 Duty of Person Dealing With Trustee 62
11.10 Resignation and Removal of the Trustee 62
11.11 Investment Fund Transition Rules 62
ARTICLE XII Plan Administration 64
12.01 Allocation of Responsibility Among
Fiduciaries 64
12.02 Fiduciary Duties 65
12.03 The Committee 65
12.04 Committee Action 66
12.05 Administrative Powers 66
12.06 Investment Direction and Investment Manager
67
12.07 Records and Reports 68
12.08 Information to be Provided 68
ARTICLE XIII Amendment, Merger and Termination 69
13.01 Amendment 69
13.02 Merger 69
13.03 Termination 70
13.04 Partial Termination 70
ARTICLE XIV Miscellaneous 72
14.01 Interest of Participants 72
14.02 Title to Assets 72
14.03 Not a Contract of Employment 72
14.04 Spendthrift Clause 72
14.05 Addresses 73
14.06 Information on Participants 73
14.07 Regularly Kept Records Are Binding 73
14.08 Claims 73
14.09 Indemnification 74
14.10 Payments to Minors. Etc. 75
14.11 Unclaimed Payments 75
14.12 Reversions 76
14.13 Necessary Parties 77
14.14 Company Action 77
14.15 Company as Agent for Employers 77
14.16 Plan Expenses 77
14.17 Agent for Service of Process 78
14.18 Illinois Law to Govern 78
14.19 Special Rules Relating to Veterans
Reemployment
Rights Under USERRA 78
ARTICLE XV Provisions Applicable to Annuity Distributions
80
15.01 Annuity Forms of Distribution 80
15.02 Determining Optional Form of Distribution;
Qualified Elections 80
15.03 Qualified Joint and Survivor Annuity 81
15.04 Qualified Preretirement Survivor Annuity
81
15.05 Election Procedures 81
15.06 Benefit Starting Date 83
15.07 Notice Requirements 83
ARTICLE XVI ESOP Provisions 85
16.01 Special Provisions Applicable When an Exempt
Loan Is Outstanding 85
16.02 Form of Contributions 85
16.03 Accounts of Participants 85
16.04 Exempt Loans 86
16.05 Allocation of Contributions. 87
16.06 Loan Suspense Account 87
16.07 Allocation of Company Stock Released from the
Loan
Suspense Account 88
16.08 Investment in Company Stock 88
16.09 Voting Company Stock 89
16.10 Aggregation of Plans 89
16.11 Dividend Pass Through 90
GRAND PREMIER FINANCIAL, INC.
SAVINGS AND STOCK PLAN AND TRUST
(As Amended and Restated Effective January 1, 1997)
ARTICLE I
Purpose, Intent and Effective Date
1.01 Purpose. Prior to January 1, 1997, Premier Financial
Services, Inc. ( Premier ) had established and maintained the
Premier Financial Services, Inc. Employee Savings and Stock Plan
and Trust (the Premier Plan ), the successor by merger to the
Premier Financial Services, Inc. Employees Profit-Sharing Plan
and Trust and the Premier Financial Services, Inc. Employee Stock
Ownership Plan and Trust, and Northern Illinois Financial
Corporation ( NIFCO ) had established and maintained the Northern
Illinois Financial Corporation Profit-Sharing and 401(k) Savings
Plan (the NIFCO Plan ). In connection with the merger of NIFCO
into Premier, the NIFCO Plan was merged into the Premier Plan
effective December 31, 1996 and, effective January 1, 1997, the
Premier Plan was amended and restated in the form of this Grand
Premier Financial Services, Inc. Savings and Stock Plan and Trust
(the Plan ). Grand Premier Financial, Inc. (the Company ) now
maintains the Plan to provide its eligible Employees with a tax
deferred savings program and to enable its eligible Employees to
acquire an equity ownership in the Company.
1.02 Intent. The Company intends this Plan, as amended from
time to time, to be a qualified profit-sharing and stock bonus
plan under Section 401(a) of the Code in full compliance with
ERISA, with the portion of the Plan comprising ESOP Contributions
and ESOP Savings and Matching Contributions being a leveraged
employee stock ownership plan under Section 4975(e)(7) of the
Code, and the feature of the Plan comprising Salary Savings
Contributions being a qualified cash and deferred arrangement
under Section 401(k) of the Code; and intends the Trust created
hereunder to be exempt from taxation under Section 501(a) of the
Code. The Company intends to continue to maintain this Plan for
the above purposes indefinitely, subject always, however, to the
rights reserved in the Company to amend and terminate the Plan as
set forth below.
1.03 Effective Date. Except as otherwise expressly provided
herein, the terms of this Plan as herein merged, amended and
restated are effective January 1, 1997, for Participants whose
Employment terminates on or after that date. The benefits, if
any, of participants whose Employment terminated before January
1, 1997, shall be as determined under the terms of the Premier
Plan or the NIFCO Plan or both as in effect at the time of such
termination.
1.04 Participation in the NIFCO Plan. On and after the
December 31, 1996 merger of the NIFCO Plan into the Premier Plan,
each Participant s employment, service and compensation under the
NIFCO Plan prior to that date shall count as Employment and
Compensation under this Plan for all purposes of this Plan.
<PAGE>
ARTICLE II
Definitions and Construction
2.01 Definitions. The following terms, when used in the
Plan and initially capitalized as shown below, shall have the
following respective meanings, unless expressly otherwise
provided:
"Accounts" mean all accounts maintained for a Participant
hereunder.
"Affiliate" means the Company and: (i) any other member of a
controlled group of corporations of which the Company is a
member, as determined under Sections 414(b) and 1563(a) of the
Code (without regard to Sections 1563(a)(4) and (e)(3)(c) of the
Code); (ii) any unincorporated trade or business that is under
common control with the Company, as determined under Section
414(c) of the Code; (iii) any organization (whether or not
incorporated) which is a member of an affiliated service group
that includes the Company, as determined under Section 414(m) of
the Code; and (iv) any other entity required to be aggregated
with the Company by regulations under Section 414(o) of the Code.
For purposes of applying this definition and Section 1563(a) and
414(b) and (c) of the Code to Sections 9.02 and 9.03 of this
Plan, the phrase "more than 50 percent" shall be substituted for
the phrase "at least 80 percent" at each place it appears in
Section 1563(a)(1) of the Code. For purposes of this definition,
an Affiliate shall be considered an Affiliate only for the time
during which it satisfies the above conditions for being an
Affiliate.
"Annual Valuation Date" means the last day of the Plan Year.
"Beneficiary" means the person or persons who become
entitled to receive benefits under this Plan by reason of the
death of a Participant.
"Board" means the Board of Directors of the Company as from
time to time constituted.
"Code" means the Internal Revenue Code of 1986 as from time
to time amended. References to any Section of the Code herein
shall include any successor provisions thereto.
"Committee" means the Committee appointed to administer the
Plan pursuant to Section 12.03.
"Company" means GRAND PREMIER FINANCIAL, INC., a Delaware
corporation.
"Company Stock" means common stock of the Company.
"Company Stock Fund" means the Investment Fund invested in
Company Stock as provided in Section 11.04.
"Compensation" means the total wages or salary, overtime,
commissions, bonuses, and any other taxable remuneration
reportable on Internal Revenue Service form W-2 paid to an
Employee during the Plan Year while a Participant in the Plan,
including any amount deferred by a Participant under the terms of
a Salary Savings Agreement, but disregarding, for Plan Years
beginning on or after January 1, 1989 and prior to January 1,
1994, to the extent required by Section 401(a)(17) of the Code,
Compensation at an annual rate in excess of $200,000 (as
periodically adjusted pursuant to Section 401(a)(17) of the
Code).
(a) In addition to other applicable limitations set
forth in the Plan and notwithstanding any other provision of the
Plan to the contrary, for Plan Years beginning on or after
January 1, 1994, the annual Compensation of each Employee taken
into account under the Plan shall not exceed the OBRA '93 annual
Compensation limit. The OBRA '93 annual Compensation limit is
$150,000, as adjusted by the Commissioner of Internal Revenue for
increases in the cost of living in accordance with Section
401(a)(17)(B) of the Code. The cost-of-living adjustment in
effect for a calendar year applies to any period, not exceeding
12 months, over which Compensation is determined (determination
period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA '93 annual
Compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination
period, and the denominator of which is 12.
(b) For Plan Years beginning on or after January 1,
1994, any reference in this Plan to the limitation under Section
401(a)(17) of the Code shall mean the OBRA '93 annual
Compensation limit set forth in this provision.
(c) If Compensation for any prior determination period
is taken into account in determining an Employee's benefits
accruing in the current Plan Year, the Compensation for that
prior determination period is subject to the OBRA '93 annual
Compensation limit in effect for that prior determination period.
For this purpose, for determination periods beginning before the
first day of the first Plan Year beginning on or after January 1,
1994, the OBRA '93 annual Compensation limit is $150,000.
"Eligible Rollover Distribution" means any distribution from
this Plan (or, where applicable, any other plan qualified under
Section 401(a) of the Code) of all or any portion of the balance
to the credit of the distributee, except that an Eligible
Rollover Distribution does not include:
(a) any distribution that is one of a series of
substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancy) of the
distributee and the distributee's designated beneficiary, or for
a specified period of ten years or more;
(b) any distribution to the extent such distribution
is required under Section 401(a)(9) of the Code;
(c) the portion of any distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to Company
Stock or other employer securities);
(d) the return to a Participant of contributions and
income or similar corrective distribution under Article IX of
this Plan or otherwise described in regulations under Sections
401(k), 401(g), 401(m) or 415 of the Code;
(e) dividends on Company Stock paid and distributed
currently under Section 7.11 of this Plan or other currently
distributed dividends on employer securities as described in
Section 404(k) of the Code;
(f) a charge against a Participant's Accounts under
Section 8.02 of this Plan respecting a loan in default or other
deemed distribution under Sections 72 and 402 of the Code arising
from default on a loan; and
(g) similar items as designated in regulations or
other rulings, notices or guidance under Section 401(a)(31) of
the Code.
"Eligibility Year of Service" of an Employee means: (i)
initially, the twelve (12) month period beginning with the date
the Employee first performed an Hour of Service in Employment and
during which he or she completes at least one thousand (1,000)
Hours of Service, and (ii) if the Employee does not complete at
least 1,000 Hours of Service during such initial period, the
first Plan Year that commences after the Plan Year in which the
Employee first performed an Hour of Service and during which he
or she completes at least 1,000 Hours of Service.
"Employee" means any individual in Employment, but shall not
include any "leased employee" within the meaning of Section
414(n) of the Code (who is regarded as an employee for purposes
of applying the minimum coverage requirements of the Code) except
for purposes of crediting Hours of Service if such individual
later enters Employment with an Employer.
"Employer" means the Company and any other Affiliate that,
with the approval of the Company, adopts the Plan by action of
its board of directors.
"Employer Discretionary Account" means the record of a
Participant's interest in the Fund attributable to Employer
Discretionary Contributions from time to time, increased by Net
Gains and decreased by Net Losses and by distributions therefrom,
all in accordance with the provisions of this Plan.
Employer Discretionary Contribution means a discretionary
Employer contribution determined by the Board in accordance with
Section 4.04.
"Employer Profit Sharing Account" means the record of a
Participant's interest in the Fund attributable to Profit Sharing
Contributions made by the Employer, increased by Net Gains and
decreased by Net Losses and by distributions therefrom, all in
accordance with the provisions of this Plan.
"Employer Profit Sharing Contribution" means an Employer
contribution that is based on Company performance in accordance
with Section 4.03.
"Employment" means service in a common law employee-
employer relationship with the Company or any Affiliate; provided
that, only individuals who are paid as employees from the
Employer payroll and treated by the Employer at all times as
Employees shall be deemed to be in Employment for purposes of the
Plan. Any person retroactively or in any other way held or found
to be a common-law employee shall not be eligible under the Plan
for any period during which he or she was not treated as in
Employment with the Employer.
"Entry Date" means the first day of each calendar month.
"ERISA" means the Employee Retirement Income Security Act of
1974, as from time to time amended. References to any Section of
ERISA herein shall include any successor provisions thereto.
"ESOP Account" means the record of a Participant's interest
in the Fund attributable to ESOP Contributions from time to time,
increased by Net Gains and decreased by Net Losses and by
distributions therefrom, all in accordance with the provisions of
this Plan. Participants ESOP Accounts shall be invested in
Company Stock, but not in the Company Stock Fund.
"Extended Break in Service" of an Employee means a period of
at least a One-Year Break in Service ending on or before December
31, 1984, or a period of at least five consecutive One-Year
Breaks in Service for such Employee ending after December 31,
1984.
"Forfeiture" means that part or all of a Participant's
Employer Discretionary Contribution or Profit Sharing Account
that is not distributable to the Participant or his or her
Beneficiary by reason of Section 7.03 hereof.
"Fund" means the trust fund held and maintained for purposes
of the Plan under the terms of the Trust established hereunder.
"Hour of Service" means each hour for which an Employee is
directly or indirectly paid or entitled to payment from the
Company or an Affiliate:
(a) for the performance of duties; or
(b) on account of a period of time for which no duties
were performed (whether or not the employment relationship has
terminated) such as vacation, holidays, illness, incapacity
(including disability), layoff, jury duty, military duty or leave
of absence), provided, however, that (A) no more than 501 Hours
of Service shall be credited under this clause on account of any
single period during which the Employee performs no duties and
(B) no Hours of Service shall be credited under this clause where
the payment is made under a plan maintained solely for the
purpose of complying with applicable workmen's compensation or
disability laws or where the payment solely reimburses the
Employee for medical or medical-related expenses incurred by him
or her; and
(c) by reason of back pay (irrespective of mitigation
of damages) awarded to the Employee or agreed to by the Employer
or Affiliate, provided, however, that no duplicate credit for the
same Hours of Service shall be given under both clauses (a) and
(b) and this clause (c).
Hours of Service under clause (i) shall be credited to the Plan
Year (or Eligibility Year of Service) during which the duties
were performed, and Hours of Service under clauses (ii) and (iii)
shall be credited to the Plan Year (or Eligibility Year of
Service) in which occurred the period during which no duties were
performed in accordance with the rules of Department of Labor
regulation 29 C.F.R. 2530.200b-2(b), which is incorporated
herein by this reference.
"Investment Fund" means any of:
(a) the Company Stock Fund, and
(b) any other investment fund maintained by the
Trustee pursuant to Section 11.04 for purposes of this Plan.
"Investment Manager" means any person or organization
designated as such by the Committee pursuant to Section 12.06:
(a) who has the power to manage, acquire or dispose of
any asset in the Fund;
(b) who is (i) registered as an investment adviser
under the Investment Advisers Act of 1940, (ii) a bank, as
defined in that Act, or (iii) an insurance company qualified to
perform asset management services under the laws of more than one
state; and
(c) who has acknowledged in writing that he, she or it
is a fiduciary with respect to the Plan.
"Matching Contribution" means an additional Employer
contribution made with respect to Salary Savings Contributions
pursuant to Section 4.02.
"Maternity Absence" means the absence of an Employee from
service with the Company or an Affiliate if such absence
commences on or after January 1, 1985:
(a) by reason of the pregnancy of the Employee;
(b) by reason of the birth of a child of the Employee;
(c) by reason of the placement of a child with the
Employee in connection with the adoption of such child by such
employee; or
(d) for purposes of caring for such child for a period
beginning immediately following such birth or placement;
provided that the Employee establishes to the satisfaction of the
Committee the length of such absence and that such absence was
for one of the reasons listed above.
"Net Gain" or "Net Loss" means the increase or decrease in
the value of the Fund, or of any component Investment Fund,
determined in accordance with Section 5.03 hereof.
"One-Year Break in Service" of an Employee means Plan Year
in which he or she does not complete more than 500 Hours of
Service. A One-Year Break in Service shall not be deemed to have
occurred if the Employee is absent: (i) on an approved leave of
absence granted by the Company or an Affiliate on or after August
5, 1993, pursuant to the Family and Medical Leave Act, if the
Employee returns to work for the Company or an Affiliate at the
end of such leave of absence; or (ii) from employment with the
Company or an Affiliate by reason of service in the uniformed
services (as that term is defined in the Uniformed Services
Employment and Reemployment Rights Act of 1994 ( USERRA )) for a
period during which the Employee s reemployment rights are
guaranteed by USERRA, and the Employee is reemployed by the
Company or an Affiliate under the terms of Section 4312 of
USERRA.
"Normal Retirement Date" means a Participant's 65th
birthday.
"Participant" means an Employee who meets the requirements
of Article III for participation in the Plan and a former
Employee who is entitled to benefits hereunder.
"Permanent Disability" or "Permanently Disabled" means a
physical or mental condition that prevents a Participant from
performing his or her normal duties for the Employer and that
further prevents such Participant from performing any other
similar duties for the Employer for which the Participant is
qualified by education, training or experience. A Participant
shall be deemed Permanently Disabled for purposes of the Plan if
such Participant qualifies for disability benefits from Social
Security or under the terms of any other formal written long-term
disability program maintained by the Employer.
"Plan" means the GRAND PREMIER FINANCIAL, INC. SAVINGS AND
STOCK PLAN AND TRUST, as herein set forth and as from time to
time amended.
"Plan Year" means the fiscal year of the Plan, which
coincides with the calendar year.
"Retirement" "Retired" or "Retires," when used with
reference to a Participant, means the termination of such
Participant's Employment (for any reason other than death) on or
after his or her Normal Retirement Date.
"Rollover Account" means the record of the value of an
Employee's interest in the Fund resulting from such Employee's
Rollover Contribution pursuant to Section 4.07, increased by Net
Gains and decreased by Net Losses and by distributions therefrom,
all in accordance with the provisions of this Plan.
"Rollover Contribution" means a transfer to this Plan of
part or all of the amount (or property) distributed to an
Employee in an Eligible Rollover Distribution (or in a
distribution before 1993 excluded from the distributee's gross
income by Section 402(a)(5) of the Code as then in effect) from
another employee benefit plan qualified under Section 401(a) of
the Code (the "other plan") if the part or all of the
distribution is transferred to this Plan:
(a) in a direct rollover from the other plan under
Section 401(a)(31) of the Code and provisions of the other plan
corresponding to Section 7.12 of this Plan;
(b) by the Employee within sixty (60) days after its
receipt by the Employee from the other plan; or
(c) from an individual retirement account (as defined
in Section 408 of the Code) ("IRA") that is a conduit IRA if, but
only if, such qualified plan distribution had previously been
deposited as a valid rollover contribution and as the only
contribution into such conduit IRA and is transferred to this
Plan either in an Eligible Rollover Distribution from such
conduit IRA or by the Employee within sixty (60) days after the
Employee's receipt of his or her distribution from the conduit
IRA, and includes the earnings thereon.
"Salary Savings Account" means the record of a Participant's
interest in the Fund attributable to Salary Savings Contributions
of the Participant and associated Matching Contributions of the
Employer, increased by Net Gains and decreased by Net Losses and
by distributions therefrom, all in accordance with the provisions
of this Plan.
"Salary Savings Contribution" means a contribution made
under the terms of a Participant's Salary Savings Agreement
pursuant to Section 4.01.
"Trust" means the GRAND PREMIER FINANCIAL, INC. SAVINGS AND
STOCK TRUST, as set forth in Article XI hereof.
"Trustee" means GRAND PREMIER TRUST AND INVESTMENT, INC. or
such banking association, corporation, other entity, individual
or group of individuals appointed as successor Trustee pursuant
to Section 11.10.
"Valuation" means the determination of the value of the
assets of the Fund, or of any component Investment Fund, in the
manner provided in Section 5.03 hereof, as of the Annual
Valuation Date for each Plan Year, or each other Valuation Date,
and as of any other date on which the Trustee, in its sole
discretion, deems it desirable to make such Valuation.
"Valuation Date" means each day on which the New York Stock
Exchange is open, and as of which a Valuation of the Fund or of
any or all component Investment Funds is made or is to be made.
"Voluntary Contribution" means a Participant's after- tax
contribution made pursuant to Section 4.06.
"Voluntary Contribution Account" means the record of a
Participant's interest in the Fund attributable to the Voluntary
Contributions from time to time, increased by Net Gains and
decreased by Net Losses and by distributions therefrom, all in
accordance with the provisions of this Plan.
"Years of Service" means the number of complete years
elapsed since the first date of the Participant s Employment (or
since the date of any re-Employment) and during which the
Participant was continuously in Employment with the Company or an
Affiliate.
2.02 Construction. The masculine pronoun whenever used
herein shall be construed so as to include the feminine and the
neuter, and the singular shall be deemed to include the plural
whenever the context so requires.
ARTICLE III
Eligibility
3.01 Participation. Each Employee of an Employer who was a
Participant in the Premier Plan or the NIFCO Plan on December 31,
1996, shall continue as Participant in the Plan from and after
January 1, 1997, subject to the terms and provisions of the Plan.
Each other Employee of an Employer who is not covered under the
terms of a collective bargaining agreement under which retirement
benefits have been subject of good faith bargaining (unless such
agreement provides for the Employee's participation in the Plan)
shall become a Participant in the Plan on January 1, 1997, or the
first Entry Date thereafter on which such Employee meets the
following respective requirements:
(a) With respect to eligibility to participate in
Salary Savings Contributions and Matching Contributions:
(i) the Employee has attained age twenty-one
(21); and
(ii) the Employee has completed 12- consecutive
months of Employment with the Employer;
(b) With respect to eligibility to participate in
Employer Discretionary and Profit Sharing Contributions:
(i) the Employee has attained age twenty-one
(21); and
(ii) the Employee has completed one Eligibility
Year of Service;
provided he or she is an Employee of an Employer on such Entry
Date.
3.02 Enrollment. The Committee shall notify eligible
Employees of their impending eligibility to participate in the
Salary Savings Contributions and Matching Contributions under the
Plan as early as practicable before the applicable Entry Date.
As part of the notification the Committee shall provide each
eligible Employee with a form of Salary Savings Agreement, form
of designation of Beneficiary, form for making initial investment
elections, and summary plan description. Participants must
complete and return such forms to the Committee in the time and
manner allowed by the Committee, or follow such other mechanism,
such as a telephone access system, as the Committee makes
available, in order to obtain the rights and benefits under this
Plan to which such forms relate.
3.03 Duration. An Employee who becomes a Participant shall
continue to be a Participant until his or her Employment with all
Employers terminates. Upon such termination of Employment, he or
she thereupon shall cease to be a Participant (except with
respect to benefits that were accrued and vested prior to such
termination) unless and until he or she thereafter returns to
active Employment as an Employee of an Employer. A former
Participant who is re- employed by an Employer (and continues to
meet the requirement of Section 3.01(b)) shall again become a
Participant immediately upon such re-Employment.
ARTICLE IV
Contributions
4.01 Salary Savings Contributions. A Participant may enter
into a Salary Savings Agreement with the Employer authorizing the
Employer to withhold a whole percentage of between one and 13
percent of such Participant's Compensation and to deposit such
amount as a Salary Savings Contribution to the Plan. Any such
Salary Savings Contribution shall be credited to the
Participant's Salary Savings Account. A Participant may change
his or her Salary Savings Agreement to increase or decrease his
or her Salary Savings Contributions or terminate the Salary
Savings Agreement by written notice to the Employer at least
fourteen (14) days prior to the end of the payroll period for
which such change is to be effective. If a Participant has not
authorized the Employer to withhold at the maximum rate and
desires to increase the total withheld for a Plan Year, such
Participant may authorize the Employer to withhold a supplemental
amount up to 100% of his or her Compensation for one or more pay
periods subject to the foregoing limit. In no event may the sum
of the amounts withheld under the Salary Savings Agreement in any
calendar year exceed $9,500 (as such amount may be adjusted from
time to time pursuant to Section 402(g)(5) of the Code).
Notwithstanding the Salary Savings Agreement of any Highly
Compensated Employee, the Committee, to the extent it determines
is necessary or desirable to meet the requirements of Section
9.05, may in its discretion reduce the level of Salary Savings
Contributions by, or terminate the Salary Savings Agreement of,
any Highly Compensated Employee, or recharacterize such Salary
Savings Contributions as Voluntary Contributions, or return
excess Salary Savings Contributions to such Highly Compensated
Employee as provided in Section 9.05.
4.02 Employer Matching Contributions. Each Employer shall
make a Matching Contribution of twenty-five percent (25%) of the
Salary Savings Contributions made for each payroll period by
Participants in its Employment during such period.
4.03 Employer Profit Sharing Contributions. Each Employer
may make an Employer Profit Sharing Contribution for a Plan Year
in an amount determined in the sole discretion of the Board. The
Employer Profit Sharing Contribution made for any Plan Year shall
be allocated to the Employer Profit Sharing Accounts of
Participants in accordance with the provisions of Section 5.05.
4.04 Employer Discretionary Contributions. Each Employer
may make an Employer Discretionary Contribution for a Plan Year
in an amount determined in the sole discretion of the Board. The
Employer Discretionary Contribution made for any Plan Year shall
be allocated to the Employer Discretionary Accounts of
Participants in accordance with the provisions of Section 5.05.
4.05 Employers Contribution of Participants Salary Savings
Amounts. Each Employer shall contribute amounts withheld by it
from Participants' Compensation as Salary Savings Contributions
under Section 4.01.
4.06 Voluntary Contributions. A Participant may make
Voluntary Contributions to the Plan out of after-tax compensation
by so characterizing or recharacterizing all or part of his or
her Salary Savings Contributions otherwise made pursuant to
Section 4.05. The Committee may recharacterize the Salary
Savings Contributions of any Highly Compensated Employee to the
extent it determines is necessary or desirable to meet the
requirements of Section 9.05. Any such characterization or
re-characterization made voluntarily by a Participant shall, and
any such re- characterization imposed by the Committee shall if
practicable, be made not later than two and one-half months after
the end of the Plan Year in which the original Salary Savings
Contributions were made; and shall in all events be made by the
end of the Plan Year following the Plan Year in which the
original Salary Savings Contributions were made. Notwithstanding
the voluntary characterization or re characterization made by a
Participant who is a Highly Compensated Employee, the Committee,
to the extent it determines is necessary or desirable to meet the
requirements of Section 9.05, may in its discretion reduce the
level of Voluntary Contributions by, or terminate the Voluntary
Contributions election of, any Highly Compensated Employee, or
return such Voluntary Contributions to such Highly Compensated
Employee as provided in Section 9.05. In no event shall the
Voluntary Contributions by a Participant to all qualified plans
of any Affiliate for all years of participation exceed ten
percent (10%) of the Participant's aggregate Compensation for all
years since becoming a Participant. Except as provided by this
Section 4.06, Voluntary Contributions may not be made under this
Plan on or after July 1, 1993; but any Voluntary Contributions
made prior to that date under the Premier Financial Services,
Inc. Employee Savings and Stock Plan and Trust or the Premier
Financial Services, Inc. Employee Profit-Sharing Plan and Trust
(together with any Voluntary Contributions theeafter made under
this Section 4.06), shall be credited to and held in the
Participant's Voluntary Contributions Account maintained pursuant
to the provisions of this Plan.
4.07 Rollover Contributions. An Employee who meets the
requirements of Sections 3.01(a) and (b) above (but whether or
not an Entry Date has yet occurred) may make Rollover
Contributions to the Plan. Each Employee's Rollover Contribution
shall be immediately allocated to his or her Rollover Account.
The balance in a Rollover Account shall be nonforfeitable. Prior
to accepting such Rollover Contribution the Committee may in
accordance with its procedures for Rollover Contributions require
such evidence or assurance as it deems desirable from the
Participant, or from the administrator of the other plan
involved, that such contribution results from an Eligible
Rollover Distribution and qualifies as a Rollover Contribution.
However, the acceptance of any Rollover Contribution by the
Trustee shall not in any manner guarantee the effect under any
tax laws of such deposit.
4.08 Condition on Employer Contributions. Unless an
Employer's or the Board's instrument making or authorizing a
particular contribution expressly provides to the contrary, all
Employer contributions to this Plan are hereby expressly
conditioned on the deductibility of such contributions for
federal income tax purposes under Section 404 of the Code, and
notwithstanding any provision of the Plan to the contrary shall
not exceed the maximum amount so deductible.
4.09 Time of Contributions. The Employer shall pay Salary
Savings Contributions and Voluntary Contributions made by or on
behalf of a Participant to the Trustee as of the earliest date on
which such Contributions can reasonably be segregated from the
Employer s assets; but in no event later than the 15th business
day of the month following the month in which the Contributions
amounts withheld otherwise would have been paid to the
Participants as Compensation, if the Participant had not elected
to have such Salary Savings Contributions or Voluntary
Contributions made on his or her behalf. The Employer shall pay
Matching Contributions, ESOP Contributions and Profit Sharing
Contributions to the Trustee by the due date for filing the
Employer's federal income tax return for the taxable year to
which they relate. For purposes of allocations required under
this Plan, all contributions shall be considered a part of the
Fund as of the Plan Year to which they relate.
4.10 Form of Contributions. Rollover Contributions may be
made in cash, or in such property as may have been distributed in
the Eligible Rollover Distribution to the extent such property is
acceptable to the Trustee in its discretion to receive for
purposes of this Plan, or in a combination thereof. Employer
Matching Contributions may be made in the discretion of the Board
in Company Stock (whether authorized and previously unissued or
previously issued and reacquired), or in cash, or in a
combination thereof. All other contributions shall be made in
cash. All property received by the Trustee as a contribution to
the Fund shall be received at its fair market value on the date
of receipt.
4.11 Employer Contribution of Unused Vacation Pay. Subject
to the limitations of this Section, for each Plan Year, the
Employer shall contribute an amount to the Trust on behalf of
each Participant equal to the amount of such Participant s unused
vacation pay. The amount of each Participant s unused vacation
pay shall be determined by the Employer as of the end of each
Plan Year, according to the Employer s vacation policy and
records, and contributed as soon as practicable after such time.
This contribution amount shall be allocated to the Participant s
Employer Discretionary Contribution Account and treated as an
Employer Contribution for all purposes of the Plan. Employer
Contributions made under this Section 4.5 shall be subject to the
limitations of Code Sections 401(a)(4), 404(a) and 415, and any
amount of unused vacation pay that cannot be contributed to the
Trust on behalf of a Participant due to such limitations shall be
treated according to the terms of the Employer s vacation policy.
Participants shall not have the option to receive the amount of
unused vacation pay in cash.
ARTICLE V
Accounts
5.01 Accounts of Participants. The Committee shall
maintain, or cause the Trustee or Investment Manager to maintain,
bookkeeping Accounts for each Participant showing respectively
each Participant's interest in the Fund, if any, attributable to:
(a) Salary Savings and Matching Contributions,
(b) Employer Profit Sharing Contributions,
(c) Employer Discretionary Contributions,
(d) Voluntary Contributions,
(e) ESOP Contributions, and
(f) Rollover Contributions,
and the Net Gain or Net Loss attributable thereto. Except as
provided in Section 9.05 (relating to excess Matching
Contributions and excess Voluntary Contributions), Section 8.01
(relating to Plan loans in default), and Section 14.11 (relating
to unclaimed payments), the Salary Savings Account, Voluntary
Contribution Account, ESOP Account, and Rollover Account of a
Participant shall be fully vested and nonforfeitable. The
Employer Discretionary Account and Employer Profit Sharing
Account of a Participant shall become vested and nonforfeitable
in accordance with Section 7.03. The Committee shall maintain,
or cause the Trustee or Investment Manager to maintain,
subaccounts within each such Account reflecting: (i) the
investment of each such Account in the Investment Funds
maintained under Section 11.04; (ii) the portion of a Participant
s Salary Savings Account that is attributable to Employer
Matching Contributions; and (iii) the portion (if any) of a
Participant's Salary Savings Account that is attributable to ESOP
Savings and Matching Contributions. The Committee or Trustee may
maintain, or cause the Investment Manager to maintain, such other
accounts and subaccounts as the Committee or Trustee deems
necessary or desirable or as the Committee may direct.
5.02 Plan Accounting. As of each Valuation Date there shall
be allocated to each Account its proportionate share since the
last Valuation Date of the Net Gain or Net Loss of the Investment
Funds in which it has been invested.
5.03 Determination of Net Gain or Net Loss. The investments
in each Investment Fund, including the Company Stock Fund, shall
be maintained in full and fractional shares or units. The
Trustee is responsible for determining the number of full and
fractional shares or units of each such Fund. To the extent an
Investment Fund is comprised of a collective investment fund of
the Trustee, the net asset and unit values shall be determined in
accordance with the rules governing such collective investment
funds, which are incorporated herein by reference. Fees and
expenses incurred for the management and maintenance of
Investment Funds shall be charged at the Investment Fund level
and reflected in the Net Gain or Loss of each Investment Fund.
5.04 Accounting for Company Stock. The following additional
rules shall apply to the Company Stock Fund:
(a) Shareholder Rights. Shareholder Rights with
respect to all Company Stock in an Account shall be exercised by
the Trustee in accordance with directions from the Participant
pursuant to the procedures of Section 6.01 and the Trust
Agreement.
(b) Tender Offer. If a tender offer is commenced for
Company Stock, the provisions of the Trust Agreement regarding
the response to such tender offer, the holding and investment of
proceeds derived from such tender offer and the substitution of
new securities for such proceeds shall be followed.
(c) Dividends and Income. Dividends (whether in cash
or in property) and other income received by the Trustee in
respect of Company Stock shall be reinvested in Company Stock and
shall constitute income and be recognized on an accrual basis as
of the record date with respect to such dividend; provided that,
with respect to any dividend that is reflected in the market
price of the underlying stock, the Company shall direct the
Trustee during such trading period to trade such stock the
regular way to reflect the value of the dividend, and all Fund
transfers and cash distributions shall be transacted accordingly
with no accrual of such dividend, other than as reflected in such
market price.
(d) Transaction Costs. Any brokerage commissions,
transfer taxes, transaction charges, and other charges and
expenses in connection with the purchase or sale of Company Stock
shall be added to the cost thereof in the case of a purchase or
deducted from the proceeds thereof in the case of a sale;
provided, however, where the purchase or sale of Company Stock is
with a "disqualified person" as defined in Section 4975(e)(2) of
the Code or a "party in interest" as defined in Section 3(14) of
ERISA, no commissions may be charged with respect thereto.
5.05 Allocation of Contributions. Salary Savings
Contributions and associated Matching Contributions shall be
allocated directly to the Salary Savings Accounts of Participants
making the Salary Savings Contributions. Voluntary Contributions
and Rollover Contributions shall be allocated directly to the
respective Accounts of Participants making such contributions.
Employer Profit Sharing and Discretionary Contributions, if any,
and Forfeitures becoming available for reallocation under Section
7.04, shall be allocated to the Accounts of Participants employed
by an Employer on the last day of the Plan Year who have
completed at least 1,000 Hours of Service during such Plan Year,
and to the Accounts of Participants who have terminated
Employment during the Plan Year as a result of death, Permanent
Disability or after attaining of Normal Retirement Age regardless
of the number of hours worked, in proportion to each eligible
Participant's Compensation earned during the Plan Year while a
Participant in the Plan.
5.06 Participant Statements. Upon completing the
allocations described above, the Committee shall prepare a
statement for each Participant showing the additions to and
subtractions from his or her account since the last Valuation
Date and the fair market value of his or her Accounts as of the
current Valuation Date.
5.07 Valuation by the Trustee Conclusive. In all matters,
the determination of the net value of the assets of the Fund made
by the Trustee shall be conclusive; provided, however, that the
valuation of any Company Stock held in the Fund that is first
acquired by the Trust on or after January 1, 1987 and is not at
the relevant time readily tradeable on an established securities
market shall, for purposes of all activities of the Plan,
determined by an independent appraiser meeting the requirements
of Section 401(a)(28)(C) of the Code.
5.08 Errors in Valuation. Upon the discovery of any error
or miscalculation in the valuation of an Account, the Trustee
shall correct the same insofar as, in the Trustee's discretion,
the correction is feasible, and any gain or loss resulting
therefrom shall be treated as income or expense to be credited or
charged to the Fund in the year in which such correction is made,
and any correction so made shall not otherwise change the value
of any other Participant's Account as such value was determined
at the time such error or miscalculation was made.
ARTICLE VI
Company Stock
6.01 Voting Company Stock. The vote of Company Stock
allocated to the Accounts of Participants on the record date for
such vote shall be passed through to the Participant (or
Beneficiary) to whose Account the Company Stock is allocated. To
this end, in the event the Trustee is notified by proxy
solicitation or otherwise of any matter to be brought before a
meeting of stockholders of the Company, the Trustee shall advise,
or cause the Company to advise, each Participant (or Beneficiary)
in writing of such matter and request instructions from each such
Participant (or Beneficiary) on how the Company Stock allocated
to his or her Company Stock Account is to be voted. Such
instructions may include an instruction to abstain. All voting
Company Stock as to which instructions have been requested and
received shall be voted in accordance with such instructions.
Voting Company Stock as to which no instructions have been
received shall be voted in the same proportion as the Company
stock for which voting instructions have been received or, if
necessary to comply with ERISA, by the Trustee, in its sole
discretion.
6.02 Contingent Put Option to Sell Company Stock. If at any
time Company Stock is neither listed on a national securities
exchange registered under Section 6 of the Securities Exchange
Act of 1934 ("Listed"), nor quoted on a system sponsored by a
national securities association registered under Section 15A(b)
of the Securities Exchange Act of 1934 ("Quoted"), each
Participant or his or her Beneficiary, or his or her legal
representatives, heirs or legatees in case of the death of such
Participant or Beneficiary (hereinafter called "Selling
Stockholder"), shall have the option (hereinafter called the "Put
Option") to require the Company to buy the shares of Company
Stock distributed to him or her from the Trust on the terms and
conditions set forth in this Section 6.02:
(a) Term. The initial term during which the Put
Option may be exercised shall begin on the date such shares of
Company Stock are distributed and end on the 60th day thereafter.
If the Put Option is not exercised within that initial term, the
Put Option may again be exercised during a second term which
shall begin on the date the distributee receives notice of the
revaluation prescribed by subsection (b) below and end on the
60th day thereafter. If the Put Option is not exercised during
that second term, it shall wholly and completely terminate.
(b) Revaluation. Following the valuation of the
Company Stock on the Annual Valuation Date as of the last day of
the Plan Year in which the initial term prescribed by subsection
(a) expired, the Trustees shall notify each distributee who
received Company Stock in such distribution but did not exercise
the Put Option during the initial term of the value of Company
Stock as determined on such Annual Valuation Date.
(c) Purchase Price. The purchase price for the
Company Stock shall be its value determined pursuant to Section
5.09 as of the last Valuation Date preceding the exercise of the
Put Option.
(d) Manner of Exercise. The Selling Stockholder shall
exercise the Put Option by giving notice (i) in writing, and (ii)
mailed by prepaid registered or certified mail to the Company and
shall contain (A) the name of the Selling Stockholder exercising
the Put Option and his or her address, and (B) the number of
shares being offered for sale.
(e) Repurchase by Trust or Company. Immediately upon
receipt of such notice of exercise, the Company shall advise the
Trustee of such notice and the Trustee may purchase all or a
portion of the Company Stock. In the event that not all of the
shares offered are accepted by the Trustee, the balance of the
shares shall be sold to the Company.
(f) Payment. The purchase price will be paid by
delivering to the Selling Stockholder a promissory note of the
purchaser providing for payment in substantially equal annual
installments over a period of five (5) years with adequate
security and interest at a reasonable rate, provided, however,
that the purchaser may prepay such note at any time without
penalty.
(g) Place and Time of Closing. The sale of Company
Stock shall be closed at the office of the purchaser at a time
during ordinary business hours fixed by the Selling Stockholder
not more than thirty (30) days after the date on which the notice
of exercise is served.
(h) Delivery of Stock and Closing Documents. Upon the
closing of a sale the Selling Stockholder shall deliver to the
purchaser in exchange for payment by the purchaser the
certificates of stock being sold, endorsed for transfer, and
bearing any necessary documentary stamps and such assignments,
certificates of authority, tax releases, consents to transfer,
Instruments and evidence of the title of the Selling Stockholder
as may be reasonably required by counsel for the purchaser.
The Put Option provided by this Section 6.02 shall lapse in the
event such Company Stock becomes Listed or Quoted; provided,
however, that the Put Option shall not lapse so long as the
Company Stock may continue to be subject to any restriction under
any Federal or state securities law, any regulation thereunder,
or any other agreement, which would make such Company Stock not
as freely tradeable as stock not subject to such restriction.
ARTICLE VII
Distributions
7.01 Distributions upon Termination of Employment. Each
Participant whose Employment is terminated shall be entitled to a
distribution of (i) all of the Participant s Rollover Account;
(ii) all of the Participant s Salary Savings Account, (iii) all
of the Participant s Voluntary Contribution Account, (iv) all of
the Participant s Employer Matching Account, (v) all of the
Participant s ESOP Account, and (vi) that portion (which may be
all) of the Participant s Employer Discretionary Account and
Profit Sharing Account determined in accordance with Section 7.02
and 7.03 hereof. Account balances will be valued for this
purpose as of the last Valuation Date preceding actual
distribution (reduced by any earlier distributions since the last
Valuation Date) and will be payable in accordance with the
provisions of this Article.
7.02 Termination by Death, Retirement or Disability. If a
Participant's Employment terminates on or after his or her Normal
Retirement Date, or by reason of his or her Permanent Disability
or death, the Participant (or his or her Beneficiary, as the case
may be) shall be entitled to a distribution of the entire balance
in his or her Employer Discretionary Account and Profit Sharing
Account.
7.03 Termination by Resignation or Dismissal. If a
Participant's Employment terminates before the Participant s
Normal Retirement Date for a reason other than his or her
Permanent Disability or death, such Participant shall be entitled
to a distribution of the applicable percentage of his or her
Employer Discretionary Account, and Profit Sharing Account based
upon the Participant s completed Years of Service (whether or not
consecutive) on the date his or her Employment terminates, in
accordance with the following table:
Completed Years Vested Percentage
of Service of Accrued
Benefit
Less than five 0%
Five or more 100%
provided, that the Vested Percentage of a Participant shall not
be less than the Participant s Vested Percentage in his or her
Accounts under the Premier Plan or the NIFCO Plan, as applicable,
prior to January 1, 1997.
7.04 Treatment of Forfeitures. That part of a Participant's
Employer Discretionary Account and Profit Sharing Account that
is not distributable as provided in Section 7.03 hereof shall be
a Forfeiture as of the date such Participant s termination of
Employment occurs. Forfeiture amounts shall be held in a
separate Forfeiture Account that shall not share in Net Gain and
Net Loss until the earlier of (i) the date the Participant s
Accounts are distributed to him under this Article VII, or (ii)
the date as of which the Participant incurs a One-Year Break in
Service, after which the Forfeiture Account relating to such
Participant shall be reallocated as a part of the Employer
contributions as set forth in Section 5.05 for the Plan Year in
which such Forfeiture became permanent. If a Participant who has
incurred a Forfeiture is re-employed by the Company or an
Affiliate after the Forfeiture Account attributable to him has
been reallocated, and repays to the play (without interest)
before the earlier of (i) 5 years after the first date on which
the Participant is re-employed by the Employer, or (ii) the date
as of which the Participant incurs a subsequent Extended Break in
Service, the amount (if any) distributed to him or her upon such
prior termination of Employment, the amount of such Forfeiture
shall be reinstated to his or her Employer Discretionary or
Profit Sharing Account.
7.05 Re-Employment of Participants Returning Before an
Extended Break in Service. In the case of a partially vested
Participant whose Employment is terminated and who received a
distribution from the Plan but who is re-employed by the Company
or an Affiliate prior to incurring an Extended Break in Service,
the amount of such Participant's then current Profit Sharing and
Employer Discretionary Account balances that are nonforfeitable
shall thereafter be computed as follows:
Step 1. Add the amount of any distribution made to such
Participant from his Employer Profit Sharing and Discretionary
Accounts as a result of his or her termination of Employment to
the then current balance in his or her Account.
Step 2. Multiply such Step 1 sum by the applicable
nonforfeitable percentage as set forth in Section 6.03.
Step 3. Subtract the amount of the prior distribution from
such Step 2 product.
7.06 Manner of Distribution. Any amounts to which a
Participant whose Employment terminates is entitled hereunder
shall be distributed to such Participant in one or more lump sums
representing the full amount distributable at the time of such
distribution, unless:
(a) on the date of a Participant's termination of
Employment the amount distributable from his or her Accounts
exceeds $3,500, and
(b) the Participant elects to receive distribution of
his or her Employer Discretionary and Profit Sharing Accounts in
the form of installments, with the consent of his or her spouse
in the manner (but subject to the exceptions) specified in
Section 7.10 if the Participant is married, by written notice to
the Committee in a form acceptable to the Committee before the
date on which distribution would otherwise be made under Section
7.07;
in which event distribution of his or her Accounts shall be made
in substantially equal installments payable not less often than
annually over a period not exceeding the joint life expectancy of
the Participant and his or her designated Beneficiary.
If distribution is made in installments, the minimum
distribution to be made each year will be an amount equal to the
quotient obtained by dividing the distributable balance of the
Participant's Accounts at the beginning of the Plan Year in which
payments begin by the period selected. Life expectancies for
this purpose shall be computed by the use of the return multiples
contained in Section 1.72-9 of the Treasury Regulations. For
purposes of this computation, the life expectancy of a
Participant, and of the Participant's spouse if he or she is the
Participant's Beneficiary, shall be recalculated annually.
However, the life expectancy of a non-spouse Beneficiary shall
not be recalculated. If the Participant's spouse is not the
designated Beneficiary, the method of distribution selected must
assume that at least 50% of the present value of the amount
available for distribution is paid within the life expectancy of
the Participant. Notwithstanding the foregoing, a Participant
who was a Participant in the NIFCO Plan prior to January 1, 1997,
may elect to have the portion of his Accounts attributable to
Company contributions under the NIFCO Plan prior to July 1, 1991
used to purchase an annuity in accordance with Article XV.
7.07 Timing of Distribution. Distribution will be made or
begin as soon as practicable after the first Valuation Date
following the later of (i) the date the Participant's Employment
terminates, or (ii) the date the Committee receives from the
Participant a written request for immediate distribution in form
and substance satisfactory to the Committee; unless one or both
of such requirements is eliminated and the distribution date is
specified by one of the following rules:
(a) Death. If a Participant has died, whether during
his or her employment or after his or her employment has
terminated, no written request for immediate distribution shall
be required and distribution shall be made as soon as practicable
after the Valuation Date that next follows the Participant's
death.
(b) Age 65. If a Participant has attained age 65,
whether during his or her Employment or after his or her
Employment has terminated, no written request for immediate
distribution shall be required and distribution shall be made as
soon as practicable after the Valuation Date that next follows
the later of the date the Participant attained age 65 or the date
the Participant's Employment terminates.
(c) $3,500. If upon a Participant's termination of
Employment the amount distributable does not exceed (and has
never exceeded) $3,500, no written request for immediate
distribution shall be required and distribution shall be made as
soon as practicable after the Valuation Date that next follows
the Participant's termination of Employment.
(d) Age 70 -. If a Participant who attains age 70 -
on or after July 1, 1987, and who is a 5% owner of the Company,
has not terminated Employment before the last Valuation Date in
the calendar year in which he or she attains age 70 -, then
neither a written request for immediate distribution nor
termination of Employment shall be required. In such event
distribution shall be made in all events by April 1 of the
calendar year following the calendar year in which he or she
attained age 70 -, based on the balance of the Participant's
Accounts as of the last Valuation Date in the calendar year in
which he or she attained age 70 -. Amounts credited to such
Participant's Accounts in any later calendar year by reason of
continuing Employment and participation in the Plan shall
similarly be distributed by April 1 of the following calendar
year, based upon the balance of the Participant's Accounts as of
the last Valuation Date in the preceding calendar year.
Distribution of benefits shall not be delayed without a
Participant's consent (which, however, shall be deemed given by
the Participant's failure to submit a written request for
immediate distribution pursuant to this Section 7.07) beyond 60
days after the end of the Plan Year in which occurs the latest of
the date the Participant attains age 65, the date the
Participant's employment terminates, or the tenth anniversary of
the date the Participant became a Participant in this Plan.
Distributions under this Plan shall be made in accordance with
the provisions of Section 401(a)(9) of the Code and regulations
thereunder, including the incidental death benefit requirements
of those regulations.
If a distribution is one to which Sections 401(a)(11) and
417 of the Code do not apply, such distribution may commence less
than 30 days after the notice required under section
1.411(a)-11(c) of the Income Tax Regulation is given, provided
that: (i) the Committee clearly informs the Participant that the
Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not
to elect a distribution (and, if applicable, a particular
distribution option); and (ii) the Participant, after receiving
the notice, affirmatively elects a distribution.
7.08 Mode of Distribution. Distributions of Participant s
ESOP Accounts and other Accounts, to the extent invested in the
Company Stock Fund immediately before distribution, shall be in
full shares of Company Stock and negotiable check or other cash
equivalent in lieu of fractional shares. Distribution of the
balance of a Participant's Accounts shall be payable by
negotiable check or other cash equivalent; provided, however,
that if:
(a) a Qualified Participant (as defined in Section
7.09) has requested distribution pursuant to Section 7.09 and the
Qualified Participant has requested distribution in the form of
cash; or
(b) the Company Stock is not publicly traded, and the
Participant has requested distribution in the form of cash; or
(c) the charter or bylaws of the Company restrict the
ownership of substantially all outstanding stock of such issuer
to Employees or to a trust described in Section 401(a) of the
Code;
all (but not less than all) of a Participant s distribution shall
be made in the form of negotiable check or other cash equivalent.
To obtain cash for any such distribution the Trustee shall
dispose of the Company Stock in the Participant's Accounts for
cash in such manner (which may be a sale ratably to the Accounts
of all other Participants or a sale to the Company or other
Employer) as the Trustee in its sole discretion shall determine.
In the event of any such purchase or sale among Participants'
Accounts, the price shall be the most recent value of such
Company Stock determined pursuant to Section 5.07. In the event
of any such purchase or sale between the Trustee and the Company,
the price shall be the more favorable to the Trustee of (i) the
most recent value of such Company Stock determined pursuant to
Section 5.07, or (ii) the fair market value of such Company Stock
on the date of such purchase or sale. Nothing in this Section
7.08 shall be construed to require the Company or any Employer to
purchase or sell Company Stock without its consent at the demand
of the Trustee.
7.09 Distributions to Qualified Participants. A Qualified
Participant (defined below) may, within 90 days after the close
of each Plan Year in his or her Qualified Election Period
(defined below), direct by written election in form and substance
satisfactory to the Committee that the Subject Portion (defined
below) be distributed to him or her in cash within the 90 day
period after such election is filed with the Committee. For
purposes of this Section:
(a) "Qualified Participant" means a Participant who
has attained age 55 and has completed 10 years of participation
in this Plan.
(b) "Qualified Election Period" means the six Plan
Year period beginning with the later of the Plan Year during
which a Participant first becomes a Qualified Participant or the
first Plan Year beginning after December 31, 1986.
(c) "Subject Portion" of a Qualified Participant's
Accounts for any Plan Year means 25% of the balance in the
Qualified Participant's ESOP Account as of the last day of the
preceding Plan Year, to the extent such Accounts are invested in
Company Stock acquired on or after January 1, 1987 (and to the
extent such amount exceeds the amount to which a prior election
under this Section applied); provided, however, that for the last
Plan Year with respect to which a Qualified Participant is
entitled to a distribution under this Section, 50% shall be
substituted for 25% above.
7.10 In-Service Withdrawals. A Participant may withdraw all
or any part of the fair market value of his or her Voluntary
Contributions Account or Rollover Account upon written request to
the Committee. After attaining age 59 - any Participant may
withdraw all or any part of his or her Salary Savings Account,
ESOP Account, Employer Discretionary Account or Profit Sharing
Account without separation from service. Any such distributions
shall be made in accordance with Section 7.08 hereof and shall
not be eligible for redeposit to the Fund. A withdrawal under
this Section shall not prohibit such Participant from sharing in
any future Employer contributions in which he or she would
otherwise be eligible to share.
7.11 Dividend Pass Through. Cash dividends paid on shares
of Company Stock allocated to the ESOP Accounts of Participants
shall be distributed to Participants not later than 90 days
following the close of the Plan Year. Cash dividends paid on
shares of Company Stock held in the Company Stock Fund shall be
paid to the Company Stock Fund allocated to Participants in
proportion to their account balance invested in the Company Stock
Fund and shall be distributed to such Participants not later than
90 days following the close of the Plan Year. Cash dividends on
all other Company Stock shall be held in the relevant Account and
reinvested pursuant to Section 6.01.
7.12 Direct Rollover Option. Notwithstanding any other
provision of this Plan to the contrary that would otherwise limit
a distributee's elections under this Section 7.12, a distributee
may elect, in writing, at a time and in the manner prescribed by
the Committee, to have any portion of an Eligible Rollover
Distribution paid directly to an eligible retirement plan,
specified by the distributee, which will accept such rollover, in
a direct rollover. For purposes of the direct rollover option:
(a) an "eligible retirement plan" is an individual
retirement account described in Section 408(a) of the Code, an
Individual retirement annuity described in Section 408(b) of the
Code, an annuity plan described in Section 403(a) of the Code, or
a qualified trust described in Section 401(a) of the Code, that
accepts the distributee's Eligible Rollover Distribution;
however, in the case of an Eligible Rollover Distribution to the
surviving spouse. an eligible retirement plan is only an
individual retirement account or an individual retirement
annuity;
(b) A "distributee" is any Participant; and a
Participant's Beneficiary who is his or her a surviving spouse,
and the Participant's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as
defined in Section 414(p) of the Code, are distributees with
respect to the Interest of the spouse or former spouse; and
(c) a "direct rollover" is a payment by the Plan to
the eligible retirement plan specified by the distributee.
7.13 Designation of Beneficiary. If, prior to receiving all
the distributions to which he or she is entitled, a Participant
dies, the remainder thereof shall be paid to such person, persons
or organizations, and in such proportions as may be designated by
an instrument in writing, and in a form acceptable to the
Committee, executed by such Participant and filed with the
Committee during his or her lifetime. The Participant (with the
consent of his or her spouse, where applicable) may revoke or
modify such designation from time to time by filing a new
designation of Beneficiary in like manner). No such designation
of a Beneficiary shall be effective in the case of a Participant
who is survived by his or her spouse unless:
(a) the Participant's sole primary designated
Beneficiary is the Participant's surviving spouse, or
(b) the Participant's designation of another
individual or individuals as Beneficiary or Beneficiaries has
been consented to in writing by the Participant's surviving
spouse, and such consent acknowledges the effect of the
designation and is notarized, or
(c) the Participant establishes to the satisfaction of
the Committee that such consent cannot be obtained because his or
her spouse cannot be located, or because of such other acceptable
circumstances as the Secretary of the Treasury may by regulations
prescribe.
The consent of a spouse given respecting another Beneficiary
shall apply only if that spouse is the surviving spouse, but
shall be irrevocable unless and until the Participant revokes a
modifies his or her designation of Beneficiary. If no such
designation is effective, or if no designated Beneficiary is then
living, then the remaining distributions shall be paid to the
Participant's spouse, or, if the Participant has no surviving
spouse, to the estate of such Participant.
7.14 Distributions Pursuant a Domestic Relations Order.
Distribution shall be made from the Plan to an alternate payee
pursuant to a domestic relations order if, but only if, the
Committee determines the order to be a "qualified domestic
relations order" as such term is defined under Section 206(d) of
ERISA and Section 414(p) of the Code. Upon receipt of a domestic
relations order, the Committee shall promptly notify any
Participant and alternative payee named in a domestic relations
order of the receipt of such order and the procedures of this
Section 7.14 for determining the qualified status of domestic
relations orders. An alternate payee shall be permitted to
designate a representative to receive copies of notices that are
sent to the alternate payee with respect to a domestic relations
order. Within a reasonable period after receipt of a domestic
relations order, the Committee shall determine whether such order
is a qualified domestic relations order as such term is defined
under Section 206(d) of ERISA and Section 414(p) of the Code. In
making such a determination, the Committee may consult outside
counsel and may request additional information from the
Participant and alternate payee with regard to the subject
domestic relations order. Under no circumstances shall an order
be determined to be a qualified domestic relations order if it
calls for payments to be made to an alternate payee before the
earliest date for such payments as specified in ERISA and the
Code, provided, however, that a payment may be made to an
alternate payee of the Participant prior to the date the
Participant attains his earliest retirement age (as defined in
Section 206(d) of ERISA and Section 414(p) of the Code) if such
payment is made pursuant to the terms of the qualified domestic
relations order. During any period in which benefits appearing
to be subject to a domestic relations order are or become payable
to a Participant while the issue of whether the order constitutes
a qualified domestic relations order is being determined the
Committee shall segregate the amounts which would have been
payable to the alternate payee during such period in the manner
specified by Section 206(d) of ERISA and Section 414(p) of the
Code.
If the Committee is able to make a preliminary determination
that a domestic relations order is a qualified domestic relations
order, it shall notify any Participant and alternate payee named
in the domestic relations order of its preliminary decision that
such order constitutes a qualified domestic relations order and
shall require such Participant and alternate payee to confirm in
writing the Committee's interpretation of the impact of the
domestic relations order on the Plan and distributions under the
Plan. Upon receipt of such executed confirmation by the
Committee, the Committee's preliminary determination shall become
final, and the Plan shall make distributions to any alternate
payee named in a qualified domestic relations order pursuant to
the terms of such order and in the manner specified by Section
206(d) of ERISA and Section 414(p) of the Code. If the Committee
determines that a domestic relations order is not a qualified
domestic relations order, it shall notify any Participant and
alternate payee named in the domestic relations order of such
decision.
7.15 Hardship Withdrawals. The Committee may, in its sole
discretion, upon the request of a Participant at any time prior
to his or her termination of employment, direct the Trustee to
make a lump sum distribution of a portion of the balance of the
Participant's Salary Savings Account, for the purposes set forth
below, subject to the following rules:
(a) Each request for a distribution must be made by
written application to the Committee supported by such evidence
as the Committee may require.
(b) The amount distributed to a Participant in
accordance with this Section 7.15 shall not exceed that portion
of the Adjusted Balance of his or her Salary Savings Account that
(i) is not derived from Voluntary Contributions under Section
4.06 and (ii) is not being used as security for a loan made under
Article VIII, determined as of the Valuation Date coinciding with
or immediately following the date a request is made hereunder,
less earnings allocated to the Participant's Salary Savings
Account on or after December 31, 1988. However, in no event
shall the amount available for distribution pursuant to this
Section 7.15 be less than the Adjusted Balance of the
Participant's Salary Savings Account on December 31, 1988, less
the amount being used as security for a loan made under Article
VIII, determined as of the Valuation Date coinciding with or
immediately following the date a request is made hereunder.
(c) The Committee shall direct the Trustee to make a
distribution to a Participant in accordance with this Section
7.15 only in the event of the Participant's hardship. For
purposes of this Section, a hardship shall be limited to:
(i) Medical expenses described in Code Section
213(d) previously incurred by the Participant, the Participant's
spouse, or any dependents of the Participant (as defined in Code
Section 152) or necessary for any of these persons to obtain
medical care described in Code Section 213(d);
(ii) Purchase (excluding mortgage payments) of a
principal residence for the Participant;
(iii) Payment of tuition and related
educational fees and room and board for the next twelve months of
post-secondary education for the Participant, his or her spouse,
children or dependents;
(iv) The need to prevent eviction of the
Participant from his or her principal residence or foreclosure on
the mortgage of the Participant's principal residence; and
(v) Funeral expenses of a family member of the
Participant.
(d) The amount distributed shall not be in excess of
the immediate and heavy financial need of the Participant, which
need shall be deemed to include any amounts reasonably
anticipated by the Participant to be necessary to pay federal,
state or local income taxes and penalties incurred as a result of
the distribution;
(e) The Participant shall first obtain all
distributions, other than those on account of hardship, and all
nontaxable loans available under the Plan and all other plans
maintained by the Company.
(f) The Participant's Salary Savings Contributions and
Voluntary Contributions under the Plan, and elective
contributions and employee contributions (as defined in Treasury
Regulation Section 1.401(k)) under all other deferred
compensation plans maintained by the Company, shall be suspended
for twelve (12) months after receipt of the hardship
distribution.
(g) The Participant may not make Salary Savings
Contributions under the Plan, or elective contributions under any
other plan maintained by the Company, for the Participant's
taxable year immediately following the taxable year of the
hardship distribution in excess of the applicable limit under
Section 402(g) of the Code for such next taxable year, decreased
by the Salary Savings Contributions to the Plan and elective
contributions to such other plans for the taxable year of the
hardship distribution.
(h) Any distribution made pursuant to this Section
shall be made in a manner that is consistent with and satisfies
the provision of Section 7.08 and the notice and consent
requirements of Code Sections 417 and 411(a)(11). If a
Participant is married at the time of the distribution, the
Participant must provide to the Committee written evidence of
spousal consent to the distribution.
ARTICLE VIII
Loans
8.01 Loan Program. A Participant may borrow against the
vested balance of his or her Salary Savings Account under the
Plan in accordance with a loan program maintained under
procedures (the "Loan Procedures") adopted by the Committee,
which the Committee may amend or modify in its discretion from
time to time, subject to the specific terms of this Article VIII
and any other applicable provisions of this Plan. The Loan
Procedures may provide for application forms, permitted purposes
for a loan, repayment procedures, interest, security, the
occurrence and consequences of a default, and such other terms
and procedures as the Committee deems desirable. Nothing in
Sections 5.01, 7.01, 13.03 or 13.04 of the Plan (relating to
vesting), or in Section 14.04 of the Plan (relating to alienation
of benefits) shall preclude such Loan Procedures from requiring
the pledge of a Participant's Accounts as security for a loan,
providing for the foreclosure of such security interest upon
default under a Loan, or providing for the discharge of such loan
by payment out of a Participant's Accounts upon default or
otherwise.
8.02 Amounts of Loans. The aggregate amount of all loans
from the Fund and any other qualified employer plans (as defined
in Section 72(p)(4) of the Code) maintained by the Company or any
Affiliate to a Participant shall in no event exceed the lesser
of:
(a) $50,000 reduced by the excess (if any) of (i) the
highest outstanding balance of loans from such plans to such
Participant during the one (1) year period ending on the day
before the date on which such loan is made, over (ii) the
outstanding balance of loans from the plan on the date on which
the loan was made; or
(b) fifty percent (50%) of the balance of the
Participant's Salary Savings Account.
8.03 Effect on Account Balances. Any funds loaned to a
Participant shall be investment of the Investment Fund to which
such loan is attributed with principal and interest paid by a
Participant on his or her loan credited to such Investment Fund
in the same manner as for any other investment.
8.04 Loan Terms. Loans to Participants shall be made
according to the following terms:
(a) Each loan shall bear interest at a rate that is
one percentage point above the prime rate quoted in The Wall
Street Journal on the first business day of the month in which
the loan is made;
(b) A Participant may have no more than two loans
outstanding at any time;
(c) Payments of principal and interest by a
Participant shall be made through payroll deductions, which
deductions shall be irrevocably authorized by the borrowing
Participant in writing on a form supplied by the Committee at the
time the loan is made to him, and such payroll deductions shall
be sufficient to amortize the principal and interest payable
pursuant to the loan during the term thereof on a substantially
level basis in equal quarterly (or more frequent) installments;
(d) The Committee may charge a borrowing Participant
or Former Participant such reasonable administrative fees with
respect to each loan as the Committee shall, in its discretion,
decide; and
(e) All loans made under this Article shall mature and
be payable in full within five years after the date such loan is
made, except that a loan to a Participant used to acquire any
dwelling unit that within a reasonable time after the loan is
made is to be used (determined at the time the loan is made) as
the principal residence of the Participant shall mature and be
payable in full within ten years after the date such loan is
made.
The Committee may impose such additional uniform and
nondiscriminatory requirements upon Participants and Former
Participants applying for loans as the Committee may determine.
ARTICLE IX
Limits on Contributions
9.01 Special Definitions. For purposes of this Article IX
(and Article X), the following terms shall have the following
respective meanings:
(a) "Aggregate Compensation" means the entire wages,
salary, and other amounts actually paid by all Affiliates to an
Employee for the relevant period for personal services actually
rendered in the course of employment; including, but not limited
to, commissions paid salesmen, compensation for services on the
basis of a percentage of profits, and bonuses; provided, however,
that Aggregate Compensation does not include:
(i) Affiliate contributions to or distributions
from this Plan or any other pension, profit sharing, thrift or
other plan of deferred compensation (other than amounts the
Employee received and included in his or her gross income under
the Code pursuant to an unfunded nonqualified plan not entitled
to any special tax benefits);
(ii) Amounts realized from the sale, exchange or
other disposition of stock acquired under a qualified or
incentive stock option;
(iii) Amounts realized from the exercise of a
nonqualified stock option and income arising at any time other
than the time of transfer attributable to the transfer of
property in connection with the performance of services; and
(iv) Other amounts which receive special tax
benefits.
Solely for the purposes of determining whether an
Employee of an Affiliate is a Highly Compensated Employee, for
determining an eligible Employee's Average Deferral Percentage
and Average Contribution Percentage, and for determining the
amount contributed on behalf of a key Employee in computing top
heavy minimum benefits under Section 10.03 such Employee's
Aggregate Compensation shall be increased by such employee's
Salary Savings Contributions and all other before-tax
contributions made on behalf of such Employee pursuant to any
qualified cash or deferred arrangement which is part of any other
defined contribution plan maintained by an Affiliate, and by
amounts deferred by such Employee under any cafeteria plan
maintained by an Affiliate which are excludable from such
Employee's taxable income under Section 125 of the Code for such
Plan Year.
An Employee's Aggregate Compensation for any Plan Year
commencing on and after January 1, 1989 and prior to January 1,
1994 in excess of $200,000 (as adjusted from time to time
pursuant to Code Section 401(a)(17)), and an Employee's Aggregate
Compensation for any Plan Year commencing on and after January 1,
1994 in excess of $150,000 (as adjusted from one time pursuant to
Code Section 401(a)(17)) shall be disregarded to the extent
required by Code Section 401(a)(17).
(b) "Annual Addition" means the sum, for any
Participant, of:
(i) the Employer contributions under this Plan
and Affiliate contributions under any other defined contribution
plans on behalf of a Participant for the Limitation Year;
(ii) Forfeitures allocated to a Participant under
any defined contribution plans maintained by Affiliates for the
Limitation Year;
(iii) the Participant's after-tax contributions
to any defined contribution plans maintained by Affiliates for
the Limitation Year;
(iv) any amounts allocated to an individual
medical account, as defined in Section 415 of the Code, that is
part of a defined benefit plan maintained by an Affiliate; and
(v) any amounts attributable to post- retirement
medical benefits allocated to the separate account of a Key
Employee under a welfare benefit fund, as defined in Section
419(e) of the Code, maintained by an Affiliate;
For purposes of this Plan, Annual Additions under (i)
above shall be determined, in the event Employer contributions
are made hereunder to enable the Trustee to repay an Exempt Loan,
as if such contributions were directly allocated to a
Participant's Account in cash and not on the basis of the value
of the stock released from the Suspense Account and actually
allocated to his or her Account.
Notwithstanding (i) and (ii) above, in any Limitation
Year in which no more than one-third of Employer contributions
are allocated to Highly Compensated Employees, Annual Additions
shall not include ESOP Contributions or ESOP Savings and Matching
Contributions applied to the repayment of interest on an Exempt
Loan, deductible for the Limitation Year under Section 404(a)(9)
of the Code, and charged against the Participant's Account.
Annual Additions shall be determined for any
Participant by treating as one plan all defined contributions
plans maintained by any Affiliate in which he or she
participates.
(c) "Annual Benefit" means the annual benefit payable
to a Participant in the form of a straight life annuity (figured
as if such straight life annuity commenced on the date he or she
attains age 55 if such benefit actually commences prior to such
time) which is the actuarial equivalent of the
Affiliate-contributed benefit payable on account of such
Participant's participation in any qualified defined benefit
pension plan maintained by the Company or any Affiliate,
(considered as one plan), excluding, however:
(i) the value of qualified joint and survivor
annuity provided by such plan(s) to the extent that such value
exceeds the sum of (A) the value of straight life annuity
beginning on the same date and (B) the value of any
post-retirement death benefits which would be payable even if the
annuity were not in the form of a qualified joint and survivor
annuity;
(ii) the amount of any benefits attributable to
rollover contributions (as defined in Sections 402(b)(4),
403(a)(4), 408(d)(3) and 409(b)(3) and 409(b)(3)(C) of the Code);
and
(iii) any ancillary benefits (such as pre-
retirement death and disability benefits and post- retirement
medical benefits).
(d) "Average Contribution Percentage" for a specified
group of Eligible Employees for a given Plan Year means the
average of the ratios, calculated separately for each Eligible
Employee in such group and after the application of Sections
9.02, 9.03 and 9.05, of (i) the sum of Employer Matching
Contributions and Voluntary Contributions, and, to the extent
designated by the Committee and permitted pursuant to regulations
under Section 401(m)(3) of the Code, Salary Savings
Contributions, if any, attributable to such Eligible Employee for
such Plan Year, to (ii) the Eligible Employee's Aggregate
Compensation for such Plan Year.
(e) "Average Deferral Percentage" for a specified
group of Eligible Employees for a given Plan Year means the
average of the ratios, calculated separately for each Eligible
Employee in such group and after application of Sections 9.02 and
9.03, of (i) the sum of the Salary Reduction Contributions, if
any, attributable to such Eligible Employee for the Plan Year, to
(ii) the Eligible Employee's Aggregate Compensation for such Plan
Year.
(f) "Eligible Employee" or "Eligible Highly
Compensated Employee" means an Employee or a Highly Compensated
Employee who is eligible to make Salary Savings Contributions or
Voluntary Contributions under the Plan for all or a portion of
the Plan Year.
(g) "Highly Compensated Employee," when used in
reference to an Employee for the current Plan Year, means an
Employee who:
(i) during the current Plan Year or preceding
Plan Year was at any time a 5% owner of any Affiliate, determined
after applying the attribution rules of Section 318 of the Code;
or
(ii) during the preceding Plan Year received
Aggregate Compensation from all Affiliates in excess of $80,000
(as periodically adjusted pursuant to Section 414(q)(l) of the
Code) and, if elected by the Company, is a member of the group
consisting of the top 20% of the Employees when ranked on the
basis of Aggregate Compensation paid during such Plan Year.
A former Employee who was a Highly Compensated Employee
when he or she separated from service with all Affiliates or at
any time after attaining age 55 shall be treated as a Highly
Compensated Employee hereunder to the extent required by Section
4 14(q)(9) of the Code.
(h) "Limitation Year" means the calendar year.
(i) "Projected Annual Benefit" of a Participant means
the Annual Benefit determined under the terms of such plan(s) on
the assumption that such Participant continues employment until
his or her normal retirement age under such plan(s) (or the
Participant's current age, if later), that his or her covered
compensation under such plan(s) continues at the same rate as in
effect in the Limitation Year under consideration until the date
he or she reaches such age, and that other relevant factors used
to determine benefits under such plan(s) remain constant as of
the current year for all future years.
9.02 General Limitation on Annual Additions.
Notwithstanding anything in this Plan to the contrary, the Annual
Additions allocated to any one Participant's Accounts in any one
Limitation Year shall not exceed the lesser of:
(a) $30,000, or, if greater, one quarter of the dollar
limitation in effect under Section 415(b)(1)(A) of the Code on
annual benefits under defined benefit plans (as such amount may
be adjusted annually by the Commissioner of Internal Revenue as
of January 1 of each calendar year for limitation years ending
with or within that calendar year), or
(b) 25% of such Participant's Aggregate Compensation
from all Affiliates for such Limitation Year;
The limit on Annual Additions shall be applied for any
Participant by treating as one plan all tax qualified defined
contribution plans maintained by any Affiliate in which he or she
participates. In the event a Participant participates in more
than one tax qualified defined contribution plan of an Affiliate,
Annual Additions to such other plan shall be reduced to the full
extent required to comply with the foregoing limitation before
any Annual Additions under this Plan are reduced.
9.03 Combined Limitation on Annual Additions. If a
Participant also participated at any time in any tax qualified
defined benefit pension plan or plans maintained by an Affiliate,
then before first giving any effect to any reduction in benefits
under such defined benefit plan(s) to comply with Section 415 of
the Code, the Annual Additions under this Plan shall be reduced
so that the sum of the defined benefit fraction and the defined
contribution fraction (both as defined in Section 415(e) of the
Code) do not exceed 1.0.
9.04 Excess Annual Additions. If any Participant's Annual
Additions would otherwise exceed the limitation of Section 9.02
or 9.03, then Voluntary Contributions under Section 4.03 for such
Plan Year shall be returned to the Participant to the extent
necessary to eliminate such excess, and any excess remaining
after all such Participant's Voluntary Contributions for such
Plan Year shall then be used to reduce Employer contributions
(with such reduction applied in order until exhausted to (i)
Matching Contributions; (ii) Profit-Sharing Contributions; (iii)
Discretionary Contributions; (iv) ESOP Contributions; and (v)
Salary Savings Contributions) for the next Limitation Year (and
succeeding Limitation Years, if necessary) for the Participant if
that Participant is covered by the Plan as of the end of the next
or succeeding Limitation Year. If the Participant is not covered
by the Plan as of the end of such next or succeeding Limitation
Year, such excess amounts shall be held unallocated in a suspense
account for such Limitation Year and allocated to the
corresponding Accounts of the other Participants for such
Limitation Year in the same manner as Employer Discretionary and
Profit-Sharing Contributions under Section 5.05 until the Annual
Addition to the Accounts of each Participant reaches such maximum
limitation. Any amounts which may not be allocated to the
Accounts of Participants at such time because the Annual Addition
to the Accounts of each such Participant has reached the
limitation of Section 9.02 or 9.03 shall be held in a suspense
account within the Fund and, when permissible under such
limitations, allocated, on a first-in-first-out basis, in
succeeding Limitation Years to the Accounts of Participants in
the manner specified above. If any Participant does not receive
the full amount otherwise allocable to his or her Accounts for a
Limitation Year because of the restrictions of Section 9.02 and
9.03, no other amount may be allocated for such Participant under
any other defined contribution plan maintained b an Affiliate.
9.05 Limitation on Elective Deferrals. Notwithstanding
anything to the contrary in the Plan or contained in any Salary
Savings Agreement made pursuant to Section 3.02 or 4.02, all
Participant Salary Savings Contribution elections made with
respect to any Plan Year shall be valid only to the extent that,
after first applying any reduction required by Sections 9.02 and
9.03, the Average Deferral Percentage for such Plan Year of the
group of Eligible Highly Compensated Employees shall bear a
relationship to the Average Deferral Percentage for the Plan Year
immediately preceding such Plan Year of the group of all other
Eligible Employees that satisfies either of the following tests:
(a) the Average Deferral Percentage of the group of
Eligible Highly Compensated Employees is not more than the
Average Deferral Percentage of the group of all other Eligible
Employees multiplied by 1.25; or
(b) the Average Deferral Percentage of the group of
Eligible Highly Compensated Employees is not more than the
Average Deferral Percentage of the group of all other Eligible
Employees multiplied by 2.0 and the excess of the Average
Deferral Percentage of the group of Eligible Highly Compensated
Employees over that of the group of all other Eligible Employees
is not more than two percentage points.
If neither of those tests is satisfied for a Plan Year, then
Salary Savings Contribution elections for such Plan Year by
Participants who are Highly Compensated Employees shall be
reduced, to the extent necessary to satisfy one of those tests,
in accordance with the following procedure: The Average Deferral
Percentage (i.e., the amount described in Section 9.01(e)(i)
divided by the amount described in Section 9.01(e)(ii) with
respect to each such Highly Compensated Employee) of the Highly
Compensated Employee with the highest amount of Salary Savings
Contributions shall be reduced to the extent necessary to cause
such Highly Compensated Employee s Average Deferral Percentage to
equal the Average Deferral Percentage of the Highly Compensated
Employee with the next highest amount of Salary Savings
Contribution for the Plan Year. This process shall be repeated
until the Plan satisfies one of the tests set forth in (a) or (b)
above. Salary Savings Contributions reduced under this Section
9.05 (adjusted for earnings, gains and losses allocable thereto)
shall be returned to each affected Highly Compensated Employee
within two and one-half months following the close of such Plan
Year. Any Employer Matching Contributions attributable to Salary
Savings Contributions returned pursuant to this Section shall be
paid to the affected Highly Compensated Employee at the same time
as such Salary Savings Contributions are returned. Salary Savings
Agreements made by all Participants who are not Highly
Compensated Employees shall remain be valid and Salary Savings
Contributions and Employer Matching Contributions for such
Participants hereunder shall not be changed. Notwithstanding the
foregoing, the Employer may elect to make a qualified nonelective
contribution to any Plan Year in order to satisfy the tests in
clause (a) or (b), including as such tests may be modified by
Section 9.06.
9.06 Limit on Voluntary Contributions and Employer Matching
Contributions. Notwithstanding anything to the contrary in the
Plan or contained in any Participant election made pursuant to
Section 4.03, all Participant Voluntary Contribution elections
made with respect to any Plan Year shall be valid only to the
extent that, alter first applying any reduction required by
Sections 9.02, 9.03 and 9.05, the Average Contribution Percentage
for such Plan Year of the group of Eligible Highly Compensated
Employees shall bear a relationship to the Average Contribution
Percentage for the Plan Year immediately preceding such Plan Year
of the group of all other Eligible Employees that satisfies
either one of the tests set forth in Section 9.05, with the term
"Average Contribution Percentage" substituted for the term
"Average Deferral Percentage" wherever such latter term appears
Section 9.05. If neither of those tests is satisfied for a Plan
Year, then Voluntary Contribution elections for such Plan Year by
Participants who are Highly Compensated Employees shall be valid
only to the extent permitted by either of those tests and the
Voluntary Contributions and Employer Matching Contributions of
Highly Compensated Employees shall be reduced, together with any
Employer contributions attributable thereto, to the extent
necessary to satisfy one of those tests, in accordance with the
following procedure: The Average Contribution Percentage (i.e.,
the amount described in Section 9.01(d)(i) divided by the amount
described in Section 9.01(d)(ii) with respect to each such Highly
Compensated Employee) of the Highly Compensated Employee with the
highest amount of Voluntary or Employer Matching Contributions
shall be reduced to the extent necessary to cause such Highly
Compensated Employee s Average Contribution Percentage to equal
the Average Contribution Percentage of the Highly Compensated
Employee with the next highest amount of Voluntary or Employer
Matching Contribution for the Plan Year. This process shall be
repeated until the Plan satsfies one of the tests set forth in
Section 9.05(a) or (b) above. A Highly Compensated Employee's
Voluntary Contributions shall be reduced to the extent necessary
before any required reduction in Employer Matching Contributions
made on his or her behalf. Employee Voluntary Contributions
thereby reduced (adjusted for earnings, gains and losses
allocable thereto) shall be returned to each affected Highly
Compensated Employee within two and one-half months after the
close of such Plan Year. Employer Matching Contributions thereby
reduced shall be a forfeited. Employee Voluntary Contribution
elections made by all Participants who are not Highly Compensated
Employees shall be valid, and Employer contributions and all
other contributions for such Participants hereunder shall not be
changed.
9.07 Limitation on Multiple Use. Notwithstanding anything
to the contrary in the Plan the sum of the Actual Deferral
Percentage for the group of eligible Highly Compensated Employees
for a Plan Year and the Actual Contribution Percentage for the
group of Eligible Highly Compensated Employees for the Plan Year
may not exceed the sum of:
(a) 125% of the greater of (A) the Actual Deferral
Percentage for the group of Eligible Employees who are not Highly
Compensated Employees for the Plan Year, or (B) the Actual
Contribution Percentage for the group of Eligible Employees for
the Plan Year, and
(b) two percentage points plus the lesser of (A) the
Actual Deferral Percentage for the group of Eligible Employees
who are not Highly Compensated Employees for the Plan Year, or
(B) the Actual Contribution Percentage for the group of Eligible
Employees who are not Highly Compensated Employees for the Plan
Year. In no event, however, shall the amount determined under
this subparagraph (ii) exceed 200% of the lesser of (ii)(A) or
(ii)(B) above.
If the sum of the Actual Deferral Percentage and the Actual
Contribution Percentage for the group of eligible Highly
Contribution Employees for a Plan Year exceeds such aggregate
limit for the Plan Year, then the Actual Contribution Percentage
for the group of Eligible Highly Compensated Employees for the
Plan Year shall be reduced to the extent necessary in the manner
described in Section 9.06 above. The test in this Section 9.07
may be modified to the extent permitted by regulations under
Section 401(m)(9) of the Code.
9.08 Aggregation of Plans. The Committee may direct that
any plan maintained by an Affiliate, qualifying under Section
401(a) of the Code, and providing for salary savings
contributions, voluntary employee contributions or matching
contributions, be aggregated with this Plan for purposes of
Sections 9.05 and 9.06; provided that the plans meet the
requirements of Sections 401(a)(4) and 410(b) of the Code and
(after applying any reduction required by Section 9.05 or 9.06 or
comparable provisions of the aggregated plans) satisfy the tests
of Section 9.05 and 9.06 on an aggregate basis. In the event
that any plan maintained by an Affiliate must be aggregated with
this Plan for purposes of enabling such plan to meet the
requirements of Section 401(a)(4) or 410 of the Code, salary
deferral contributions, voluntary employee contributions and
matching contributions under such other plan or plans, if any,
shall be aggregated with Salary Savings Contributions, Voluntary
Contributions and Matching Contributions under this Plan in
applying the tests of Sections 9.05 and 9.06. Notwithstanding
the absence of any such aggregation, if an Eligible Highly
Compensated Employee is in fact eligible to make salary reduction
contributions, voluntary employee contributions or to receive
employer matching contributions under any other plan maintained
by an Affiliate, such contributions shall be aggregated with
Salary Reduction Contributions, Voluntary Contributions and
Employer Matching Contributions under this Plan in determining
such Highly Compensated Employee's Average Contribution
Percentage and Average Deferral Percentage for purposes of this
Plan. In the event of any permissive or mandatory aggregation of
plans under this Section 9.08, contributions under this Plan
shall not be reduced and returned or otherwise applied under
Sections 9.05 and 9.06 of this Plan until full effect has been
given to the comparable provisions for reduction, return or other
application of contributions in all other aggregated plans.
9.09 Qualified Nonelective Contributions. The Employer may
elect to make a qualified nonelective contribution to any Plan
Year. "Qualified nonelective contributions" means Employer
contributions that are fully vested at all times and subject to
the restrictions on distribution applicable to Salary Savings
Contributions under code Section 401(k)(2) and Article VII of the
Plan. Qualified nonelective contributions may be made on behalf
of all Eligible Employees who are not Highly Compensated
Employees, or on behalf of all Eligible Employees, in the
discretion of the Employer. Qualified nonelective contributions
shall be allocated according to each Eligible Employee's
Compensation for the Plan year as a Participant. The qualified
nonelective contributions, if any, credited to a Participant's
accounts for a Plan Year, shall be counted as Salary Savings
Contributions for purposes of calculating the Average Deferral
Percentage under Section 9.05 and 9.07 of the Plan.
ARTICLE X
Required Top-Heavy Plan Provisions
10.01 Special Rules Where Plan Is Top-Heavy.
Notwithstanding any other provision of his Plan to the contrary,
this Article X shall apply in any Top-Heavy Plan Year.
10.02 Special Definitions. For purposes of this Article
X (and Article IX), the following terms shall have the following
respective meanings:
(a) "Accrued Benefit" when used in reference to the
interest of an Employee, former Employee or Beneficiary under any
defined benefit Aggregated Plan maintained by an Affiliate means
the actuarial equivalent of such individual's benefit commencing
at normal retirement age, and when used in reference to the
interest of an Employee, former Employee or Beneficiary under
this Plan or any other defined contribution Aggregated Plan
maintained by an Affiliate, means the balance in the accounts
maintained for such individual, increased by amounts distributed
during the five-year period ending on the Determination Date;
provided, however, that:
(i) Any distribution which is still counted
towards computing such individual's account balance or annual
benefit commencing at normal retirement age for the purpose of
determining whether the most recent Plan Year is a Top-Heavy Plan
Year shall not be treated as a distribution;
(ii) Amounts attributable to any tax deductible
employee contribution shall not be taken into account;
(iii) Amounts attributable to any rollover
contribution accepted after December 31, 1983 shall not be taken
into account by the accepting plan if such rollover contribution
is initiated by the employee and is between plans which are not
maintained by Affiliates;
(iv) Any rollover contribution which is not
initiated by the employee or which is made between plans
maintained by Affiliates shall not be treated as a distribution
by the transferring plan; and
(v) An individual's Accrued Benefits under all
defined benefit Aggregated Plans (treated as one plan) shall be
determined under a uniform actuarial method (or the fractional
rule of Section 411(b)(1)(C) if there is no such uniform method)
and identical actuarial assumptions as specified in such plans
(or the fractional rule of Section 411(b)(1)(C) if there is no
such uniform method) and identical actuarial assumptions as
specified in such plans, considering non-proportional subsidies
but ignoring proportional subsidies; and
(vi) An individual's Accrued Benefit under a
defined contribution Aggregated Plans shall be adjusted to
reflect contributions made, required to be made, or allocated
under such plan after such Accrued Benefit is determined and
before the date specified pursuant to regulations under Section
416 of the Code.
(b) "Aggregated Plan" means:
(i) any other qualified plan maintained by an
Affiliate in which any Key Employee participates;
(ii) any other qualified plan of an Affiliate
which enables a plan in which a Key Employee participates to meet
the requirements of Section 401(a)(4) or Section 410 of the Code;
and
(iii) any other qualified plan of an Affiliate
designated by the Company as an "aggregated plan" and which
satisfies the requirements of Section 401(a)(4) or Section 410 of
the Code, when considered together with the group of plans
described in (i) and (ii) above.
(c) "Determination Date" means, for this Plan for the
first Plan Year, the last day of such Plan Year; and for this
Plan for any succeeding Plan Year, the last day of the preceding
Plan Year.
(d) "Key Employee" means an Employee or former
Employee who, at any time during a Plan Year or any of the four
preceding Plan Years, is (or was):
(i) among the 50 highest paid officers of all
Affiliates when ranked on the basis of Aggregate Compensation
having annual Aggregate Compensation (while an officer) of more
than $45,000 (as adjusted for cost of living increases pursuant
to Section 415(d) of the Code); provided, however, that no more
than 10% of all Employees of all Affiliates shall be treated as
Key Employees under this subsection (i);
(ii) one of the 10 Employees who own both more
than 1/2% in value and the largest percentage ownership interests
in value of any Affiliate and who has annual Aggregate
Compensation from all Affiliates of more than $30,000 (as
adjusted from time to time for cost of living increases pursuant
to Section 415(d) of the Code);
(iii) an owner of more than 5% of an Affiliate;
or
(iv) an owner of more than 1% of any Affiliate
who has annual Aggregate Compensation from an Affiliate of more
than $150,000. Ownership for purposes of subsections (ii), (iii)
and (iv) above shall be determined after application of the
attribution rules of Section 318 of the Code. For purposes of
this definition, the Beneficiary of a Key Employee shall be
treated as a Key Employee.
(e) "Top-Heavy Plan Year" means any Plan Year for
which the present value of cumulative accrued benefits under this
Plan and any Aggregated Plan for Key Employees exceeds 60% of the
cumulative accrued benefits under this Plan and all Aggregated
Plans for all Employees.
(f) "Top-Heavy Ratio" means a fraction computed as of
each Determination Date in accordance with Section 416 of the
Code, the numerator of which is the sum for all Key Employees of
account balances under this Plan and any other defined
contribution plan maintained by an Affiliate plus the present
value of Accrued Benefits for all Key Employees under any defined
benefit plans maintained by an Affiliate, and the denominator of
which is the sum of such account balances plus such Accrued
Benefits for all Participants. Both the numerator and denominator
of the Top-Heavy Ratio shall be adjusted for any distribution of
an account balance or an Accrued Benefit within the five-year
period ending on the Determination Date and any contributions due
but unpaid as of the Determination Date. The account balances
and accrued benefits of a Participant who has not performed
services for an Affiliate within the five-year period ending on
the Determination Date, or who is not a Key Employee but who was
a Key Employee in a prior year, will be disregarded. For purposes
of computing the Top-Heavy Ratio, the value of account balances
and the present value of accrued benefits will be determined as
of the most recent Valuation Date that falls within or ends with
the twelve-month period ending on the Determination Date. When
aggregating plans, the value of account balances and accrued
benefits will be calculated with reference to the Determination
Dates under such plans that fall within the same calendar year.
10.03 Minimum Allocation in Top-Heavy Plan Years. The
Employer shall make a minimum contribution in any Top- Heavy Plan
Year to be allocated on behalf of each Participant (without
regard to whether such Participant is an active Participant) who
is not a Key Employee and who is an Employee on the last day of
such Top-Heavy Plan Year, and who does not in such Top-Heavy Plan
Year receive the minimum benefit required by Section 416(c)(1) of
the Code under any defined benefit plan(s) maintained by an
Affiliate, so that each such Participant receives an allocation
of Employer contributions equal to at least 4% of such
Participant's Aggregate Compensation for the Plan Year; provided,
however, that:
(a) If the Participant is also a participant in a
defined benefit plan or plans maintained by an Affiliate (without
receiving such minimum benefit under such plan(s)), the minimum
contribution shall be 7-1/2% rather than 4% of such Participant's
Aggregate Compensation; and
(b) The minimum contribution required under this Plan
shall be reduced by the amount, if any, allocated to the account
of such Participant under any other defined contribution
Aggregated Plan (before applying any comparable minimum
contribution rule in such other plan); and
(c) In no event, however, shall the minimum
contribution exceed the percentage of Compensation (including in
Compensation for such purpose any amounts a Key Employee elects
to defer under any arrangement qualified under Section 401(k) of
the Code) at which Employer contributions are made (or required
to be made) under the Plan for the Key Employee for whom such
percentage is the highest.
The minimum allocation applies even though under other Plan
provisions the Participant would not otherwise be entitled to
receive an allocation, or would have received a lesser allocation
for the year because the Participant fails to make mandatory
contributions to the Plan, the Participant's Compensation is less
than a stated amount, or the Participant fails to complete 1,000
Hours of Service during the Plan Year. In no event shall the
Compensation or Aggregate Compensation of a Participant taken
into account under the Plan for purposes of Article X for any
Plan Year commencing on and after January 1, 1989 and prior to
January 1, 1994 exceed $200,000, or such greater amount provided
pursuant to Section 401(a)(17) of the Code. The Compensation of
a Participant taken into account for purposes of Article X for
Plan Years commencing on and after January 1, 1994 shall be
limited in accordance with the provisions of subsections (a)
through (c) set forth in the definition of Compensation in
Section 2.01.
ARTICLE XI
The Trust and Trustee
11.01 The Trust. A Trust, known as the GRAND PREMIER
FINANCIAL, INC. SAVINGS AND STOCK TRUST is hereby established for
the purposes of the Plan and the assets thereof shall be held,
invested and disposed of by the Trustee acting in accordance with
this Article XI and other applicable provisions of the Plan.
11.02 The Trustee. GRAND PREMIER TRUST AND INVESTMENT,
INC. is hereby continued as Trustee of the Trust and hereby
agrees to accept the terms of the Trust as herein amended and
restated and to perform the duties created hereunder.
11.03 The Fund. The Fund shall be held by the Trustee
in trust and dealt with in accordance with the provisions of the
Plan and Trust hereby established. All contributions received by
the Trustee under the Plan shall be credited to and thereafter
held as a part of the Fund. The Trustee shall not be under any
duty to require payment of any contributions to the Fund, or to
see that any payment made to it is computed in accordance with
the provisions of the Plan, or otherwise be responsible for the
adequacy of the Fund to meet and discharge any liabilities under
the Plan. The Fund shall be used and applied only in accordance
with the Plan and Trust and no part of the principal or income of
the Fund shall be used for or diverted to purposes other than for
the exclusive benefit of Participants and their Beneficiaries and
for the payment of expenses and taxes in accordance with the
provisions of the Plan, and the Employers shall have no right,
title or interest in the Fund or any part thereof and none of the
contributions made thereto shall revert to the Employers, except
as expressly permitted under Section 14.12.
11.04 Investment Funds. The Company or the Committee
shall direct the Trustee to maintain, or cause an Investment
Manager to maintain, the following Investment Funds:
(a) a Company Stock Fund, which shall be invested in
Company stock to the extent shares are available for purchase;
and
(b) such other Investment Funds as the Company or the
Committee deems advisable.
The Company may change the number or composition of the
Investment Funds, subject to the terms and conditions agreed to
with the Trustee. In addition, the Committee may, from time to
time, in its discretion:
(c) limit investments in or transfers from an
Investment Fund; or
(d) liquidate, consolidate or otherwise reorganize an
existing Investment Fund.
11.05 Participant Investments. Except as provided in
Section 7.09, all amounts held in this ESOP Account on January 1,
1997, shall remain in the ESOP Account on and after that date.
Participants shall be given the option to direct the investment
of all contributions made on their behalf into any one or more of
the Investment Funds. Such Investment Funds shall be under the
full control and management of the Committee and the Trustee or
Investment Manager. In this connection, a Participant's right to
direct the investment of any contribution shall apply only to
selection of the desired Investment Fund. The following rules
shall apply to the administration of such Investment Funds:
(a) Each Participant may make an election to invest
the Contributions made on his or her behalf and posted to his or
her Accounts in whole multiples of one percent (1%) in one or
more Investment Funds. Such Participant must notify the
Committee in writing on the appropriate form (or by such other
method, such as a telephone access system, as may be made
available by the Committee) of his or her investment election at
least 15 days before the Participant s initial Entry Date or all
Contributions made on the Participant s behalf shall be invested
in all the Investment Fund that is a money market fund (or that
most nearly bears the investment characteristics of a money
market fund if no Investment Fund is a money market fund.).
(b) A Participant may direct the investment of any new
Contributions made on his or her behalf or redirect the
investment of his or her existing Account balances (other than
his or her ESOP Account) in whole multiples of one percent (1%),
by completing a form furnished by the Committee or by such other
method, such as a telephone access system, as may be made
available by the Committee.
(c) A Participant's initial investment election and
any change in such investment election will be effective with
respect to an Investment Fund on the business day following the
day on which the investment election is received pursuant to
procedures specified by the Committee. A Participant's
investment election shall continue in effect, notwithstanding any
change in his or her Compensation or his or her Salary Savings
Agreement, until the effective date of a new investment election.
A Participant may change his or her investment election as to
future Contributions at any time.
(d) If the Participant elects to invest, or change
investment of, his or her Account balance in more than one
Investment Fund, he or she must designate in whole multiples of
one percent (1%) what percentage of his or her Accounts is to be
invested in each Investment Fund. A Participant or Beneficiary
may make an Investment Election to change the allocation of his
or her Account Balance among the Investment Funds at any time.
(e) An investment election to change a Participant's
investment of his or her Account balance in one Investment Fund
to another Investment Fund shall be effective at the end of the
business day following the day on which the election is received
pursuant to procedures specified by the Committee.
Notwithstanding the foregoing, the amount of any permissible
investment election may be reduced or the effective date of any
investment election may be delayed to the extent required by the
provisions of any Investment Fund, the availability of an
Investment Fund, the ability to purchase Company Stock or such
other circumstances as the Committee may determine.
Notwithstanding the provisions of this Section 11.05 and Section
11.04, the Company Stock Fund shall not be available as an
investment option for Participants, both as to new contributions
and existing aggregate Account balances, until such time as a
Registration Statement is filed with the U.S. Securities Exchange
Commission registering the offer and sale of additional shares of
Company Stock under the Plan.
11.06 Powers of Trustee. So long as his, her or its
action is consistent with ERISA and Section 401 of the Code and
amendments to ERISA and the Code, the Trustee is authorized and
empowered, but not by way of limitation:
(a) To invest and reinvest the principal and income of
the Fund and keep the Fund invested, without distinction between
principal and income, in such stocks, bonds, notes or other
securities or in such other property, real or personal (and may
invest the entire Fund in securities of the Company or any
Affiliate pursuant to Section 6.01), or in any fund created and
administered for the collective investment of money or property
of employee benefit trusts then qualified under Sections 401(a)
and 501(a) of the Code (in which case the provisions of the
documents governing such collective investment fund shall govern
any investment therein, and are hereby made a part of this Trust)
as the Trustee may deem proper without being limited by any
statute or rule of law regarding investments by trustees other
than ERISA. The Trust may be invested, maintained and reinvested
in any such property even though the Trustee, in its individual
or any other capacity, shall have invested, or may thereafter
invest, its own or other funds in the same or similar property
the interest, principal or other avails of which may be payable
at different rates or times or may have different ranks or
priorities. The Trustee, in its discretion, may keep such
portion of the Fund in cash or cash balances in a banking
institution (which may but need not be the Trustee if the Trustee
is a banking institution) or in a savings and loan association as
the Trustee may from time to time deem to be in the best
interests of the Fund.
(b) To sell, exchange, convey, transfer or otherwise
dispose of any property held by him or her by private contract or
at public auction, and no persons dealing with the Trustee shall
be bound to see to the application of the purchase money or to
inquire into the validity, expediency or propriety of any such
sale or other disposition.
(c) To borrow money for the benefit of the Fund and to
secure such loan by a pledge or mortgage of all or part of the
Fund, and to renew loans at any time.
(d) To vote upon any stocks, bonds or other securities
(subject to Section 6.02 in the case of Company Stock); to give
general or special proxies or powers of attorney with or without
powers of substitution; to exercise any conversion privileges,
subscription rights or other options and to make any payments
incidental thereto; to consent to or otherwise participate in
corporate reorganizations or other changes affecting corporate
securities, to delegate discretionary powers and to pay any
assessments or charges in connection therewith; and generally to
exercise any of the powers of any owner with respect to stocks,
bonds, securities, insurance contracts or other property held in
the Fund.
(e) To make, execute, acknowledge and deliver any and
all documents of transfer and conveyance and any and all other
instruments that may be necessary or appropriate to carry out the
powers herein granted.
(f) To register any investment held in the Fund in
his, her or its own name or in the name of a nominee and to hold
any investment in bearer form, but the books and records of the
Fund.
(g) To employ such agents, custodians, brokers,
assistants, actuaries, and counsel as the Trustee may deem
necessary for the proper administration of the Trust, unless such
persons are provided by the Company, and to be fully protected in
action upon the advice of said counsel, who may, but need not be,
counsel for the Company. The Trustee shall, at no time, be
obliged to institute, or become a party to, any legal action
unless indemnified to his, her or its satisfaction for any fees,
costs and expenses to be incurred in connection therewith.
(h) To pay from the Fund all reasonable and necessary
expenses, including. but not by way of limitation, taxes of any
kind, fees for agents, attorneys, or other counsel, incurred in
connection with the collection, administration, management,
investment, protection and distribution of the Fund to the extent
that they are not paid by the Company; and
(i) To do all acts whether or not expressly
authorized, which he or she may deem necessary or proper for the
protection of the property held hereunder.
11.07 Compensation and Expenses. A corporate Trustee
shall be entitled to compensation for services hereunder as
agreed between the Company and the Trustee and the Company or the
Employers shall reimburse the Trustee for any and all necessary
expenses incurred in the administration of the Plan, to the
extent such expenses are not paid by the Trust in accordance with
Section 14.16. The Company may provide the Trustee with
clerical, bookkeeping and stenographic help and facilities that
may be necessary to enable the Trustee to perform his, her or its
functions hereunder and may appoint consultants, accountants, or
other assistants, to perform any nondiscretionary function of the
Trustee under the supervision and direction of the Trustee.
11.08 Accounts. The Trustee shall keep accurate and
detailed accounts of all investments, receipts, disbursements and
other transactions hereunder, and all accounts, books and records
relating thereto shall be open to inspection and audit at all
reasonable times by any persons designated by the Company. As of
the close of each calendar year, or as of the close of such other
fiscal period as the Company may, from time to time, designate,
or as of the date of the removal or resignation of the Trustee,
as provided in Section 11.10 hereof, the Trustee shall file with
the Company a written account setting forth all investments,
receipts, disbursements and other transactions effected by the
Trustee during the period from the date of the last such account.
11.09 Duty of Person Dealing With Trustee. No person
dealing with the Trustee shall be under any obligation to inquire
into the validity or propriety of any action by the Trustee, the
application of any property delivered to him or her or the
exercise by him or her of any of the powers conferred upon him or
her by this agreement. The execution by the Trustee of any
instrument, document or paper in connection with the exercise of
any of the powers enumerated herein shall, of itself, be
conclusive evidence to all persons of the authority of the
Trustee to execute the same and to exercise all powers incident
thereto.
11.10 Resignation and Removal of the Trustee. The
Company may remove the Trustee at any time upon thirty (30) days'
notice in writing to the Trustee. The Trustee may resign at any
time upon thirty (30) days' notice in writing to the Company.
Such notice of removal or resignation may be waived by the party
entitled thereto provided a successor Trustee shall have been
appointed and accepted his, her or its appointment in writing.
Upon such removal or resignation of the Trustee, the Company
shall appoint a successor Trustee, who shall have the same powers
and duties as those conferred upon the Trustee hereunder.
11.11 Investment Fund Transition Rules. Effective as of
the date any Investment Fund is added or deleted, each
Participant shall have the opportunity to make new investment
elections. The Committee and Trustee may use any reasonable
accounting methods in performing their respective duties during
the period of transition from one Investment Fund to another,
including, but not limited to:
(a) designating into which Investment Fund a Participant's
Account balance will be invested if the Participant fails to
submit a proper investment election;
(b) the method for allocating net investment gains or
losses and the extent, if any, to which amounts received by and
distributions paid from the Trust during this period share in
such allocation; and
(c) investing all or a portion of the Trust's assets in a
short-term, interest-bearing Fund during such transition period.
ARTICLE XII
Plan Administration
12.01 Allocation of Responsibility Among Fiduciaries.
The Company, the other Employers, the Trustee and the members of
the Committee each shall have only those specific powers, duties,
responsibilities and obligations as are specifically given them
under this Plan and the Trust. In general, the Company through
the Board and each Employer through its board of directors (or
through its Board of behalf of Employers other than the Company
pursuant to Section 14.15) shall have the sole responsibility for
making Employer contributions to the Fund in accordance with
Article IV hereof. The Company through the Board shall have the
sole responsibility to amend or terminate the Plan, in whole or
in part, in accordance with Article XIII hereof, and sole
responsibility to appoint and remove the Trustee and the members
of the Committee. The Committee shall be responsible for the
administration of the Plan as provided herein. The Trustee shall
be responsible for the administration of the Trust and the
custody and management of the assets held under the Trust. Each
of the Company, the members of the Committee, and the Trustee,
shall be a fiduciary ("Fiduciary") of the Plan to, but only to,
the extent he, she or it (i) exercises any discretionary
authority or discretionary control respecting the management of
the Plan or exercises any authority or control respecting
management of its assets, (ii) renders investment advice for a
fee or other compensation, direct or indirect, with respect to
the Fund or has any authority or responsibility to do so, or
(iii) has any discretionary authority or discretionary
responsibility in the administration of the Plan. Each Fiduciary
may rely upon any direction, information or action of another
Fiduciary as being proper under the Plan, and it is not required
under the Plan to inquire into the propriety of any such
direction, information or action. It is intended under this Plan
that each Fiduciary shall be responsible for the proper exercise
of its own powers, duties, responsibilities and obliations under
this Plan and shall not be responsible for any act or failure to
act of another Fiduciary. No Fiduciary guarantees the Fund in
any manner against investment loss or depreciation in asset
value.
12.02 Fiduciary Duties. All Fiduciaries shall discharge
their duties as Fiduciaries solely in the interest of the
Participants and Beneficiaries and for the exclusive purpose of
providing benefits to Participants and their Beneficiaries and
defraying reasonable expenses of administering the Plan. They
shall discharge such duties with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent
man acting in a like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and
with like aims. They shall not maintain the indicia of ownership
of any assets of the Plan outside the jurisdiction of the
district courts of the United States. The Fiduciaries shall not
do any action prohibited under or in violation of Part 4 of Title
I of ERISA, or which would subject any person or the Company to
imposition of a tax under Section 4975 of the Code.
12.03 The Committee. The Plan will be administered by a
Committee composed of at least three persons who are officers,
directors, or employees of an Affiliate. Each member of the
Committee shall be appointed by the Company and shall thereafter
serve until death, resignation, or removal by the Company or
until he or she ceases to be an officer, director, or employee of
an Affiliate. Any member of the Committee may resign at any time
upon at least 15 days notice in writing to the Company. The
Company may remove any member of the Committee at any time upon
giving notice in writing to such member. Upon such resignation,
or removal, or upon the death of a member of the Committee, or
his or her ceasing to be an officer, director, or employee of an
Affiliate, the Company may, and if the membership of the
Committee would otherwise be less than three shall, promptly
appoint a successor member who shall have the same powers and
duties as those conferred upon his or her predecessor. The
Committee shall elect one of its members as chairman, and any
document required to be filed with, or any notice required to be
given to, the Plan or the Committee will be properly filed or
given if mailed or delivered, to the chairman.
12.04 Committee Action. The Committee shall act with or
without a meeting by the vote or concurrence of a majority of its
members; provided, however, that no member of the Committee who
is a Participant in the Plan shall take part in any action having
particular reference to his or her own benefits hereunder. All
written directions by the Committee may be made over the
signatures of a majority of its members and all persons shall be
protected in relying on such written directions.
12.05 Administrative Powers. In its sole discretion the
Committee shall have the administrative powers and duties
specified in this instrument, which shall include but not be
limited to the following powers and duties:
(a) Determinations of Fact. To determine all
questions relating to the administration of the Plan, including
the power to determine whether a Participant has resigned or has
been dismissed or is Retired or is married or Permanently
Disabled or dead, the date of any such resignation, dismissal,
Retirement, Permanent Disability or death, or as to the age or
identity of a Participant or Beneficiary or whether a Beneficiary
is living or dead, and to resolve all other questions of fact
relating to the rights or eligibility of Employees and
Participants and their Beneficiaries, and the amounts of their
respective interests; and its determinations shall be final and
binding on all persons whomsoever;
(b) Construction of the Plan. To construe and
interpret the terms and provisions of the Plan and resolve in its
discretion any ambiguities in the application of the Plan; and
its determinations shall be final and binding on all persons
whomsoever;
(c) Direction. To direct the Trustee with respect to
payment from the Fund;
(d) Procedures and Forms. To establish uniform and
nondiscriminatory procedures and requirements, consistent with
the terms and purposes of this Plan, for the time and manner of
making Salary Savings Contributions (including the form of Salary
Savings Agreement), Voluntary Contributions, and Rollover
Contributions, the making of investment elections by Participants
and directing transfers to and from the various Investment Funds,
the payment of distributions to Participants and Beneficiaries,
the designation of Beneficiaries, and like matters;
(e) Rules. To adopt such rules and regulations as the
Committee may deem reasonably necessary for the proper and
efficient administration of the Plan and consistent with its
purposes;
(f) Enforcement. To enforce the Plan in accordance
with Its terms and with the Committee's own procedures, rules and
regulations and to settle and discharge disputes arising
thereunder;
(g) Records. To maintain the account records of all
Participants;
(h) Loans. To administer the loan program established
by Article VIII;
(i) Retention of Services. To retain counsel, employ
agents and provide for such clerical, accounting, actuarial and
consulting services as may be required in carrying out the
provisions of the Plan. The Committee shall be entitled to rely
conclusively upon, and shall be fully protected in any action
taken by it in good faith in relying upon, any opinions or
reports that shall be furnished to it by any such counsel, agents
or other persons; and
(j) Additional Powers. To do all other acts in the
Committee's opinion necessary or desirable for the proper and
advantageous administration of the Plan.
12.06 Investment Direction and Investment Manager. The
Committee, by written notice to the Trustee, may assume the right
to direct the Trustee with respect to the investment of all or of
any designated portion of the Fund or may by written notice to
the Trustee advise the Trustee of the appointment of an
Investment Manager to manage all or any designated portion of the
Fund. Any Investment Manager shall be appointed by the Committee
and shall serve pursuant to written Agreement with the Committee
at the pleasure of the Committee. Any notice to the Trustee shall
remain in force until revoked or amended by further written
notice to the Trustee. To the extent the Committee assumes or
appoints an Investment Manager to assume such responsibilities,
the Committee or the Investment Manager shall give instructions
to the Trustees for the purchase, sale, exchange or other
acquisition or disposition of securities, or an Investment
Manager may directly make any such purchase, sale, exchange or
other acquisition or disposition of securities, on behalf of and
for the Account of the Fund. The Trustee shall follow the
instructions of the Committee or the Investment Manager and shall
be under no obligation to make any investment review or to
consider the propriety of holding or selling any securities or
property of the Fund subject to the management of the Committee
or an Investment Manager. The Trustee shall not be liable or
responsible for any loss resulting to the Fund by reason of its
following such instructions of the Committee or the Investment
Manager or by reason of its failure to take any action with
respect to any investment which was acquired pursuant to any such
Instructions in the absence of further Instructions of the
Committee or the Investment Manager.
12.07 Records and Reports. The Committee shall have the
responsibility to meet the reporting and disclosure requirements
with respect to the Plan, including filing the annual reports
with the Internal Revenue Service. The Committee shall exercise
such authority and responsibility as it deems appropriate in
order to comply with ERISA and governmental regulations issued
thereunder relating to records of Participants' service and
Accounts.
12.08 Information to be Provided. The Committee shall
furnish and make available to Participants and Beneficiaries and
to the Secretary of Labor or his or her delegate, and to the
Secretary of the Treasury or his or her delegate such plan
descriptions, summaries, reports, registration statements,
notifications and other documents as may be required by ERISA and
the Code and regulations thereunder, and the Committee shall
retain such records for such periods as may be required by such
laws and regulations.
ARTICLE XIII
Amendment, Merger and Termination
13.01 Amendment. The Company reserves the right, at any
time or times to amend this Plan and the Trust established
hereunder to any extent and in any manner that it may deem
advisable and all Participants and persons claiming any interest
hereunder shall be bound thereby; provided, however, that no
amendment may be adopted the effect of which would be:
(a) to divest any Participant or Beneficiary of his or
her then vested interest in the Fund, the vested interest of a
Participant who is still an Employee being the benefit to which
he or she would have been entitled had he or she then resigned;
(b) except as permitted by regulations under Section
411(d) of the Code, to eliminate or reduce, with respect to the
aggregate Account balances of any Participant or Beneficiary as
of the later of the date such amendment is adopted or effective,
any early retirement subsidy that continues alter retirement, or
an optional form of benefit;
(iii) except as provided by Section 14.12, to cause
any part of the Fund or its income to be used for, or diverted
to, any purpose other than the exclusive benefit of Participants
or their Beneficiaries; or
(iv) to materially increase the duties and
responsibilities of the Trustee without its consent.
Notwithstanding the foregoing provisions of this Section,
however, this Plan may be amended in any manner whatsoever, with
prospective or retroactive effect, for the purpose of qualifying
it under Section 401 of the Code or complying with any provision
of ERISA. Any amendment of the Plan shall be by written
instrument adopted by the Board of Directors, or by such
committee to whom the Board of Directors has expressly delegated
the power and authority to amend the Plan.
13.02 Merger. The Company may direct a merger or
combination of this Plan with, or a transfer of part or all of
its assets and liabilities to, any other plan or trust qualified
under Section 401(a) of the Code ("other plan"). In the event of
any such merger, consolidation or assets or liabilities, each
Participant in the Plan whose interests were so merged,
consolidated or transferred into, with, or to the other plan must
be entitled to receive a benefit immediately thereafter (if the
other plan then terminated) which would be equal to or greater
than the benefit he or she would have been entitled to receive
immediately theretofore (if the Plan had then terminated).
13.03 Termination. Anything to the contrary herein
notwithstanding, this Plan and the Trust established hereunder
may be terminated (in whole or in part) by the Company by a duly
adopted resolution of the Board or further contributions
hereunder may be discontinued by any Employer by a duly adopted
resolution of its board of directors. In the event of
termination (whether in whole or in part) and notwithstanding
anything herein to the contrary, the interests of all affected
Participants shall be fully vested and no part of any such
Participant's Accounts shall thereafter be forfeited for any
reason whatsoever except as provided in Section 8.01 and 14.11.
Upon such termination or discontinuance, the assets of the Fund
shall be held and administered by the Trustee for the benefit of
the Participants in the same manner and with the same powers,
rights, duties and privileges herein prescribed, until the Fund
has been fully distributed pursuant to the provisions of Article
VII hereof, provided, however, that subject to Section 411(a)(11)
of the Code, in the case of a termination of the Plan (in whole
or in part), the Board may direct the Trustee to make
distribution of the Accounts as soon as practicable in accordance
with the provisions of Article VII hereof to each affected
Participant as if he or she were Retiring on the date of such
termination.
13.04 Partial Termination. In the event of any partial
termination of the Plan under Section 13.03 an appropriate
portion of the assets of the Fund attributable to the
Participants and Beneficiaries subject to such partial
termination shall be segregated, held and administered by the
Trustee for the benefit of such Participants and Beneficiaries as
provided in Section 13.03; and the interests (including the ESOP
Account, Employer Discretionary Account and Profit Sharing
Accounts of each affected Participant) shall, notwithstanding
Section 7.03, thereafter be fully vested and nonforfeitable
except as provided in Sections 8.01 and 14.11.
ARTICLE XIV
Miscellaneous
14.01 Interest of Participants. No Participant or
Beneficiary shall have any right to, or interest in, any part of
the Fund, except as expressly provided in this Plan. Any person
claiming benefits under this Plan will look solely to the Fund
for payment.
14.02 Title to Assets. No Participant or Beneficiary
shall have any title or claim in or to any specific assets in the
Fund but shall have only a proportionate interest in the Fund as
a whole.
14.03 Not a Contract of Employment. This Plan shall not
be deemed to be a contract of Employment between the Company or
any Affiliate and any Employee. Nothing contained herein shall be
deemed to give to any Employee the right to be retained in
Employment or to interfere with the right of the Company or
Affiliate to discharge any Employee at any time. Nothing
contained herein shall be deemed to give the Company or Affiliate
the right to require any Employee to remain employed, or to
interfere with the Employee's right to terminate his or. her
Employment at any time.
14.04 Spendthrift Clause. Except as otherwise provided
in Sections 7.14, 8.01 and 14.10, amounts payable under this Plan
to a Participant or Beneficiary shall be paid only to him or her
and upon his or her personal receipt. No benefit payable under
the provisions hereof shall be assigned or alienated or be
subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge. Any attempt
to so anticipate, alienate, sell, transfer, assign, pledge,
encumber or charge shall be void, nor shall the Fund be in any
manner liable for or subject to the debts, contracts,
liabilities, engagements or torts of the persons entitled to any
benefit payment.
14.05 Addresses. Each person entitled to benefits
hereunder shall file with the Committee from time to time in
writing his or her complete mailing address and change of mailing
address. Any check representing payment hereunder and any
communication addressed to a Participant or to any other person
at his or her last address so filed (or if no such address has
been filed, then at his or her last address indicated on the
records of the Company or any Affiliate) shall be deemed to have
been received by such person for all purposes of the Plan, and
neither the Committee, Trustee nor the Company or any Affiliate
shall be obliged to search for or ascertain the location of any
such persons.
14.06 Information on Participants. Participants shall
furnish promptly to the Committee such Information as the
Committee reasonably considers necessary or desirable for the
purpose of administering the Plan. If such information is not
submitted, or shows that such information previously has been
misstated on the records of the Plan, the Committee will make
such corrections and adjustments in accordance with the available
facts as it considers appropriate.
14.07 Regularly Kept Records Are Binding. The regularly
kept records of the Company or Affiliate shall be conclusive and
binding upon all persons with respect to the nature and length of
Employment, the type and amount of compensation paid and the
manner of payment thereof, the type and length of absence from
work and all other matters contained therein relating to
employees.
14.08 Claims. Any claim for benefits not received or
received in an improper amount shall be made in writing to the
Committee. The Committee shall consider such claim and shall
either approve it or deny It within 90 days, unless within 90
days the Committee determines that special circumstances require
an extension of time in processing the claim and so notifies the
claimant in writing of such extension, the special circumstances
justifying the extension, and the date by which the Committee
expects to render a final decision. In no event shall extension
exceed a further period of 90 days. Each denial shall be in
writing, setting forth the specific reasons for such denial and
be written in a manner calculated to be understood by the
Participant or Beneficiary. Within 60 days after the receipt
from the Committee of any written denial of a claim for benefits,
or within 60 days from the end of the period (after any
applicable extension) for initial consideration of claims if no
decision has been rendered by that date (which shall be deemed a
denial of such claim), a Participant (or Beneficiary) whose claim
is denied (or deemed denied) may request, by written application
to the Committee, a review by the Committee of the decision
denying the payment of benefits. In connection with such review,
such Participant (or Beneficiary) shall be entitled to review any
and all documents pertinent to the claim or its denial and shall
also be entitled to submit issues and comments in writing. The
decision of the Committee upon such review shall be made promptly
and not later than 60 days after the receipt of such request for
review, unless special circumstances require an extension of time
for processing, in which case a decision shall be rendered as
soon as possible, but no later than 120 days alter the
Committee's receipt of a request for review. The decision on
review shall be written in a manner calculated to be understood
by the Participant (or Beneficiary), shall include specific
reasons for the decision and specific refernces to the pertinent
Plan provisions on which the decision is based, and shall be
final.
14.09 Indemnification. Except as otherwise provided in
ERISA, the Company, any Affiliate, their directors, officers,
employees and agents, the Trustee, the members of the Committee
or any of them, shall not incur any personal liability for the
breach of any responsibility, obligation, or duty in connection
with any act done or omitted to be done in good faith in the
management and administration of the Plan and Trust established
hereunder and the Investment and handling of the Fund and shall
be indemnified and held harmless by the Employers from and
against any such personal liability including all expenses
reasonably incurred in its or their defense in case the Employers
fail to provide such defense.
14.10 Payments to Minors. Etc. In the event any portion
of the Fund becomes distributable under the terms hereof to a
minor or other person under a legal disability, the Committee, in
its sole discretion, may direct that such distribution shall be
made in any one or more of the following ways:
(a) directly to said minor or other person;
(b) to the legal guardian or conservator of said minor
or other person; or
(c) to the spouse, parent, brother, sister, child or
other relative of said minor or other person for the use of said
minor or other person.
The Committee shall not be required to see to the application of
any distributions so made to any of said persons, but the receipt
therefor shall be a full discharge of the liability of the
Trustee and the Fund to such minor or other person.
14.11 Unclaimed Payments. If any check or other
instrument in payment of a benefit hereunder, which was mailed by
regular United States mail to the address of the payee furnished
the Committee or Trustee by the payee or the Company or an
Affiliate is returned unclaimed, the Trustee shall notify the
Committee and shall discontinue further payments to such payee
until the Committee or Trustee receives further information and
instructions from such payee or the Company or an Affiliate. Such
discontinuance shall not be treated as a forfeiture of any
unclaimed or future payment, provided, however, that where the
Committee or Trustee is unable to locate a payee and an amount
has been distributable and unclaimed for three (3) years
following the date distribution was to be made or commenced, or
upon the termination of the Plan if earlier, the entire
distribution payable to such payee shall be forfeited and used to
pay current or reasonably anticipated expenses of the Plan or the
Trust; or if there are no such current or anticipated expenses,
treated as a Profit Sharing Contribution and allocated as set
forth in Section 5.05 hereof. Any amounts so treated shall again
become payable to such payee as an administrative expense of the
Plan upon his or her filing a written claim for benefits under
the Plan with the Committee containing his or her complete
mailing address and such evidence that he or she is entitled to
such benefits as the Committee may require.
14.12 Reversions. In no event shall any of the assets
of the Fund revert to the Employers except the sum, if any,
remaining in the Fund after all liabilities under the Plan to
Participants and Beneficiaries have been fully satisfied and
discharged; provided, however, that there shall be returned to
the Employers:
(a) contributions made by a mistake of fact, within
one (1) year after the payment of such contributions;
(b) contributions conditioned upon their deductibility
under Section 404 of the Code to the extent the deduction is
disallowed, within one (1) year alter the disallowance of the
deduction; and
(c) any amounts remaining in the suspense account for
excess annual additions maintained under Section 9.04 upon
termination of the Plan, as soon as practicable after all
liabilities of the Plan to Participants and their Beneficiaries
have been satisfied.
The amount of any contribution that may be returned to any
Employer pursuant to subparagraph (i) above shall be reduced by
any portion thereof previously distributed from the Fund and by
any losses of the Fund allocable thereto, and in no event shall
the return of such contribution cause the balance of any
Participant's Accounts to be less than the amount of the such
balance had the contribution not been made.
14.13 Necessary Parties. Necessary parties to any
accounting, litigation or other proceedings shall include only
the Trustee, Committee and the Company, and the settlement or
judgment in any such cases in which the Company is duly served or
cited shall be binding upon all members of the Plan, Participants
and their Beneficiaries and estates and all persons claiming by,
through or under them.
14.14 Company Action. Any action this Plan requires or
permits the Company to take shall be duly and properly taken if
done by written resolution of the Board; or, except where
otherwise expressly provided in this Plan, in writing by an
individual authorized generally by the by-laws of the Company or
specifically by such written resolution of the Board to take
actions of such kind respecting this Plan.
14.15 Company as Agent for Employers. In the event an
Affiliate other than the Company becomes an Employer hereunder by
adopting this Plan with the consent of the Company for the
benefit of its eligible employees, such Employer irrevocably
appoints the Company as its agent to do all acts and things
respecting the Plan on its behalf; to the end that the Trustee,
Committee, Participants and Beneficiaries and all other persons
may deal with the Company respecting this Plan as if it were the
only Employer under this Plan.
14.16 Plan Expenses. All taxes of any kind upon or in
respect of the Fund or its income, including income taxes upon
Participants or Beneficiaries respecting distributions from the
Fund and required by the Code or any other federal, state or
local revenue law to be withheld at the source, but excepting
only any federal excise taxes respecting the Plan or its
operation that the Code specifically imposes on the Company or
other persons and not on the Fund, shall be paid by the Trustee
from the Fund. All other expenses incurred in the management or
administration of the Plan and the Trust may, in the discretion
of the Company, be paid by the Company, but if for any reason not
paid by the Company shall be paid by the Trustee from the Fund
unless the Company has affirmatively directed the Trustee in
writing not to pay such expenses; in which event the Company
shall indemnify the Trustee and the Fund from and against such
expenses and all other costs and charges (including attorneys
fees and costs of collection imposed on the Trustees or the Fund)
respecting such expenses.
14.17 Agent for Service of Process. The agent for
service of process under the Plan shall be the Secretary of the
Company.
14.18 Illinois Law to Govern. This Plan and the Trust
established hereunder shall be administered, construed and
regulated and its validity and effect and the rights hereunder of
all parties interested shall at all times be determined in
accordance with the laws of the State of Illinois subject,
however, to applicable provisions of ERISA and the Code.
14.19 Special Rules Relating to Veterans Reemployment
Rights Under USERRA.
Effective on and after December 12, 1994, the following special
provisions of this Section shall apply to an Employee or
Participant who is reemployed in accordance with the reemployment
provisions of USERRA following a period of qualifying military
service (as determined under USERRA):
(a) Each period of qualifying military service served
by an Employee or Participant shall, upon such reemployment, be
deemed to constitute Employment with the Employer for all
purposes of the Plan, including determining the Participant s
vested percentage in his Employer Discretionary and Profit
Sharing Accounts.
(b) The Participant shall be permitted to make up
Salary Savings Contributions missed during the period of
qualifying military service. The Participant shall have a period
of time beginning on the date of the Participant s reemployment
with the Employer following his period of qualifying military
service and extending over the lesser of (i) the product of three
and the Participant s period of qualifying military service, and
(ii) five years, to make up such missed Salary Savings
Contributions.
(c) If the reemployed Participant elects to make up
Salary Savings Contributions in accordance with paragraph (b)
above, the Employer shall make any Matching Contributions that
would have been made on behalf of such Participant had the
Participant made such Salary Savings Contributions during the
period of qualifying military service.
(d) If the Employer made any Employer Discretionary or
Profit Sharing Contributions to the Plan during the period of
qualifying military service, it shall make an Employer
Discretionary and Profit Sharing Contribution on behalf of the
Participant upon the Participant s reemployment following his
period of qualifying military service, in the amount that would
have been made on behalf of such Participant had the Participant
been employed during the period of qualifying military service.
(e) The Plan shall not (i) credit earnings to a
Participant s Accounts with respect to any Salary Savings,
Matching, Discretionary or Profit Sharing Contribution before
such Contribution is actually made, or (ii) make up any
allocation of forfeitures, with respect to the period of
qualifying military service.
(f) A reemployed Participant shall be entitled to
accrued benefits attributable to Salary Savings Contributions
only if such Contributions are actually made.
(g) For all purposes under the Plan, including the
Employer s liability for making contributions on behalf of a
reemployed Participant as described above, the Participant shall
be treated as having received Compensation from the Employer
based on the rate of Compensation the Participant would have
received during the period of qualifying military service, or if
that rate is not reasonably certain, on the basis of the
Participant s average rate of Compensation during the 12-month
period immediately preceding such period.
(h) If a Participant makes a Salary Savings
Contribution or the Employer makes a Matching, Discretionary or
Profit Sharing Contribution in accordance with the foregoing
provisions of this Section 14.19:
(i) such Contributions shall not be subject to
any otherwise applicable limitation under Code Sections 402(g),
404(a) or 415, and shall not be taken into account in applying
such limitations to other Participant or Employer Contributions
under the Plan or any other plan, with respect to the year in
which such Contributions are made, and such Contributions shall
be subject to these limitations only with respect to the year to
which such Contributions relate and only in accordance with
regulations prescribed by the Internal Revenue Service; and
(ii) the Plan shall not be treated as failing to
meet the requirements of Code Sections 401(a)(4), 401(a)(26),
401(k)(3), 401(k)(11), 401(k)(12), 401(m), 410(b) or 416 by
reason of such Contributions.
ARTICLE XV
Provisions Applicable to Annuity Distributions
15.01 Annuity Forms of Distribution. A Participant who
elects the annuity form of distribution in accordance with
Section 7.06 shall receive a distribution of his Accounts in the
form of a Qualified Joint and Survivor Annuity, unless such
Participant elects one of the optional annuity forms specified
below. The optional forms of retirement benefit are:
(a) a Qualified Joint and Survivor Annuity;
(b) a straight life annuity;
(c) a single life annuity with a period certain of
ten or fifteen years guaranteed;
(d) a survivorship life annuity with survivorship
percentage of 100%; and
(e) a fixed period annuity for any period of whole
months that is not less than sixty and does not exceed the life
expectancy of the Participant and the named Beneficiary as
provided in Section 15.06.
15.02 Determining Optional Form of Distribution;
Qualified Elections. Unless a qualified election of an optional
form of benefit distribution (other than a Qualified Joint and
Survivor Annuity) is made pursuant to the qualified election
provisions of subsection 15.05, the form of retirement benefit
for a Participant who elects to receive the annuity form of
benefit in Section 7.06 shall be determined as follows:
(a) for a Participant who does not die before his
Benefit Starting Date, a Qualified Joint and Survivor Annuity;
and
(b) for a Participant who dies before his Benefit
Starting Date, either:
(i) a Qualified Preretirement Survivor Annuity
under which the spouse may elect to start receiving the death
benefit on any first day of the month after the date the
Participant dies and before the date the Participant would have
been age seventy and one-half (70-); provided, however, that if
the spouse dies before benefits start, the Participant's vested
Account balance, determined as of the date of the spouse's death,
shall be paid to the spouse's Beneficiary; or
(ii) a lump sum payment to the Participant's
Beneficiary for a Participant who does not have a spouse who is
entitled to a Qualified Preretirement Survivor Annuity.
15.03 Qualified Joint and Survivor Annuity. For a
Participant who has a spouse, an immediate survivorship life
annuity where the survivorship percentage is 50% and the
Beneficiary is the Participant's spouse. A former spouse will be
treated as the spouse to the extent provided under a qualified
domestic relations order as described in Code Section 414(p). If
a Participant does not have a spouse, the Qualified Joint and
Survivor Annuity means a single life annuity. The amount of
benefit payable under the Qualified Joint and Survivor Annuity
shall be the amount of benefit that may be provided by the
Participant's vested Account.
15.04 Qualified Preretirement Survivor Annuity. A
single life annuity payable to the surviving spouse of a
Participant who: (i) elects to receive a Qualified Joint and
Survivor Annuity form of benefit; and (ii) dies before his
Benefit Starting Date. A former spouse will be treated as the
surviving spouse to the extent provided under a qualified
domestic relations order as described in Code Section 414(p).
15.05 Election Procedures. The Participant or spouse
shall make any election under this Section 15.05 in writing. The
Committee may require such individual to complete and sign any
necessary documents as to the provisions to be made. Any
election permitted under subsection (a) or (b) below shall be
subject to the qualified election provisions of subsection (c)
below:
(a) Retirement Benefits. A Participant may elect one
of the annuity forms described in subsection 15.01.
(b) Death Benefits. If a Participant dies before his
Benefit Starting Date, death benefits shall be distributed as
follows:
(i) If the Participant has a surviving spouse
Beneficiary and elected to receive his benefit in the form of a
Qualified Joint and Survivor Annuity, the surviving spouse shall
receive distribution of the Participant's Account in the form of
a Qualified Preretirement Survivor Annuity. The spouse may waive
the Qualified Preretirement Survivor Annuity by electing to have
the Account distributed in a lump sum.
(ii) If the Participant's Beneficiary is not his
spouse, any election of an optional form of benefit made by the
Participant before the Participant's death shall be revoked, and
the Participant's Beneficiary shall receive a distribution of the
Participant's Account in a lump sum.
(c) Qualified Election.
(i) The Participant or spouse may make an
election at any time during the election period. The Participant
or spouse may revoke the election made (or make a new election)
at any time and any number of times during the election period.
An election is effective only if it meets the consent
requirements below.
(ii) The election period as to retirement benefits
is the ninety (90) day period ending on the Benefit Starting
Date. An election to waive the Qualified Joint and Survivor
Annuity by a Participant who has elected an optional form of
retirement benefit may not be made before the date he is provided
with the notice of the ability to waive the Qualified Joint and
Survivor Annuity. If the Participant elects the series of
installments, he may elect on any later date to have the balance
of his vested Account paid under any of the optional forms of
retirement benefit available under the Plan. His election period
for this election is the ninety (90) day period ending on the
Benefit Starting Date for the optional form of retirement benefit
elected.
(iii) A Participant may make an election as to
death benefits at any time before he dies. The spouse's election
period begins on the date the Participant dies and ends ninety
(90) days after the Participant's date of death. A Participant
may not elect to waive the Qualified Preretirement Survivor
Annuity.
(iv) If the Participant has elected one of the
optional forms of distribution described in subsection 7.06 and
the present value of the Participant's vested Account exceeds
$3,500, any benefit that is payable in a form other than a
Qualified Joint and Survivor Annuity or a Qualified Preretirement
Survivor Annuity requires the consent of the Participant's
spouse. The consent, to be effective, must satisfy the following
criteria:
(A) The spouse's consent shall be witnessed
by a plan representative or notary public.
(B) The spouse's consent must acknowledge
the effect of the election, including that the spouse had the
right to limit consent only to a specific Beneficiary or a
specific form of benefit, if applicable, and that the
relinquishment of one or both such rights was voluntary. Unless
the consent of the spouse expressly permits designations by the
Participant without a requirement of further consent by the
spouse, the spouse's consent must be limited to the form of
benefit, if applicable, and the Beneficiary, class of
Beneficiaries, or contingent Beneficiary named in the election.
(C) Spousal consent is not required if the
Participant establishes to the satisfaction of the plan
representative that the consent of the spouse cannot be obtained
because there is no spouse or the spouse cannot be located.
(D) A spouse's consent under this Section
shall not be valid with respect to any other spouse.
(E) A Participant may revoke a prior
election without the consent of the spouse. Any new election
will require a new spousal consent, unless the consent of the
spouse expressly permits such election by the Participant without
further consent by the spouse.
(F) A spouse's consent may be revoked at any
time within the Participant's election period.
15.06 Benefit Starting Date. For a Participant who has
elected the annuity form of distribution, the first day of the
first period for which an amount is payable as an annuity.
15.07 Notice Requirements. If the Participant elects
the annuity form of benefit, the Committee shall furnish no less
than thirty (30) days and no more than ninety (90) days before
the Benefit Starting Date to the Participant a written
explanation of all the methods of retirement benefit distribution
available under the Plan. The written explanation shall address
each of the following:
(a) With respect to the Qualified Joint and Survivor
Annuity, the Committee shall furnish to the Participant a written
explanation of the following: (A) the terms and conditions of
the Qualified Joint and Survivor Annuity; (B) the Participant's
right to make, and the effect of, an election to waive the
Qualified Joint and Survivor Annuity; (C) the rights of the
Participant's spouse; and (D) the right to revoke an election and
the effect of such a revocation. The Committee shall furnish the
written explanation by a method reasonably calculated to reach
the attention of the Participant no less than thirty (30) days
and no more than ninety (90) days before the Benefit Starting
Date. After the written explanation is given, a Participant or
spouse may make written request for additional information. The
written explanation must be personally delivered or mailed (first
class mail, postage prepaid) to the Participant or spouse within
thirty days from the date of the written request. The Committee
does not need to comply with more than one such request by a
Participant or spouse. The Committee's explanation shall be
written in nontechnical language and will explain the terms and
conditions of the Qualified Joint and Survivor Annuity and the
financial effect upon the Participant's benefit (in terms of
dollars per benefit payment) of electing not to have benefits
distributed in accordance with the Qualified Joint and Survivor
Annuity.
(b) All other methods of distribution. The Committee
shall furnish to the Participant a written explanation of the
material features and relative values of these methods of
distribution, including the automatic method of distribution
described in Section 7.06, and the Participant's right to defer
distribution until Normal Retirement Age. The Committee shall
furnish the written explanation by a method reasonably calculated
to reach the attention of the Participant no more than thirty
(30) days after the Participant's Date of Separation and no more
than ninety (90) days before the Benefit Starting Date.
ARTICLE XVI
ESOP Provisions
16.01 Special Provisions Applicable When an Exempt Loan
Is Outstanding. The provisions of this Article XVI shall be
applicable at any time there is an Exempt Loan outstanding with
respect to the Plan. For purposes of this Article, the following
terms shall have the following respective meanings:
"Exempt Loan" means a loan to the Trust, to enable the Trust
to acquire Company Stock, that is made or guaranteed by the
Company or an Affiliate or by another person that is a
"disqualified person" with respect to the Plan under Section
4975(e)(2) of the Code, and that is intended to meet the
exemption requirements of Section 4975(d)(3) of the Code and
regulations thereunder.
"ESOP Contributions" means any Employer Contribution
determined by the Board that is applied pursuant to Section 16.05
to the repayment of an Exempt Loan.
"ESOP Savings and Matching Contributions" means that
portion, if any, of Salary Savings Contributions and Matching
Contributions that is applied pursuant to Section 16.05 to the
repayment of an Exempt Loan.
"Loan Suspense Account" means the account for unallocated
Company Stock acquired with the proceeds of an Exempt Loan as
provided in Section 16.06.
16.02 Form of Contributions. ESOP Contributions shall
be made in cash to the extent of the portion of the ESOP
Contribution required under Section 16.05 of the Plan to enable
the Trustee to make payment of debt service on any Exempt Loan.
16.03 Accounts of Participants. In the event the
Trustee acquires Company Stock with the proceeds of an Exempt
Loan, such Company Stock and earnings thereon shall be added to
and maintained in a Loan Suspense Account until released as
provided in Section 16.06. The Trustee shall separately account
for contributions made to meet the obligations of the Trust under
the Exempt Loan, earnings on such contributions, and earnings on
the Loan Suspense Account. Notwithstanding Section 11.05, all
ESOP Contributions and ESOP Savings and Matching Contributions
shall be invested in the Company Stock Fund.
16.04 Exempt Loans. The Trustee may, but need not,
enter into an Exempt Loan. Any Exempt Loan to the Trust shall be
subject to the following conditions:
(i) the rate of Interest charged to the Trust must be
reasonable;
(ii) any collateral pledged to the creditor by the
Trust shall consist only of Company Stock purchased with the
proceeds of such Exempt Loan (or with the proceeds of a prior
Exempt Loan repaid with the proceeds of such current Exempt Loan)
and earnings thereon, if any;
(iii) the creditor shall have no recourse against
the Trust except as to such pledged Company Stock held in the
Loan Suspense Account and to earnings thereon, if any;
(iv) repayment of the Exempt Loan may be made only from
Employer contributions (including ESOP Contributions and ESOP
Savings and Matching Contributions) made to enable the Trustee to
repay the Exempt Loan, earnings on Company Stock acquired with
the proceeds of the Loan and held in the Loan Suspense Account,
and from other dividends on Company Stock to the extent permitted
by ERISA or the Code;
(v) in the event of default upon an Exempt Loan, the
value of Plan assets transferred in satisfaction of the Exempt
Loan shall not exceed the amount of default; and if the lender is
a disqualified person (within the meaning of Section 4975(e)(2)
of the Code) the Exempt Loan must provide for a transfer of Plan
assets upon default only upon and to the extent of the failure of
the Plan to meet the repayment schedule of the Exempt Loan;
(vi) except as provided by Section 6.02 or as otherwise
required by applicable law, no security acquired with the
proceeds of an Exempt Loan may be subject to a put, call or other
option, or buy-sell or similar arrangement, while held by and
when distributed from the Exempt Loan has been repaid or Plan,
whether or not the Plan is then a leveraged employee stock
ownership plan; and
(vii) upon the payment of any portion of the
balance due on the Exempt Loan, Company Stock originally pledged
as collateral for such portion shall be released from the Loan
Suspense Account in accordance with Section 16.06.
16.05 Allocation of Contributions. So long as any
Exempt Loan is outstanding. ESOP Contributions shall be applied
to the payment of debt service on such Exempt Loan (or Loans) to
the extent required (after taking into consideration dividends
paid on Company Stock held in the Suspense Account pursuant to
Section 16.11 and any other funds available to the Trustee for
that purpose) or permitted (without prepayment penalty) under the
payment schedule of such Exempt Loan (or Loans). If such ESOP
Contributions are insufficient to enable the Trustee to make
payments required under the payment schedule of such Exempt Loan
(or Loans), there shall then be applied to the payment of
required debt service on such Exempt Loan (or Loans), in order
until exhausted: (i) Matching Contributions, and then (ii) Salary
Savings Contributions. Stock released from the Suspense Account
as a result of such Exempt Loan repayment shall be allocated to
Accounts in accordance with Section 16.07.
16.06 Loan Suspense Account. In the event the Trustee
purchases Company Stock with the proceeds of an Exempt Loan, such
Company Stock will be held initially in a Loan Suspense Account.
For each Plan Year during the term of the Exempt Loan, Company
Stock released from the Loan Suspense Account shall equal the
Company Stock (including stock dividends in Company Stock
thereon) held in the Loan Suspense Account immediately before
such release multiplied by a fraction, the numerator of which is
the amount of principal paid on the Exempt Loan for the current
year, and the denominator of which is the sum of the numerator
plus the amount of principal to be paid for all future years;
provided, however, that if the Exempt Loan provides for annual
payments of principal and interest at a cumulative rate that is
less rapid at any time than level annual payments of such amounts
for ten years, or provides for interest to be included in any
payment that would not be deemed interest under standard loan
amortization tables, or by reason of renewal, extension or
refinancing has an expected total (past and future) term
exceeding ten years, the release fraction for any Plan Year will
be determined on the basis of combined principal and interest
payments (applying, in the case of a variable interest rate, the
rate applicable as of the end of the Plan Year) in accordance
with regulations under Section 4975(d)(3) and (e)(7) of the Code.
16.07 Allocation of Company Stock Released from the Loan
Suspense Account. Company Stock released from the Loan Suspense
Account under Section 16.06 first shall be allocated to
Participants who have made Salary Savings Contributions with
respect to a Plan Year, but only to the extent such contributions
and associated Employer Matching Contributions are ESOP Savings
and Matching Contributions until the fair market value of the
shares so allocated is equal to such Participant's ESOP Savings
and Matching Contributions. The balance of shares released with
respect to such Plan Year shall be allocated to Participants
employed by the Employer on the last day of the Plan Year who
have completed at least 1,000 Hours of Service during such Plan
Year and to Participants who have terminated employment during
the Plan Year as a result of death, Disability or attainment of
Normal Retirement Age regardless of the number of hours worked,
in proportion to each eligible Participant's Compensation earned
during the Plan Year while a Participant in the Plan.
16.08 Investment in Company Stock. ESOP Contributions
and ESOP Savings and Matching Contributions as determined under
Section 16.05, all earnings on the Loan Suspense Account, and any
other cash received by the Trust in the Company Stock Fund, other
than cash borrowed specifically for the purchase of Company Stock
by the Trust, will first be used to the extent required or
permitted (without prepayment penalty) to pay debt service on any
Exempt Loan or other outstanding obligations of the Trust. The
Trustee shall use any excess to buy Company Stock available
either from holders of outstanding stock or newly issued stock
from the Company. However, such purchases of Company Stock will
only be made at a price, or at prices, which in the judgment of
the Trustees, or when required by Section 5.07 of an independent
appraiser, do not exceed the fair market value for such shares of
Company Stock. So long as no current obligations of the Trust
are outstanding and unpaid and in the event the Trustee shall for
any reason determine that Company Stock is not available for
purchase, or shall determine to hold cash in the Company Stock
Fund of the Trust pending the making of loans, transfers or cash
distributions or paying the expenses of the administering the
Plan and the Trust, the Trustee may invest such funds within the
Company Stock Fund in savings accounts, bank certificates of
deposit, securities, bonds, or other investments deemed by the
Trustee to be desirable for the Trust, or such funds may be held
temporarily in cash.
16.09 Voting Company Stock. All Company Stock in the
Loan Suspense Account shall be voted by the Trustee in such
manner (which may be an abstention) as it in its sole discretion
deems to be in the best interests of Participants and their
Beneficiaries.
16.10 Aggregation of Plans. The limitations of Sections
9.05 and 9.06 shall be applied separately to (i) ESOP Savings and
Matching Contributions, and (ii) the remaining Salary Savings
Contributions and Matching Contributions, to the extent required
by regulations under Section 401(k) and 401(m) of the Code. The
Committee may direct that any plan maintained by an Affiliate,
qualifying under Section 401(a) of the Code, and providing for
salary savings contributions, voluntary employee contributions or
matching contributions, be aggregated with this Plan for purposes
of Sections 9.05 and 9.06; provided that the plans meet the
requirements of Sections 401(a)(4) and 410(b) of the Code and
(after applying any reduction required by Section 9.05 or 9.06 or
comparable provisions of the aggregated plans) satisfy the tests
of Section 9.05 and 9.06 on an aggregate basis; and further
provided that only a plan (or portion thereof) that is an
employee stock ownership plan within the meaning of Section
4975(e)(7) of the Code shall be aggregated with this Plan in
applying Sections 9.05 or 9.06 to ESOP Savings and Matching
Contributions and such plan (or portion thereof) shall not be
aggregated in applying Sections 9.05 or 9.06 to remaining Salary
Savings Contributions and Matching Contributions to the extent
such aggregation is forbidden by Sections 401(k) and 401(m) of
the Code.
16.11 Dividend Pass Through. Cash dividends paid on
shares of Company Stock held in the Suspense Account shall first
be used to repay any Exempt Loan incurred to purchase the Company
Stock on which such dividends were paid and any remaining cash
dividends shall be allocated to Participants in proportion to
their Account balance attributable to ESOP Contributions and
shall be distributed to such Participants not later than 90 days
following the close of the Plan Year. Cash dividends on all
other Company Stock shall be allocated and paid or reinvested in
accordance with Section 7.11.
IN WITNESS WHEREOF, the Company has amended and restated the
Plan and the Trust established herein and the Trustee hereby
accepts the terms of the Trust and agrees to perform the duties
created herein, this _____ day of December, 1996.
GRAND PREMIER TRUST AND GRAND PREMIER FINANCIAL, INC.
INVESTMENT, INC.
as Trustee
By:
By:
Its:
Executive Vice President
CHI3:74856.4 03.20.97 12.3
GRAND PREMIER FINANCIAL, INC.
DEFERRED COMPENSATION PLAN
(As Amended and Restated Effective January 1, 1997)
CERTIFICATE
I, , Secretary of
Grand Premier Financial, Inc., hereby certify that the attached
document is a correct copy of Grand Premier Financial, Inc.
Deferred Compensation Plan, as amended and restated effective
January 1, 1997.
Dated this day of December, 1996.
As Secretary as Aforesaid
(Seal)
GRAND PREMIER FINANCIAL, INC. DEFERRED COMPENSATION PLAN
(As Amended and Restated Effective January 1, 1997)
Premier Financial Services, Inc. ( Premier ) established
the Premier Financial Services, Inc. Senior Leadership and
Directors Deferred Compensation Plan (the Premier Plan )
effective August 1, 1994, for the eligible highly compensated
employees and members of the Board of Directors of Premier.
Northern Illinois Financial Corporation ( NIFCO ) established the
NIFCO Execuflex Plan (the NIFCO Plan ) effective July 1, 1991,
for a select group of management employees and members of the
Board of Directors of NIFCO.
Pursuant to the merger of NIFCO into Premier to form Grand
Premier Financial, Inc. (the Company), the NIFCO Plan was merged
into the Premier Plan, and the Premier Plan was amended and
restated, and renamed as this Grand Premier Financial, Inc.
Deferred Compensation Plan, as amended and restated effective
January 1, 1997 (the Plan ).
The purpose of the Plan is to permit Eligible Employees and
Directors of the Company to contribute a portion of their
Compensation on a pre-tax basis toward retirement benefits,
enhance the overall effectiveness of the Company s executive
compensation program and to attract, retain and motivate such
individuals.
ARTICLE I
DEFINITIONS
Wherever used herein the following terms shall have the
meanings hereinafter set forth:
1.1. "Account" or "Accounts" means the account or accounts
maintained under the Plan by the Company in the Participant's
name, including the Participant's Employer Contribution Account
and Compensation Deferral Account, and the Sub-Accounts listed in
Section 4.1 of the Plan.
1.2 Beneficiary means the person, persons, trust or other
entity that a Participant designates by written, revocable
designation filed with the Company to receive payments in the
event of the Participant s death. If a Participant has not
designated a Beneficiary under the Plan, or if no designated
Beneficiary is living on the date of distribution hereunder,
amounts distributable pursuant to the Plan shall be distributed
to those persons or entities entitled to receive distributions of
the Participant's accounts under the Qualified Savings Plan.
1.3. "Board" means the Board of Directors of the Company.
1.4. "Bonus" means the additional cash remuneration payable
to a Participant annually pursuant to an Employer's performance
compensation program or any other plan, program or arrangement
under which an Employer pays an amount of cash remuneration to a
Participant above such Participant's Base Salary.
1.5. "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any regulations relating thereto.
1.6. "Company" means Grand Premier Financial, Inc., a
Delaware corporation, or, to the extent provided in Section 8.8
below, any successor corporation or other entity resulting from a
merger or consolidation into or with the Company or a transfer or
sale of substantially all of the assets of the Company.
1.7. "Company Stock" means the common stock of the Company.
1.8. "Compensation" means a Participant's Salary, Bonus or
Director's Fees payable in any calendar year. Compensation
deferrals elected under this Plan shall not affect the
determination of compensation or earnings for purposes of any
other plan, policy or program (including, but not limited to, the
Qualified Savings Plan and any other non-qualified plan)
maintained by an Employer.
1.9. "Compensation Deferral Account" means the account or
accounts maintained under the Plan by the Company in the
Participant's name to which the Participant's Compensation
Deferral Contributions are credited in accordance with the Plan.
A Participant shall be fully vested in the amount in his
Compensation Deferral Account at all times.
1.10. "Compensation Deferral Contribution" means the
amount of Compensation a Participant elects to defer under
Section 2.1 of the Plan.
1.11. "Director" means an individual who is a member of
the Board.
1.12. "Director's Fees" means the annual and periodic
fees paid to the Director by the Company for service on the
Board.
1.13. "Disability" means a Participant is permanently
and totally disabled as determined in the sole discretion of the
Company.
1.14. "Eligible Employee" means each employee of an
Employer who is designated as eligible to participate in this
Plan by the Chief Executive Officer of the Company and approved
by the Board.
1.15. "Employer" means the Company and any Affiliated
Company that adopts the Plan with the Company's consent.
"Affiliated Company" means a business entity that is a member of
a controlled group of corporations (as such term is defined in
the Code) that includes the Company. An Affiliated Company may
adopt the Plan on behalf of its Eligible Employees, by resolution
of its Board of Directors, approved in writing by the Company.
1.16. "Employer Contribution Account" means the account
or accounts maintained under the Plan by the Company in the
Participant's name to which Employer Matching Contributions are
credited in accordance with the Plan.
1.17. "Employer Matching Contribution" means the
contribution made by each Employer under the Plan based on a
Participant's Compensation Deferral Contributions, according to
Section 2.2 of the Plan.
1.18. "Employment Termination" means the date of (i) an
Eligible Employee's termination of employment with the Employer;
or (ii) a Director's termination of service on the Board, and
shall include such termination for any reason, unless expressly
indicated otherwise.
1.19. "Investment Fund" or Fund means the investments
described in Section 4.3 which serve as a means to measure value
increases or decreases with respect to a Participant s Accounts.
1.20. "Participant" means any (i) Eligible Employee or
(ii) Director, who has completed the election and enrollment
forms provided by the Company. A Participant who is removed from
status as an Eligible Employee by the Chief Executive Officer
will continue as a Participant as to his existing Accounts, but
shall not be eligible to make further Compensation Deferral
Contributions or receive Employer Matching Contributions. Each
individual who was a participant in the NIFCO Plan or the Premier
Plan on December 31, 1996, shall continue as a Participant in
this Plan on and after that date, subject to the terms and
provisions of this Plan.
1.21. "Plan" means the Grand Premier Financial, Inc.
Deferred Compensation Plan, as amended and restated effective
January 1, 1997, as set forth herein and as hereinafter amended
from time to time.
1.22. "Plan Year" means the calendar year, which is the
Company's fiscal year.
1.23. "Qualified Savings Plan" means the Grand Premier
Financial, Inc. Savings and Stock Plan and Trust, as amended
from time to time, and each successor or replacement plan.
1.24. "Retirement Date" means the first day of the
calendar month coincident with or next following the date on
which a Participant has: (i) attained age 55 years and completed
at least 10 Years of Service; or (ii) attained age 60 years.
1.25. "Salary" means a Participant's annual base salary
rate for the Plan Year, as specified by an Employer prior to each
Plan Year, but including a Participant's variable compensation.
1.26. "Trust" means the trust agreement entered into by
the Company under which the Employers agree to contribute to a
Trust for the purpose of accumulating assets to assist the
Employers in fulfilling their obligations to Participants
hereunder. Such Trust Agreement shall be substantially in the
form of the model trust agreement set forth in Internal Revenue
Service Revenue Procedure 92-64, or any subsequent Internal
Revenue Service Revenue Procedure, and shall include provisions
required in such model trust agreement that all assets of the
Trust shall be subject to the creditors of the Employers in the
event of insolvency.
1.27. "Years of Service" means the number of consecutive
12-month periods of the Participant's employment with an Employer
(including years of employment prior to the date on which an
Employer became an Affiliated Company). No credit shall be given
for partial years of employment or periods of employment
preceding an Employment Termination and return to work. Each
Participant in the Plan who was an employee of NIFCO or a
participant in the NIFCO Plan as of the date of the merger of
NIFCO into Premier, shall be credited with Years of Service under
this Plan for comparable periods of employment with NIFCO.
1.28. Words in the masculine gender shall include the
feminine and the singular shall include the plural, and vice
versa, unless qualified by the context. Any headings used herein
are included for ease of reference only and are not to be
construed so as to alter the terms hereof.
ARTICLE II
COMPENSATION DEFERRAL CONTRIBUTIONS
EMPLOYER MATCHING CONTRIBUTIONS
2.1. Compensation Deferral Elections. Any Eligible Employee
or Director may elect to become a Participant under the Plan by
completing the election form provided by the Company. A
Participant may elect to defer annually the receipt of a portion
of the Compensation otherwise payable to him by an Employer in
any Plan Year. The amount of Compensation deferred by a
Participant shall be a fixed amount or percentage of such
Compensation, but shall not exceed: (i) fifty percent (50%) of
such Participant's Base Salary; (ii) one hundred percent (100%)
of such Participant's Annual Bonus; (iii) and one hundred percent
(100%) of such Participant's Director's Fees.
The election by which a Participant elects to defer
compensation as provided in this Plan shall be in writing, signed
by the Participant, and delivered to the Company prior to January
1 of the Plan Year in which the Compensation to be deferred is
otherwise payable to the Participant; except that, in the year in
which a Participant first becomes eligible to participate in the
Plan, such Participant may make an election to defer Compensation
for services to be performed within 30 days after the date the
Participant becomes eligible.
Notwithstanding the foregoing, a Participant may not make
contributions to this Plan during any period for which
contributions must be suspended in accordance with regulation
section 1.401(k)-1(d)(2)(iii)(B)(3) of the Code, as a condition
of the Participant s receipt of a hardship withdrawal from the
Qualified Savings Plan.
Any deferral election made by the Participant shall be
irrevocable with respect to the Compensation covered by such
election.
2.2. Employer Matching Contributions. Each Employer shall
make a matching contribution on behalf of Participants in its
employ who have elected to make Compensation Deferral
Contributions. The Company shall make a matching contribution on
behalf of Participants who are Directors and who elect to make
Compensation Deferral Contributions. The amount of Employer
Matching Contribution made on behalf of each Participant shall
equal twenty-five percent (25%) of such Participant's
Compensation Deferral Contributions made under this Plan.
Employer Matching Contributions required under this Section shall
be made at least quarterly.
2.3. Cessation of Deferrals. All Compensation Deferral
Contributions and Employer Matching Contributions shall cease
upon a Participant's Employment Termination.
2.4. Cessation of Participation. If the U.S. Department of
Labor (the DOL ) issues regulations or any other official notice
specifically defining the group of employees that may participate
in a plan of this type and any active Participants do not meet
the criteria set forth in such regulations or notice, such
Participants shall become inactive Participants as of the later
of the (i) effective date, or (ii) publication date, of such
regulations or notice, provided that such regulations or notice
include a grandfather provision for such Participants with
respect to their Account balances on such date. If such a
grandfather provision is not provided, the Accounts of such
Participants shall be immediately distributed in accordance with
Section 5.1(a).
ARTICLE III
VESTING OF PARTICIPANTS' ACCOUNTS
3.1. Vesting of Participants' Accounts. A Participant shall
be fully vested in the amount in his Compensation Deferral
Account at all times. A Participant shall be vested in his
Employer Matching Contributions Account at a rate of twenty
percent (20%) per Year of Service, beginning at the end of a
Participant s second Year of Service with an Employer, as
illustrated by the following schedule:
Years of Service Vested Percentage
Less than 2 years 0%
2 full years 20%
3 full years 40%
4 full years 60%
5 full years 80%
6 or more full years 100%
Notwithstanding the foregoing, a Participant shall be fully
vested in his Employer Matching Contribution Account upon: (i)
the date of the Participant's Employment Termination on account
of death or Disability; or (iii) the Participant's Retirement
Date.
A Participant whose Employment Termination occurs prior to
his Retirement Date and for a reason other than death or
Disability, shall forfeit the portion of his Employer Matching
Contribution Account that is not vested. A Participant covered
by Section 3.2 below shall forfeit the full amount of his
Employer Matching Contribution Account.
3.2. Forfeiture Due to Competition or Confidentiality
Breach. A Participant may not, except with the express prior
written consent of the Company, for a period of two (2) years
after the Participant's Employment Termination (the "Restrictive
Period"), directly or indirectly compete with the business of the
Employers, including, but not by way of limitation, by directly
or indirectly owning, managing, operating, controlling,
financing, or by directly or indirectly serving as an employee,
officer or director of or consultant to, or by soliciting or
inducing, or attempting to solicit or induce, any employee or
agent of an Employer to terminate employment with the Employer,
and become employed by any person, firm, partnership,
corporation, trust or other entity which owns or operates, a
bank, savings and loan association, credit union or similar
financial institution (a "Financial Institution") within a
twenty-five (25) mile radius of (i) an Employer's main office or
(ii) the office of any Employer's Affiliated Companies (the
"Restrictive Covenant"). The foregoing Restrictive Covenant
shall not prohibit a Participant from owning directly or
indirectly capital stock or similar securities which are listed
on a securities exchange or quoted on the National Association of
Securities Dealers Automated Quotation System which do not
represent more than one percent (1%) of the outstanding capital
stock of any Financial Institution.
At all times during and after employment with an Employer or
service on the Board, a Participant shall keep secret and
inviolate all knowledge or information of a confidential nature
relating to the business and financial affairs of the Employers,
including, without limitation, all unpublished matters relating
to the business, properties, accounts, books, records, customers,
trade secrets and contracts of the Employers (the
"Confidentiality Clause").
If a Participant violates the Restrictive Covenant or the
Confidentiality Clause all amounts in the Participant's Employer
Contribution Accounts shall be forfeited; except that this
Section 3.2 shall become ineffective upon a Change in Control of
the Company, with respect to Participants Accounts as of the
Change in Control.
3.3. Full Vesting Upon Change in Control. A Participant
shall become fully vested in all Employer Matching Contributions
made on his behalf in any Plan Year upon the occurrence of a
Change in Control of the Company. For purposes of this Plan, a
"Change in Control" of the Company shall be deemed to have
occurred if:
(a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act, except
that a person shall be deemed to be the "beneficial owner" of all
shares that any such person has the right to acquire pursuant to
any agreement or arrangement or upon exercise of conversion
rights, warrants, options or otherwise, without regard to the
sixty day period referred to in such Rule), directly or
indirectly, of securities representing 25% or more of the
combined voting power of the Company's then outstanding
securities; provided, however, that the following acquisitions
shall not constitute a Change in Control: (i) any acquisition
directly from the Company; (ii) any acquisition by the Company;
or (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company; or
(b) at any time during any period of two consecutive
years (not including any period prior to January 1, 1997)
individuals who at the beginning of such period constituted the
Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to such date whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 or Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a person other than the
Board.
ARTICLE IV
PARTICIPANTS' SUB-ACCOUNTS
4.1. Establishment of Sub-Accounts. The following
Sub-Accounts may be established with respect to each
Participant:
(a) Retirement Sub-Account,
(b) Education Sub-Account,
(c) Fixed Period Sub-Account, and
(d) Preretirement Survivor Income Sub-Account.
4.2. Benefit Allocation Election. Each Participant shall
elect in writing the form and timing of the distribution of his
Accounts, at the time the Participant elects Compensation
Deferral Contributions under Section 2.1 above, by specifying the
allocation of Contributions among his Sub- Accounts. A
Participant s Compensation Deferral Contributions from Bonus, and
his Employer Matching Contributions, may only be allocated to
Sub-Accounts specified in Sections 4.1(a) through (c). A
Participant may not modify, alter, amend or revoke his allocation
for a Plan Year after such Plan Year begins. The Company may
establish uniform rules that limit a Participant s eligibility to
allocate contributions to any Sub-Account based on such other
factors the Company deems appropriate.
If a Participant allocates a portion of his anticipated
contributions to his Education Sub- Account, the Participant may
further allocate among subaccounts on behalf of any of the
Participant s dependent children. Any such allocation election
shall apply uniformly to each subaccount.
4.3. Investment of Participants' Accounts. Participants'
Compensation Deferral Contributions and Employer Matching
Contributions may be contributed by the Employers to, and held
and invested under, the Trust. A Participant may direct by
written instruction delivered to the Company that his Accounts
and Sub-Accounts be valued as if they were invested, in multiples
of five percent (5%), in Company Stock or one or more of the
Investment Funds designated by the Company for such purpose. A
Participant may make a separate selection with respect to each
Sub-Account. Such election, which must be in writing, shall be
effective as soon as administratively possible following timely
delivery to the Company and shall apply to new Contributions and
previous accumulations as the Participant specifies. If any
Participant fails to file a selection the Participant shall be
deemed to have selected the most conservative fund (e.g. fixed
income or money market fund).
(a) The selection of the Investment Funds that will be
in effect for a Plan Year, in addition to Company Stock, shall be
elected by the Company and announced to the Participants prior to
the beginning of such Plan Year. The Company may from time to
time change the Investment Funds, provided such change is
evidenced by a written resolution executed by the Company and the
Participants are given timely notice of such change.
(b) The valuation of Participants Accounts shall
reflect the net asset value expressed per share of the designated
Investment Fund(s). The fair market value of an Investment Fund
shall be determined by the Company. It shall represent the fair
market value of all securities or other property held for the
respective Fund, plus cash and accrued earnings, less accrued
expenses and proper charges against the Fund. The Company shall
provide each Participant with a written statement of his Accounts
at least annually.
(c) All Compensation Deferral and Employer Matching
Contributions shall be credited to a Participant's Accounts and
invested as soon as practicable following the date such
contributions are received by the trustee, allowing for such
factors as the availability of an investment fund as of the time
of the contribution and the availability of shares of Company
Stock for purchase by the trustee. Any amount in a Participant's
Account that is forfeited according to Sections 3.1, 3.2, 5.5 or
5.6 shall be applied toward Employer Matching Contributions
required for that month under Section 2.2.
(d) The trustee under the Trust shall purchase shares
of Company Stock in the market on or as soon as practicable after
the date it receives any Participants' Compensation Deferral
Contributions or Employer Matching Contributions that are to be
invested in Company Stock, allowing for such factors as the
availability of shares of Company Stock for purchase by the
trustee. Dividends on shares of Company Stock held in
Participants' Accounts shall be credited to such Accounts. Cash
dividends shall be reinvested in Company Stock as soon as
practicable. Notwithstanding the provisions of this Article IV,
investments in Company Stock shall not be available, either as to
new Contributions and existing aggregate Account balances, until
such time as a Registration Statement is filed with the U.S.
Securities Exchange Commission registering the offer and sale of
additional shares of Company Stock under the Plan. If a
Participant s Employment Termination occurs at a time when all or
a portion of his Accounts are invested in Company Stock, that
portion of the Participant's Accounts may be distributed in cash
or Company Stock, in the discretion of the Company.
4.4. Special Rules for Preretirement Survivor Income
Sub-Account. Each Participant s Preretirement Survivor Income
Sub-Accounts, shall be valued as if utilized to provide benefits
by purchase of an appropriate insurance policy designated by the
Company.
(a) While a Participant is an employee of the
Employer, this Sub-Account shall be immediately debited with that
portion of the Contributions made by him or on his behalf as is
necessary to provide the benefits the Participant selected
pursuant to Section 4.2.
(b) If the amount a Participant allocates to such a
Sub-Account exceeds the amount necessary to provide currently
elected benefits, then the excess portion of such Sub- Account
shall be valued as if it were invested in a manner designated by
the Company from time to time. If a Participant terminates
employment for any reason, including death, any amounts
accumulated in excess of that allocated to the provision of
benefits shall be distributed as if accumulated in Participant s
Retirement Sub-Account.
(c) The required allocation for each such Sub-Account
shall be determined by the Company in a uniform manner. The
amounts required are subject to change at the Company s
discretion at any time.
4.5. New Elections Under Merged Plan. Prior to 1997, each
Participant in the Premier Plan and the NIFCO Plan had elected
in writing the form and timing of the distribution of his
Accounts, at the time the Participant elected Compensation
Deferral Contributions. In connection with the merger of the
NIFCO Plan into the Premier Plan and the amendment and
restatement of the Premier Plan in the form of this Plan, each
Participant in the Premier Plan and the NIFCO Plan shall make a
special benefit allocation election under this Article IV prior
to January 1, 1997, with respect to his Accounts in the Premier
Plan and the NIFCO Plan as of December 31, 1996.
ARTICLE V
DISTRIBUTION OF PARTICIPANTS' ACCOUNTS
5.1. Distribution of Participant s Retirement Sub-Account.
Upon a Participant s Employment Termination for any reason,
including death, the vested portion of the Participant's
Retirement Sub-Account shall be distributed to the Participant at
the time and in the form described below. If the Participant is
deceased, the benefit shall be paid to his Beneficiary.
(a) All benefits payable under the Plan shall commence
as soon as administratively practicable following the date on
which the Participant s Employment Termination occurs.
Notwithstanding the foregoing, if an individual ceases to be a
Participant in accordance with Section 2.4 and the circumstances
described in the last sentence of such Section apply, the total
value of his Retirement Sub-Account shall be distributed as soon
as administratively practicable following the later of the
effective date or publication date of the DOL regulations or
notice.
(b) Distribution of a Participant s Retirement
Sub-Account shall be in one of the following forms at the
Participant s election, subject to the rules set forth in (d)
below:
(i) A single lump sum.
(ii) Substantially equal annual installments over
a period of not less than 2 nor more than 10 full years.
Notwithstanding any provision to the contrary, if the
Participant s Retirement Sub-Account has a value less than
$10,000 at the time benefits are to commence, then the
Participant s benefit shall be paid as a lump sum as soon as
administratively feasible following the Participant s Employment
Termination.
(c) In the event that the Participant elects to have
his benefits distributed in a lump sum, the Participant shall
receive a single lump sum equal to the total vested value of his
Retirement Sub-Account determined as of the date such benefits
are processed for payment. In the event that the Participant
elects to have his benefits distributed in installments:
(i) the amount of the first payment shall be
determined by multiplying the vested value of the Participant s
Retirement Sub-Account as of the date such benefits are
processed for payment by a fraction, the denominator of which
equals the number of years over which the benefits are paid, and
the numerator of which is one.
(ii) the amounts of the payments for each
succeeding year shall be determined by multiplying the vested
value of the Participant s Account as of the applicable
anniversary of his first payment date by a fraction, the
denominator of which equals the number of remaining years over
which the benefits are to be paid, and the numerator of which is
one.
(d) A Participant shall elect the form in which his
benefits are payable in accordance with Section 5.1(b). Separate
elections may be made with respect to the form in which benefits
shall be distributed upon the occurrence of the following events:
(i) voluntary termination, including Retirement;
(ii) involuntary termination, excluding Disability
and death;
(iii) Disability; and
(iv) death.
Such elections must be made when the Participant makes his
initial election to participate in the Plan in accordance with
Article II. Any election made pursuant to this Section shall be
made on forms and in the manner prescribed by the Company and
shall be irrevocable, except as provided in Section 5.5 below.
5.2. Distribution of Participant s Education Sub-Account.
If a Participant remains continuously employed by an Employer
until the first day of the calendar year in which an eligible
dependent of the Participant attains age 18, the Plan shall pay
to the Participant a benefit during that year and each of the
next three calendar years determined as follows:
Percentage of
Calendar Year Dependent s Subaccount
1 25%
2 33-1/3%
3 50%
4 100%
On or after the first day of each calendar year in which a
benefit is to be paid to him under this Section, the Participant
may specify the date in such year (but in no event later than
September 1 of the year) as of which the benefit is to be paid,
to the extent administratively practical. A Participant may
establish subaccounts under his Education Sub-Account, with
separate payments for each eligible dependent. A Participant may
have a maximum of five subaccounts at any time.
(a) If a Participant still has a balance in his
Education Sub-Account upon his Employment Termination for any
reason, the vested portion of the balance shall be transferred to
his Retirement Sub-Account and distributed in accordance with
Section 5.1. Notwithstanding the preceding sentence, a
Participant who still has a balance in his Education Sub-Account
upon his Employment Termination may elect to have such Sub-
Account paid in the manner described in the body of this Section
5.2, provided he files a written notification of such election
with the Company at least one full calendar year prior to such
Employment Termination.
(b) Notwithstanding any provision to the contrary, if
on the January 1 of the calendar year in which an eligible
dependent of a Participant attains age 18 the eligible dependent
s subaccount has a balance of less than $1,000, then the balance
shall be paid to the Participant in one lump sum.
(c) If any portion of an Education Sub-Account is not
vested on the date such portion is to be paid, distribution will
be postponed until the January 1 following the date it is
vested.
5.3. Distribution of Participant s Fixed Period Sub-Account.
A benefit equal to the lump sum value of the vested portion of a
Participant s Fixed Period Sub-Account shall be paid to him as
soon as administratively practicable after the date specified by
the Participant in the payment year specified by the
Participant (which shall be at least 4 years from the date of
initial deferral to such Fixed Period Sub-Account). On or after
the first day of any calendar year in which a benefit is to be
paid to him under this Section, the Participant may specify the
date in such year (but in no event later than September 1 of the
year). Nonvested amounts will be paid as soon as
administratively practicable after April 1 following the year the
Participant becomes vested. A Participant may establish
subaccounts under his Fixed Period Sub-Account, with separate
payment years for each. A Participant may have a maximum of five
subaccounts at any time. If a Participant incurs an Employment
Termination (for any reason) and the Participant has a balance in
his Fixed Period Sub- Account, the vested portion of his balance
shall be transferred to his Retirement Sub-Account and be
distributed in accordance with Section 5.1; provided that, a
Participant who still has a balance in his Fixed Period
Sub-Account upon his Employment Termination may elect to have
such balance paid in accordance with his original election,
provided the Participant files a written notification of such
election with the Company at least one full calendar year prior
to such Employment Termination.
5.4. Distribution of Participant s Preretirement Survivor
Income Sub-Account. If a Participant dies while an active
employee of an Employer, the Participant s Beneficiary shall be
paid a benefit in equal monthly installments, commencing the
first day of the first month following the date of the
Participant s death, and continuing uninterrupted throughout a
payout as selected by the Participant at the time he establishes
his Preretirement Survivor Income Sub-Account. The amount of
supplemental benefit payable hereunder shall be determined in
accordance with Section 4.2 within administrative guidelines
established by the Company.
(a) A benefit shall be payable under this Section 5.4
only if a Participant dies in a Plan Year for which he has
allocated a portion of Contributions to the Preretirement
Survivor Income Sub-Account.
(b) All rights of a Participant under this Section 5.4
shall terminate on the date he terminates employment.
(c) In the event a Participant s death occurs as a
result of suicide prior to completing twenty-five (25) months of
continuous allocation to his Preretirement Survivor Income
Sub-Account, then the Company may elect to reduce the benefits
payable under this Section to an amount equal to the aggregate
contributions allocated to the Participant s Preretirement
Survivor Income Sub-Account. For the purpose of the preceding
sentence, an election to increase the Participant s annual
benefit or to lengthen the payout period shall be considered a
new benefit election, and the first month of the Plan Year in
which the enhanced benefits become effective shall be treated as
the first month of a separate twenty-five (25) month period with
respect to such enhanced benefits.
5.5. Change in Distribution Election. The Company may
permit a Participant to change his election as to the form,
period or commencement of distribution of his Accounts. A
Participant may request such change by writing filed with the
Company. In the event a Participant changes his election as to
form, period or commencement of distribution within 12 months
prior to his Retirement Date or other Employment Termination for
a reason other than death, Disability or involuntary termination,
the amount distributable from such Participant's Accounts will be
reduced by 10 percent. This reduction will be forfeited. This
reduction is intended to discourage Participants from changing
their elections as to distribution and prevent Participants from
being deemed in constructive receipt of their Accounts upon their
Employment Termination.
5.6. Unscheduled Withdrawal Right. A Participant may
request an unscheduled withdrawal of all or any portion of the
his Accounts (to the extent vested) before or after his
Employment Termination by written notice to the Company; provided
that, the amount distributable from such Participant's Accounts
will be reduced by 10 percent. This reduction will be forfeited.
If a Participant elects an unscheduled withdrawal under this
Section prior to Employment Termination, the Participant would
not be permitted to elect Compensation Deferral Contributions for
a period of thirty-six months following the date of such
withdrawal. This reduction and ineligibility period is intended
to discourage Participants from requesting withdrawals (other
than on account of an unforeseeable emergency) and prevent
Participants from being deemed in constructive receipt of their
Accounts.
5.7. Hardship Distribution. A Participant may request, by
writing filed with the Company, that a distribution be made to
him of all or part of the amount then credited to his Accounts
(to the extent vested) on account of a severe financial hardship.
The Company will approve such a distribution to the Participant
only in the event of an unforeseeable emergency. An
"unforeseeable emergency" is an unanticipated emergency that is
caused by an event beyond the control of the Participant and that
would result in severe financial hardship to such Participant if
early withdrawal were not permitted. An unforeseeable emergency
that results in severe financial hardship is an unexpected
illness or accident of the Participant or a dependent, loss of a
Participant's property due to casualty, or other similar,
extraordinary, unforeseeable circumstances beyond the control of
the Participant. The severe financial hardship may not be
relieved by an early distribution under this Plan to the extent
it might otherwise be relieved through reimbursement or
compensation by insurance or otherwise, by liquidation of a
Participant's assets, or by cessation of Compensation deferrals
under the Plan. Any hardship distribution under this Section
will be limited to the amount necessary to meet the emergency.
5.8. Limitation on Distribution. Notwithstanding the
foregoing provisions of the Plan relating to distribution of
Participant's Accounts, if distribution of a Participant's
Accounts in any calendar year would not be deductible by an
Employer because of the limitations of Code Section 162(m), such
distribution shall be postponed in whole or in part, in the sole
discretion of the Company, until the first calendar year in which
such distribution would not be limited as to deductibility by
Code Section 162(m).
ARTICLE VI
ADMINISTRATION OF THE PLAN
6.1. Administration by the Company. The Company shall be
responsible for the general operation and administration of the
Plan and for carrying out the provisions thereof.
6.2. Powers and Duties of Company. The Company shall
administer the Plan in accordance with its terms and shall have
all powers necessary to carry out the provisions of the Plan.
The Company shall interpret the Plan and shall determine all
questions arising in the administration, interpretation, and
application of the Plan, including but not limited to, questions
of eligibility and the status and rights of employees,
Participants and other persons. Any such determination by the
Company shall be conclusive and binding on all persons. The
regularly kept records of the Company shall be conclusive and
binding upon all persons with respect to a Participant's date and
length of employment, Years of Service, time and amount of
Compensation and the manner of payment thereof, type and length
of any absence from work and all other matters contained therein
relating to Participants. To the extent not inconsistent with
this Plan, all terms and provisions set forth in the Qualified
Savings Plan with respect to the administrative powers and duties
of the Company, expenses of administration, and procedures for
filing claims, also shall be applicable with respect to this
Plan.
ARTICLE VII
AMENDMENT OR TERMINATION
7.1. Amendment or Termination. The Company intends the Plan
to be permanent but reserves the right to amend or terminate the
Plan, or terminate the Plan as it applies to any Employer. Any
such amendment or termination shall be made pursuant to a written
resolution of the Board and shall be effective as of the date of
such resolution.
7.2. Effect of Amendment or Termination. No amendment or
termination of the Plan shall divest any Participant or
Beneficiary of the amount in the Participant's Accounts, or of
any rights to which the Participant would have been entitled if
the Plan had been terminated immediately prior to the effective
date of such amendment or termination. Upon termination of the
Plan, all Participants shall become fully vested in the amounts
in their Accounts and distribution of Participants' Accounts
shall be made to Participants or their beneficiaries in the
manner elected by such Participants, unless the Company
determines to distribute all Accounts in lump sums. No
Compensation Deferral or Employer Matching Contributions shall be
permitted after termination of the Plan.
ARTICLE VIII
GENERAL PROVISIONS
8.1. Participants' Rights Unsecured. Except as set forth in
Section 4.1, the Plan at all times shall be entirely unfunded and
no provision shall at any time be made with respect to
segregating any assets of an Employer for payment of any benefits
hereunder. The right of a Participant or the Participant's
Beneficiary to receive a distribution of the Participant's
Accounts hereunder shall be an unsecured claim against the
general assets of the Employers, and neither the Participant nor
a Beneficiary shall have any rights in or against any specific
assets of the Employers.
8.2. General Conditions. Any benefit payable under the
Qualified Savings Plan shall be paid solely in accordance with
the terms and conditions of the Qualified Savings Plan, and
nothing in this Plan shall operate or be construed in any way to
modify, amend or affect the terms and provisions of the Qualified
Savings Plan.
8.3. No Guaranty of Benefits. Nothing contained in the Plan
shall constitute a guaranty by the Employers or any other person
or entity that the assets of the Employers will be sufficient to
pay any benefit hereunder. No Participant or other person shall
have any right to receive a benefit or a distribution of Accounts
under the Plan except in accordance with the terms of the Plan.
8.4. No Enlargement of Employee Rights. Establishment of
the Plan shall not be construed to give any Participant the right
to be retained in the service of an Employer.
8.5. Spendthrift Provision. No interest of any person or
entity in, or right to receive a distribution under, the Plan
shall be subject in any manner to sale, transfer, assignment,
pledge, attachment, garnishment, or other alienation or
encumbrance of any kind; nor may such interest or right to
receive a distribution be taken, either voluntarily or
involuntarily for the satisfaction of the debts of, or other
obligations or claims against, such person or entity, including
claims for alimony, support, separate maintenance and claims in
bankruptcy proceedings.
8.6. Applicable Law. The Plan shall be construed and
administered under the laws of the State of Illinois except to
the extent preempted by federal law.
8.7. Incapacity of Recipient. Subject to applicable state
law, if any person entitled to a payment under the Plan is deemed
by the Company to be incapable of personally receiving and giving
a valid receipt for such payment, then, unless and until claim
therefor shall have been made by a duly appointed guardian or
other legal representative of such person, the Company may
provide for such payment or any part thereof to be made to any
other person or institution then contributing toward or providing
for the care and maintenance of such person. Any such payment
shall be a payment for the account of such person and a complete
discharge of any liability of the Company and the Plan therefor.
8.8. Corporate Successors. The Plan shall not be
automatically terminated by a transfer or sale of assets of the
Company, or by the merger or consolidation of the Company into or
with any other corporation or other entity, but the Plan shall be
continued after such sale, merger or consolidation only if and to
the extent that the transferee, purchaser or successor entity
agrees to continue the Plan. In the event that the Plan is not
continued by the transferee, purchaser or successor entity, the
Plan shall terminate subject to the provisions of Section 5.2.
8.9. Unclaimed Benefit. Each Participant or Beneficiary
shall keep the Company informed of his or her current address.
The Company shall not be obligated to search for the whereabouts
of any person. If the location of a Participant is not made
known to the Company within three years after the date on which
payment of the Participant's benefits under the Plan may first be
made, payment may be made as though the Participant had died at
the end of the three-year period. If, within one additional year
after such three-year period has elapsed, or, within three years
after the actual death of a Participant, the Company is unable to
locate any Beneficiary of the Participant, then the Company shall
have no further obligation to pay any benefit hereunder to such
Participant or Beneficiary or any other person and such benefit
shall be irrevocably forfeited.
8.10. Limitations on Liability. Notwithstanding any of
the preceding provisions of the Plan, none of the Employers nor
any individual acting as an employee or agent of an Employer,
shall be liable to any Participant, former Participant or any
Beneficiary or other person for any claim, loss, liability or
expense incurred in connection with the Plan.
8.11. Claims Procedure. In the event that a
Participant's claim for benefits under the Plan is denied in
whole or in part by the Company, the Company will notify the
Participant (or Beneficiary) of the denial. Such notification
will be made in writing, within 90 days of the date the claim is
received by the Company. The notification will include: (i) the
specific reasons for the denial; (ii) specific reference to the
Plan provisions upon which the denial is based; (iii) a
description of any additional information necessary for the
claimant to perfect the claim and an explanation of why such
material or information is necessary; and (iv) an explanation of
the applicable review procedures.
The Participant (or Beneficiary) has 60 days from the date
he receive notice of a claim denial to file a written request for
review of the denial with the Company. The Company will review
the claim denial and inform the Participant (or Beneficiary) in
writing of its decision within 60 days of the date the claim
review request is received by the Company. This decision will be
final.
CHI3:88293.2 03.20.97 12.7
EXHIBIT 21
Subsidiaries of the Registrant
The following subsidiaries are 100% owned by Grand Premier Financial, Inc.
Grand National Bank
First National Bank of Northbrook
First Bank North
First Bank South
First Security Bank of Cary Grove
Grand Premier Trust and Investment Services, Inc.
Grand Premier Operating Systems, Inc.
Grand Premier Insurance Services
American Suburban Mortgage Corporation (inactive)
EXHIBIT 23.1
Independent Auditor's Consent
The Board of Directors
Grand Premier Financial, Inc.
We consent to the incorporation by reference in the Registration Statement
Nos. 333-0327, 333-11635, 333-11645 and 333-11663 on Form S-8 of Grand Premier
Financial, Inc. of our report dated January 29, 1997, relating to the
consolidated balance sheet of Grand Premier Financial, Inc. and subsidiaries as
of December 31, 1996, and the related consolidated statements of earnings,
changes in stockholders equity, and cash flows for the year then ended, which
report is incorporated by reference in the December 31, 1996 annual report on
Form 10-K of Grand Premier Financial, Inc.
KPMG Peat Marwick LLP
Chicago, Illinois
March 24, 1997
EXHIBIT 23.2
Independent Auditor's Consent
We consent to the incorporation by reference in the previously filed
Registration Statements, file Nos. 333-0327, 333-11635, 333-11645 and
333-11663 of Grand Premier Financial, Inc. of our report dated January
31, 1996 included in this Annual Report on Form 10-K for the year ended
December 31, 1996.
Hutton, Nelson & McDonald LLP
Oakbrook Terrace, Illinois
March 24, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
ANNUAL REPORT
Pursuant to Section 15 (d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1996
PREMIER FINANCIAL SERVICES, INC.
EMPLOYEE SAVINGS AND STOCK PLAN AND TRUST
(Full title of the plan)
GRAND PREMIER FINANCIAL, INC.
486 WEST LIBERTY ST.
WAUCONDA, IL 60084
(Name of issuer of the Securities held pursuant to the Plan and
the address of principal executive offices, including Zip Code)
Required Information
Financial Statements
The following financial statements are filed as part of this report:
(a) Financial Statements of the Plan which are included in the
annual report of the Plan to its Participants for the year ended
December 31, 1996 as follows:
Independent Auditors' Report
Statements of Net Assets Available for Plan Benefits for the two
years ended December 31, 1996
Statements of Changes in Net Assets Available for Plan Benefits
for the two years ended December 31, 1996
Notes to Financial Statements
Schedule I - Assets Held for Investment Purposes
Schedule II - Reportable Transactions
(b) Exhibit
23. Consents of Experts and Counsel
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees have duly caused this annual report to be signed on its behalf
by the undersigned hereunto duly authorized.
Premier Financial Services, Inc.
Employeee Savings and Stock Plan
and Trust
March 25, 1997 By: /s/s David L Murray
David L. Murray, Executive
Vice President, Chief Financial
Officer and Director
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
ANNUAL REPORT
Pursuant to Section 15 (d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1996
PREMIER FINANCIAL SERVICES, INC.
SENIOR LEADERSHIP AND DIRECTORS
DEFERRED COMPENSATION PLAN
(Full title of the plan)
GRAND PREMIER FINANCIAL, INC.
486 WEST LIBERTY ST.
WAUCONDA, IL 60084
(Name of issuer of the Securities held pursuant to the Plan and
the address of principal executive offices, including Zip Code)
Required Information
Financial Statements
The following financial statements are filed as part of this report:
(a) Financial Statements of the Plan which are included in the
annual report of the Plan to its Participants for the year ended
December 31, 1996 as follows:
Independent Auditors' Report
Statements of Net Assets Available for Plan Benefits December 31,
1996 and 1995
Statements of Changes in Net Assets Available for Plan Benefits
for the year ended December 31, 1996 and December 31, 1995
Notes to Financial Statements
(b) Exhibit
23. Consents of Experts and Counsel
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees have duly caused this annual report to be signed on its behalf
by the undersigned hereunto duly authorized.
Premier Financial Services, Inc.
Senior Leadership and Directors
Deferred Compensation Plan
March 25, 1997 By: /s/ David L Murray
David L. Murray, Executive
Vice President, Chief Financial
Officer and Director
1996 Annual Report
Grand Premier Financial, Inc.
Contents
Corporte Message to the shareholders 2
Consolidated Balance Sheets 4
Consolidated Statements of Earnings 5
Consolidated Statements of Cash Flows 6
Consolidated Statements of Changes in
Stockholders Equity 8
Independent Auditors Report 9
Notes to Consolidated Financial
Statements 10
Management s Discussion and Analysis of
Financial Condition and Results of
Operations 26
Supplementary Business and Stock
Information 33
Five Year Summary of Selected
Financial Data 34
Board of Directors 35
Executive Officers 36
1996 was an interesting year in many ways. The most significant
happening was certainly the fact that two fine companies merged in
August to form Grand Premier Financial, Inc. The merger brought many
good people and good markets together. A great deal of time and effort
went into this project and we have been working diligently ever since
August to craft the very best performing company that we can out of all
of those pieces.
Usually in this letter we spend some considerable time discussing the
financial results of the past year. This year, though, we will touch
only upon a few topics directly but we urge you to read Management s
Discussion and Analysis of Financial Condition and Results of
Operations later in this report for a more in depth review of what we
have done and where we are headed.
Total loans rose by $90,049,000, which represents an increase of 10.41%
while deposits grew by 4.87%. We expect the resulting improvement in
our loan to deposit ratio to lay the groundwork for increased earnings
in 1997.
Salaries rose by a larger than usual amount, which requires some
explanation. The Northern Illinois Financial banks were combined into a
single charter, called Grand National Bank, in February. When that
happened, the staff was reduced and separation packages were paid to
those who left us. With the combination of Northern Illinois and
Premier Financial, we once again found overlapping functions which we
began eliminating and redundant staff which we are paring, causing an
expense for additional separation packages. We expect to begin
realizing benefits from those actions in 1997.
There were also other items which adversely affected our performance in
1996, most notably expenses related to the organization and formation of
Grand Premier Financial, Inc., which were in excess of one million
dollars and the write down of some real estate holdings. We feel that
we have successfully identified and recorded all major expense items
which should permit our 1997 performance to begin reaching desired
levels.
Our first order of business in 1997 will be to convert all of our
offices to one data processing system. This will happen in the first
half of the year and we plan to merge all of our remaining bank charters
into the Grand National Bank charter at the same time. The result will
be one bank charter, one consistent product set and thirty locations
capable of serving all of our clients with higher quality and lower
overhead. At the same time, we are developing various other vehicles to
deliver products and services to our clients such as a Telephone Banking
Center, PC Banking products and many more.
This process has been difficult and expensive in both time and money and
it is not yet finished but we are convinced that it was the right thing
to do. We believe that the combination of locations and talent which we
have created and the financial strength which this company possesses
will allow us to keep pace with the ever increasing desires of a
sophisticated and demanding marketplace and to create better and better
value for you. Thank you for your support in the past. We promise to
keep working to merit your continued confidence in us.
Richard L. Geach, Chairman of the Board and Chief Executive Officer
Robert W. Hinman, President and Chief operating Officer
David L. Murray, Senior Executive Vice President and Chief Financial
Officer
Howard A. McKee, Chairman of the Executive Committee
Consolidated Balance Sheets
December 31, 1996 and 1995
(000's) omitted except per share data)
1996 1995
Assets
Cash & non-interest bearing deposits $49,441 $65,279
Interest bearing deposits 3,114 5,524
Federal funds sold 13,400 6,500
Cash and cash equivalents 65,955 77,303
Securities available for sale at fair value 535,687 598,570
Securities purchased under agreement to resell 4,405 -
Loans 966,324 876,333
Less: Unearned discount ( 842) ( 1,581)
Allowance for possible loan losses (10,116) ( 9,435)
Net loans 955,366 865,317
Bank premises & equipment 33,321 36,676
Excess cost over fair value
of net assets acquired 18,489 20,227
Accrued interest receivable 12,264 13,698
Other assets 17,051 12,882
Total assets $1,642,538 $1,624,673
Liabilities & stockholders' equity
Non-interest bearing deposits $211,015 $196,534
Interest bearing deposits 1,206,379 1,155,123
Deposits 1,417,394 1,351,657
Short-term borrowings 23,486 88,232
Long-term borrowings 30,000 11,588
Other liabilities 13,569 17,193
Liabilities $1,484,449 $1,468,670
Stockholders' equity
Preferred stock - $1 par value, 2,000,000
shares authorized:
Series A perpetual, $1,000 stated value, 8.25%,
7,000 shares authorized, 5,000 shares issued
and outstanding at 12/31/95 - 5,000
Series B convertible, $1,000 stated value, 8.00%,
7,250 shares authorized, issued and outstanding 7,250 7,250
Series C perpetual, $1,000 stated value, 8.00%,
2,000 shares authorized, issued and outstanding
at 12/31/96 2,000 -
Series D perpetual, $1,000 stated value, 7.50%,
3,300 shares authorized, 2,000 shares issued
and outstanding at 12/31/95 - 2,000
Common stock - $.01 par value
No. of Shares 1996 1995
Authorized 30,000,000 30,000,000
Issued 19,983,679 19,869,823
Outstanding 19,983,679 19,869,823 200 199
Surplus 49,670
49,345
Retained earnings 89,154
82,159
Unrealized gain on securities available for
sale, net of tax 9,815 10,050
Stockholders' Equity $158,089 $156,003
Total liabilities & stockholders' equity $1,642,538 $1,624,673
See accompanying notes to consolidated financial statements.
Consolidated Statements of Earnings
Years ended December 31, 1996, 1995 and 1994
(000's omitted except per share data)
Interest income 1996 1995 1994
Interest & fees on loans $79,816 $73,108 $61,719
Interest & dividends on
investment securities:
Taxable 26,514 27,680 21,897
Exempt from federal income tax 7,142 6,880 7,230
Other interest income 898 1,114 1,320
Interest income 114,370 108,782 92,166
Interest expense
Interest on deposits 52,258 48,248 35,199
Interest on borrowings 4,300 5,293 3,729
Interest expense 56,558 53,541 38,928
Net interest income 57,812 55,241 53,238
Provision for possible loan losses 2,875 1,435 555
Net interest income after provision
for possible loan losses 54,937 53,806 52,683
Other income
Service charges on deposits 6,439 5,322 5,004
Trust fees 3,222 2,928 2,741
Investment securities gains, net 3,838 4,046 1,365
Other operating income 4,217 4,879 4,033
Other income 17,716 17,175 13,143
Other expenses
Salaries 21,972 19,424 18,637
Pension, profit sharing & other
employee benefits 4,643 4,674 4,577
Net occupancy of bank premises 4,676 4,544 4,007
Furniture & equipment 3,050 2,773 2,950
Federal deposit insurance premiums 95 1,455 2,792
Write-down of real estate held for
development 2,506 - -
Other 17,109 14,926 14,970
Other expenses 54,051 47,796 47,933
Earnings before income taxes 18,602 23,185 17,893
Income tax expense 5,285 6,156 4,549
Net earnings $13,317 $17,029 $13,344
Earnings per share
(On weighted average
common and common equivalent
shares outstanding of 20,103,661
in 1996, 20,097,319 in 1995 and
20,233,748 in 1994) $.62 $.79 $.60
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
Cash flows from operating activities:
Net earnings $13,317 $17,029 $13,344
Adjustments to reconcile net earnings to
net cash from operating activities:
Amortization net, related to:
Investment securities 1,260 2,212 5,522
Excess of cost over net
assets acquired 1,738 1,592 1,592
Other ( 133) 357 248
Depreciation 3,059 3,197 2,964
Provision for possible loan losses 2,875 1,435 555
Write-down of real-estate held
for development 2,506 - -
Provision for write down of securities - - 85
Gain on sale related to:
Investment securities (3,838) (4,046) (1,365)
Loans sold to secondary market ( 185) ( 222) ( 257)
Loans originated for sale (38,163) (26,565) (24,930)
Loans sold to secondary market 38,163 26,565 24,930
Deferred income tax expense (5,165) (5,478) 2,878
Change in:
Other assets ( 932) (2,054) ( 289)
Other liabilities 1,473 1,453 (1,471)
Net cash from operating activities 15,975 15,475 23,806
Cash flows from investing activities:
Purchase of securities
held to maturity - (8,888) (14,571)
Purchase of securities
available for sale (304,580) (342,354) (224,341)
Proceeds from:
Maturities of securities
held to maturity - 11,550 24,275
Maturities of securities
available for sale 227,389 164,060 114,976
Sales of securities
available for sale 142,485 178,984 41,511
Net increase in loans ( 92,395) (114,298) 3,405
Purchase of bank premises & equipment( 4,224) ( 2,576) ( 125)
Securities under resale agreement ( 4,405) - -
Other net - 27 ( 152)
Net cash from investing activities ( 35,730) (113,495) ( 55,022)
Cash flows from financing activities:
Net increase (decrease) in:
Deposits 65,737 86,262 18,137
Short term borrowings ( 64,746) 5,385 4,531
Long term borrowings 18,412 5,850 5,350
Purchase of treasury stock - ( 1,374) ( 600)
Reissuance of treasury stock - 149 59
Exercised stock options 330 51 19
Redemption of preferred stock ( 5,000) - ( 1,950)
Cash paid out for fractional shares ( 4) - -
Cash dividends paid ( 6,322) ( 4,864) ( 4,640)
Net cash from financing activities 8,407 91,459 20,906
Decrease in cash and cash equivalents ( 11,348) (6,561) (10,310)
Cash and cash equivalents,
beginning of year 77,303 83,864 94,174
Cash and cash equivalents, end of year $65,955 $77,303 $83,864
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest $56,926 $51,572 $37,908
Income taxes 10,526 10,858 2,036
Purchase of bank subsidiaries and branch
Fair value of assets acquired - - 91
Cash received - - 10,037
Deposit premium - - 1,123
Fair value of liabilities assumed - - 11,251
Non-cash activities:
Investment securities transferred to
securities available for sale - 111,356 143,821
Loans transferred to (from) other real
estate owned 988 438 (48)
Conversion of preferred stock - - 1,300
Land transferred to other assets 1,803 - -
See notes to consolidated financial statements
<TABLE>
Consolidated Statements of Changes in Stockholders' Equity
Years ended December 31, 1996, 1995 and 1994
Unrealized Gain
<CAPTION>
(loss) on securities
Preferred Common Retained Available for Sale, Treasury Total
Stock Stock Surplus Earnings Net of Tax Stock
<S> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1994 $16,200 $153 $51,295 $61,418 $4,117 ($208) $132,975
Net earnings 13,344 13,344
Cash dividends common stock (3,578)
(3,578)
Cash dividends preferred stock (1,205)
(1,205)
Three-for-one stock split 49 -
(49)
Redemption of Series C
perpetual preferred stock (1,950) (1,950)
Exercised stock options 19 19
Change in unrealized gain
(loss) on securities available
for sale, net of tax (11,930) (11,930)
Purchase and retirement of
common stock (1) (600)
(599)
Treasury stock reissuance 59 59
Balance December 31, 1994 14,250 201 50,666 69,979 (7,813) (149) 127,134
Net earnings 17,029 17,029
Cash dividends common stock (3,743)
(3,743)
Cash dividends preferred stock (1,106)
(1,106)
Exercised stock options 51 51
Change in unrealized gain
(loss) on securities available
for sale, net of tax 17,863 17,863
Purchase and retirement of
common stock (2) (1,374)
(1,372)
Treasury stock reissuance 149 149
Balance December 31, 1995 14,250 199 49,345 82,159 10,050 0 156,003
Net earnings 13,317 13,317
Cash dividends common stock (5,382)
(5,382)
Cash dividends preferred stock (940)
(940)
Exercised stock options 1 329 330
Change in unrealized gain
(loss) on securities available
for sale, net of tax (235) (235)
Redemption of Series A
preferred stock (5,000) (5,000)
Cash paid out for fractional
shares (4)
(4)
Balance December 31, 1996 $9,250 $200 $49,670 $ 89,154 $9,815 $0 $158,089
</TABLE>
See accompanying notes to consolidated financial statements.
Independent Auditors' Report
The Board of Directors
Grand Premier Financial, Inc.
We have audited the accompanying consolidated balance sheet of Grand
Premier Financial, Inc. and subsidiaries as of December 31, 1996 and the
related consolidated statements of earnings, changes in stockholders'
equity and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Grand Premier Financial, Inc. and subsidiaries at December 31, 1996
and the results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles.
We previously audited and reported on the consolidated balance
sheet of Premier Financial Services, Inc. and subsidiaries as of
December 31, 1995 and the related consolidated statements of earnings,
changes in stockholders equity and cash flows for the years ended
December 31, 1995 and 1994, prior to their restatement for the 1996
pooling of interests. The contribution of Premier Financial Services,
Inc. and subsidiaries to total assets, stockholders equity, interest
income and net income represented 41.3%, 39.8%, 40.8%, and 36.8% of the
respective restated totals as of and for the year ended December 31,
1995 and the contribution of Premier Financial Services, Inc. and
subsidiaries to total stockholders equity, interest income and net
income represented 41.3%, 39.6%, and 42.8% of the respective restated
totals as of and for the year ended December 31, 1994. Separate
consolidated financial statements of the other company included in the
December 31, 1995 restated consolidated balance sheet and the restated
consolidated statements of earnings, changes in stockholders equity and
cash flows for the years ending December 31, 1995 and 1994 were audited
separately by other auditors whose report thereon dated January 31,
1996, expressed an unqualified opinion on those statements.
We also audited the combination of the accompanying consolidated
balance sheet as of December 31, 1995, and the consolidated statements
of earnings, changes in stockholders equity and cash flows for the
years ended December 31, 1995 and 1994, after restatement for the 1996
pooling of interests; in our opinion, such consolidated statements have
been properly combined on the basis described in Note 2 of the notes to
the consolidated financial statements.
KPMG Peat Marwick LLP
Chicago, Illinois
January 29, 1997
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
1. Summary of significant accounting policies
Nature of operations
Grand Premier Financial, Inc. (the Company ) is a registered bank
holding company organized in 1996 under Delaware law. The operations of
the Company and its subsidiaries consist primarily of those financial
activities, including trust and investment services, common to the
commercial banking industry. The Company's markets are throughout
northern Illinois.
Principals of presentation
The accompanying consolidated financial statements conform to generally
accepted accounting principles and to general practices within the
banking industry. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of income and expense during the reporting period. Actual
results could differ from those estimates.
The accompanying consolidated financial statements include the financial
information of the Company and its subsidiaries, all of which are wholly
owned. Significant intercompany balances and transactions have been
eliminated.
Securities available for sale
Securities classified as securities available for sale are carried at
fair value with unrealized gains and losses, net of income taxes
excluded from earnings and reported as a separate component of
stockholders' equity. Gains or losses on sale of securities are
determined on the basis of specific identification.
Investments held-to-maturity
Investments held-to-maturity are stated at cost adjusted for
amortization of premiums and accretion of discounts on the level yield
method over the life of the security. Management has the positive
intent and ability to hold these investment securities to maturity. On
November 30, 1995, the Company transferred all securities classified as
held-to-maturity to securities available for sale under the provisions
of the SFAS No. 115 implementation guide.
Loans
Loans are stated at face value less unearned discounts. Interest income
on loans not discounted is computed on the principal balance
outstanding. Interest income on discounted loans is computed on a basis
which results in an approximate level rate of return over the term of
the loan. Accrual of interest is discontinued on a loan when management
believes that the borrower's financial condition is such that collection
of interest is doubtful.
Impaired loans
Effective January 1, 1995, the Company adopted Statements of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of
a Loan" (SFAS 114), and No. 118, "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosures" (SFAS 118). In
accordance with SFAS 114, impaired loans are measured and reported based
on the present value of expected cash flows discounted at the loan's
effective interest rate, or at the fair value of the loan's collateral
if the loan is deemed "collateral dependent." A valuation allowance is
required to the extent that the measure of the impaired loans is less
than the recorded investment.
Impaired loans are loans for which it is probable that the creditor will
be unable to collect all amounts due according to the terms of the loan
agreement. The specific factors that influence management's judgment in
determining when a loan is impaired include evaluation of the financial
strength of the borrower and the fair value of the collateral. A loan
is not impaired during a period of "minimum delay" in payment,
regardless of the amount of shortfall, if the ultimate collectibility of
all amounts due is expected. The Company defines "minimum delay" as
past due less than 90 days.
SFAS 114 does not apply to larger groups of homogeneous loans such as
real estate-residential and other loans which are collectively evaluated
for impairment. The Company applies the measurement methods described
above to loans on a loan-by-loan basis. The Company's impaired loans
are nonaccrual loans, as generally loans are placed on nonaccrual status
on the earlier of the date that principal or interest amounts are 90
days or more past due or the date that collection of such amounts is
judged uncertain based on evaluation of the financial strength of the
borrower and the fair market value of the collateral. Restructured
loans are impaired loans in the year of restructuring; thereafter, such
loans are subject to management's evaluation of impairment based on the
restructured terms.
The Company's charge-off policy for impaired loans is consistent with
its policy for loan charge-offs to the allowance: impaired loans are
charged-off when an impaired loan, or a portion thereof, is considered
uncollectible or is transferred to foreclosed properties.
SFAS 118 allows a creditor to use existing methods for recognizing
interest income on an impaired loan. Consistent with the Company's
method for nonaccrual loans, interest receipts on impaired loans are
recognized as interest income or are applied to principal when the
ultimate collectibility of principal is in doubt. In accordance with
SFAS 114 and SFAS 118, no retroactive application of these provisions
have been made to the consolidated financial statements for periods
prior to January 1, 1995.
Allowance for possible loan losses
The allowance for possible loan losses is increased by provisions
charged to expense and recoveries on loans previously charged off, and
reduced by loans charged off in the period. The allowance is based on
past loan loss experience, management's evaluation of the loan portfolio
considering current economic conditions and such other factors, which,
in management's best judgement, deserve current recognition in
estimating loan losses. Regulatory examiners may require the Company to
recognize additions to the allowances based upon their judgments about
information available to them at the time of their examination.
Bank premises and equipment
Bank premises and equipment are stated at cost, less accumulated
depreciation and amortization. Depreciation expense is computed by the
straight line method for furniture and equipment and both the straight
line method and the declining balance method for buildings based on the
estimated useful lives of the assets. Rates of depreciation are based
on the following: buildings 31-40 years and equipment 3-15 years. Cost
of major additions and improvements are capitalized. Expenditures for
maintenance and repairs are reflected as expense when incurred.
Excess cost over fair value of net assets acquired
The excess cost over fair value of net assets acquired is being
amortized over 25 years for acquisitions prior to 1985, and over 15
years for acquisitions subsequent to that date using the straight line
method.
Income taxes
The Company and its subsidiaries file consolidated federal and state
income tax returns. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred taxes of a change in tax
rates is recognized in income in the period that includes the enactment
date.
Stock Option Plan
Prior to January 1, 1996, the Company accounted for its stock option
plan in accordance with the provisions of Accounting Principles Board
( APB ) Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations. As such, compensation expense would be
recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. On January 1, 1996, the
Company adopted SFAS No. 123, Accounting for Stock-based Compensation
( SFAS No. 123"). SFAS No. 123 permits entities to recognize as expense
over the vesting period the fair value of all stock-based awards on the
date of grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of APB Opinion No. 25 and provide pro
forma net income and pro forma earnings per share disclosures for
employee stock option grants made in 1995 and future years as if the
fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion
No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
Earnings per share
Earnings per share is computed by dividing net income (less preferred
stock dividends) by the total of the average number of common shares
outstanding and the additional dilutive effect of stock options
outstanding during the respective period. The dilutive effect of stock
options is computed using the average market price of the Company's
common stock for the period.
Cash and noninterest bearing deposits
Cash and noninterest bearing deposits includes reserve balances that the
Company's subsidiary banks are required to maintain with the Federal
Reserve Bank of Chicago. These required reserves are based principally
on deposits outstanding. The average reserves required for the years
ended December 31, 1996 and 1995 were $5,327,000 and $4,315,000,
respectively.
2. Merger
The merger of Northern Illinois Financial Corporation ("Northern
Illinois") and Premier Financial Services, Inc. ("Premier") with and
into the Company was consummated on August 22, 1996 and was accounted
for as a pooling of interests. Each outstanding share of Northern
Illinois and Premier common stock was converted into 4.25 shares and
1.116 shares of the Company common stock, respectively. Total shares
issued of the Company s common stock was 19,940,181. Each of the 7,250
shares of Premier Series B Preferred Stock was converted into one share
of Grand Premier Series B Preferred Stock, and each of the 2,000 shares
of Premier Series D Preferred Stock was converted into one share of
Grand Premier Series C Preferred Stock. All financial statements and
information have been restated to reflect the merger. The table below
reconciles total assets, net income and net income per common share
previously reported by Northern Illinois and Premier to the data
reported in the restated consolidated statements.
December 31
Total assets (in thousands): 1995 1994
Northern Illinois Financial Corporation $ 954,454 $ 872,563
Premier Financial Services, Inc. 670,219 620,504
Restated $ 1,624,673 $ 1,493,067
Net Income (in thousands):
Northern Illinois Financial Corporation $ 10,767 $ 7,634
Premier Financial Services, Inc. 6,262 5,710
Restated $ 17,029 $ 13,344
Net Income per common share:
Northern Illinois Financial Corporation $ 3.62 $ 2.53
Premier Financial Services, Inc. .77 .68
Restated $ .79 $ .60
3. Securities available for sale
The amortized cost and approximate fair value of securities available
for sale at December 31, 1996 and 1995 are as follows (in thousands):
<TABLE>
1995 1996
<CAPTION>
Gross Gross Approx. Amortized Gross Gross Approx.
Amortized Unrealized Unrealized Fair Cost Unrealized Unrealized Fair
Cost Gains Losses Value Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury obligations $79,067 $256 ($419) $78,904 $98,717 $ 467 ($ 477) $ 98,707
U.S. Government agencies 55,495 177 ( 702) 54,970 137,998 986 (581) 138,403
Obligations of state &
political subdivisions 132,223 3,234 (824) 134,633 133,886 4,144 (855) 137,175
Debt securities issued by
foreign institutions 5 - - 5 2,010 - - 2,010
Corporate debt securities 14,817 34 (40) 14,811 37,956 132 (29) 38,059
Mortgage-backed securities 215,655 1,217 (1,869) 215,003 146,722 1,803 (379) 148,146
Equity securities 22,332 15,029 - 37,361 25,021 11,049 - 36,070
$519,594 $19,9 47 ($3,854) $535,687 $582,310 $18,581 ($ 2,321) $598,570
</TABLE>
The amortized cost and fair value of securities available for sale
as of December 31, 1996 by contractual maturity are shown below.
Expected maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
(In thousands) Approximate
Amortized Fair
Cost Value
Due in one year or less $49,692 $49,193
Due after one year through five years 97,901 98,954
Due after five years through ten years 59,198 60,025
Due after ten years 74,816 75,151
Mortgage-backed and equity securities 237,987 252,364
$519,594 $535,687
During 1996, proceeds from sales of securities available for sale were
$142,485,000. Gross gains of $4,389,000 and gross losses of $551,000 were
realized on those sales. Proceeds from sales of securities available for sale
during 1995 were $178,984,000. Gross gains of $4,766,000 and gross losses of
$720,000 were realized on those sales. During 1994, proceeds from sales of
investment securities were $41,511,000. Gross gains of $1,460,000 and gross
losses of $95,000 were realized on those sales.
On December 31, 1996 securities with a carrying value of approximately
$241,171,000 were pledged to secure funds and trust deposits and for other
purposes as required or permitted by law.
4. Loans
The following is a summary of loans by major classification as of December 31,
1996 and 1995 (in thousands):
1996 1995
Commercial, financial and
agricultural loans $ 229,700 $ 229,589
Real estate-construction loans 42,772 45,098
Real estate-mortgage loans 625,364 530,636
Loans to individuals 68,488 71,010
$ 966,324 $ 876,333
The Company serviced loans for others totaling $87,983,000, $127,747,000, and
$128,271,000 as of December 31, 1996, 1995 and 1994, respectively. Custodial
escrow balances maintained in connection with the foregoing loan servicing and
included in demand deposits were approximately $87,000 and $1,094,000 at
December 31, 1996 and 1995, respectively.
A summary of changes in the allowance for possible loan losses for the three
years ended December 31 is as follows (in thousands):
1996 1995 1994
Balance beginning of year $9,435 $9,738 $10,595
Recoveries 572 1,116 926
Provision for possible loan losses 2,875 1,435 555
12,882 12,289 12,076
Less:loans charged off 2,766 2,854 2,338
Balance end of year $10,116 $9,435 $9,738
The recorded investment in collateral-dependent loans for which an impairment
has been recognized at December 31, 1996 and 1995 was $4,718,000 and $6,118,000,
respectively. The recorded investment in loans for which an impairment has been
recognized was $4,718,000 and $3,748,000 and the related allowance for possible
loan losses was $917,000 and $1,199,000 at December 31, 1996 and 1995,
respectively. The average recorded investment in impaired loans during 1996 and
1995 was $5,475,000 and $6,927,000, respectively. Interest income recognized on
impaired loans during 1996 and 1995 was $188,000 and $284,000, respectively.
As of December 31, 1996, 1995 and 1994, the outstanding balance of nonaccrual
loans was approximately $4,718,000, $6,118,000 and $8,911,000, respectively.
Had interest on such loans been accrued, interest and fees on loans in the
accompanying consolidated statements of earnings would have been greater by
approximately $369,000, $643,000 and $1,011,000 in 1996, 1995 and 1994,
respectively.
The Company's subsidiary banks make loans to their executive officers,
directors, principal holders of the Company's equity securities and to
associates of such persons. These loans were made in the ordinary course of
business on the same terms and conditions, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other customers and do not involve more than a normal risk. The following is a
summary of activity with respect to such loans for the latest fiscal year (in
thousands):
Balance, January 1, 1996 $10,630
New loans 9,957
Repayments 5,038
Balance, December 31, 1996 $15,549
5. Bank premises and equipment
Bank premises and equipment are recorded at cost less accumulated depreciation
as follows (in thousands):
1996 1995
Land, buildings and improvements $41,030 $42,679
Furniture, fixtures and equipment 17,798 16,596
58,828 59,275
Less accumulated depreciation 25,507 22,599
$33,321 $36,676
6. Short-term borrowings and securities sold under agreements to
repurchase
Following is a summary of short-term borrowings and securities sold under
agreements to repurchase at December 31, 1996 and 1995 (in thousands):
1996 1995
Federal funds purchased and FHLB advances $ - $25,225
Notes payable to banks - 13,250
Securities sold under agreements to
repurchase 23,486 49,757
$23,486 $88,232
The notes payable to banks totaling $13,250,000 at December 31, 1995 were draws
on revolving lines of credit due on demand with variable interest (7.43% at
December 31, 1995) and were secured by the Company's common stock holdings in
its subsidiaries. At December 31, 1996, the Company had unused lines of credit
of $4,500,000 maturing May 1997 and $20,000,000 maturing January, 1999. The
lines bear interest at the option of the Company of prime rate floating or fixed
at one month, two month, three month or six month periods at LIBOR plus 1 3/4%.
The note agreements contain certain restrictive covenants. The Company was in
compliance with such covenants at December 31, 1996.
At December 31, 1996 and 1995 there were no material amounts of assets at risk
with any one customer under agreements to repurchase securities sold. At
December 31, 1996 and 1995 securities sold under agreements to repurchase are
summarized as follows (in thousands):
Weighted
Average Collateral
Repurchase Interest Collatera Market
1996 Liability Rate Book Value Value
Demand $16,857 3.83% $12,370 $12,333
Term 6,629 5.61% 7,496 7,543
$23,486 4.33% $19,866 $19,876
1995
Demand $12,637 4.07% $16,772 $16,919
Term 37,120 5.72% 38,779 38,980
$49,757 5.30% $55,551 $55,899
7. Long-Term Borrowings
At December 31, 1996 and 1995 long-term borrowings consisted of the following
(in thousands):
1996 1995
Securities sold under agreements to
repurchase bearing interest at 6% to 7%
with final maturity at June 19, 1997 $ - $3,588
FHLB advances with interest at 6.92%,
repaid in 1996 - 3,000
FHLB advances, 5.85%, interest payable
monthly, due December 20, 1999 5,000 5,000
FHLB advances, 6.54%, interest payable
monthly, due August 23, 2000 5,000 -
FHLB advances, 6.75%, interest payable
monthly, due July 2, 2001 5,000 -
FHLB advances, 6.24%, interest payable
monthly, due November 6, 2001 15,000 -
$30,000 $11,588
8. Employee benefit plans
Effective July 1, 1994 the Company froze the benefits accumulating to
participants in a defined benefit pension plan covering substantially all
Premier Financial Services, Inc.'s employees. Accrued benefits as of that date
were fully funded. The net pension income for 1995 and 1994 was $142,000 and
$177,000, respectively. No income or expense was recorded in 1996.
The Company has a savings and stock plan for officers and employees. Company
contributions to the plan are discretionary. The plan includes provisions for
employee contributions which are considered tax-deferred under Section 401(k) of
the Internal Revenue Code. Total expense was $886,000 for 1996 $880,000 for
1995, and $791,000 for 1994.
The Company has a stock option plan for key employees. Options are granted at
the fair market value of the stock at the grant date. Options vest at the rate
of 20% of granted shares at the end of each year in the succeeding five year
period after the grant date, with the exception of 120,000 options granted in
1996 which vest ratably over a three year period beginning September 23, 1997.
The plan provides for adjusting the total number of shares of common stock that
may be available for options under the Plan on January 1, of each calendar year,
so that the total number of shares of common stock that may be issued and sold
under the Plan as of January 1, of each calendar year to be equal to four
percent (4%) of the outstanding shares of common stock of the Company on such
date; provided, however, that no such adjustment will reduce the total number of
shares of common stock that may be issued and sold under the plan below 400,000.
The Company applies APB Opinion 25 and related Interpretations in accounting for
its plan. Accordingly, no compensation cost has been recognized for its stock
options plans. Had compensation cost for the Company's stock-based compensation
plans been determined based on the fair value at the grant dates for awards
under those plans consistent with the method contained in SFAS No.123, the
Company's net income and earnings per share would have been reduced to the pro
forma amounts indicated below:
1996 1995
Net Income As reported $13,317 $17,029
Pro forma $13,244 $17,018
Earnings per share As reported $.62 $.79
Pro forma $.61 $.79
The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions for 1995 and
1996, respectively; risk-free interest rates of 5.8% and 5.9%; dividend yield of
3.0% for both years; expected lives of 4 and 5 years; and volatility of 25% and
30%. The weighted fair value of the options granted in 1995 and 1996 was $1.28
and $2.57, respectively.
A summary of the status of the Company's stock option plan as of and for each of
the years in the three year period ended December 31, 1996 is presented below.
Option
Amount Exercise price
Outstanding at January 1, 1994 396,802 $2.23 to $6.42
Granted -
Exercised (8,524) 2.23
Forfeited - -
Outstanding at December 31, 1994 388,278 2.23 to 6.42
Granted 75,888 6.16
Exercised (20,222) 2.23 to 4.08
Forfeited - -
Outstanding at December 31, 1995 443,944 2.23 to 6.42
Granted 216,280 10.75
Exercised (114,380) 2.23 to 6.42
Forfeited (10,892) 2.23 to 6.42
Outstanding at December 31, 1996 534,952 $2.23 to $10.75
The number of options exercisable at December 31, 1996, 1995 and 1994 were
247,599, 330,068 and 347,221, respectively.
The following table summarizes information about stock options outstanding at
December 31, 1996.
Number Remaining
Exercise of Contractual Number
Price Shares Life Exercisable
2.23 29,837 1.5 years 29,837
2.83 104,595 2.5 years 104,595
2.46 45,721 4 years 45,721
4.08 32,807 5 years 32,807
6.42 40,672 6.5 years 23,167
6.16 65,040 8 years 11,472
10.75 120,000 3 years -
10.75 96,280 9 years -
534,952 247,599
The Company adopted a Deferred Compensation Plan January 1, 1997 for Directors
and employees designated as Senior Leadership Employees by the Board of
Directors. Participants may elect to defer up to 50% of salary, 100% of any
bonus or 100% of director fees under the Plan. The Company makes a 25% matching
contribution. Seventy-five thousand shares are registered for purchased by the
Plan. Participants' deferral amounts are 100% vested on the earlier of 1) the
end of the sixth year following the year in which deferrals are made, 2) normal
retirement, or 3) employment termination due to death or disability. Prior to
the merger, Northern Illinois and Premier each had a deferred Compensation Plan
for their key employees. Total expense was approximately $329,000 in 1996,
$167,000 in 1995, and $170,000 in 1994.
9. Stockholders' equity
On April 28, 1994, the Board of Directors of Premier Financial Services, Inc.
declared a three-for-one stock split in the form of a stock dividend, payable
July 1, 1994 to stockholders of record on June 8, 1994. The stock split
resulted in the issuance of 4,849,830 additional shares of common stock from
authorized but unissued shares. The issuance of authorized but unissued shares
resulted in the transfer of $48,498 from surplus to common stock, representing
the par value of the shares issued.
In 1994, Premier Financial Services, Inc. redeemed all of the outstanding
Premier Series C Preferred Stock for $1,950,000 and converted 1,300 shares of
Premier Series D Preferred Stock to Premier Series B convertible Preferred Stock
at stated value. In 1996, Premier Financial Services, Inc. redeemed all of the
outstanding Premier Series A Preferred Perpetual Stock for $5,000,000.
Under the Company's shareholder rights plan each share of common stock entitles
its holder to one right. Under certain conditions, each right entitles the
holder to purchase one one-hundredth of a share of Junior Preferred Stock at a
price of $27.25 per share, subject to adjustment. The rights will only be
exercisable if a person or group has acquired, or announced an intention to
acquire 15% or more of the outstanding shares of Company common stock or any
person or group would be the beneficial owner of 30% or more of the voting power
of the Company. Under certain circumstances, including the existence of a 15%
acquiring party, each holder of a right, other than the acquiring party, will be
entitled to purchase at the exercise price Company common stock having a market
value of two times the exercise price. The rights may be redeemed at a price of
$.01 per right prior to the existence of a 15% acquiring party, and thereafter,
may be exchanged for one common share per right to the existence of a 50%
acquiring party. The rights will expire on June 30, 2006. The rights do not
have voting or dividend rights and until they become exercisable, have no
dilutive effect on the earnings of the Company.
10. Regulatory Matters
The Company and its banking subsidiaries are subject to various regulatory
capital requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary actions by regulators
that, if undertaken, could have a direct material effect on the Company's
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and its banking subsidiaries
must meet specific capital guidelines that involve quantitative measures of each
entities' assets, liabilities, and certain off-balance sheet items as calculated
under regulatory accounting practices. The Company's and its banking
subsidiaries capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and its banking subsidiaries to maintain minimum amounts and
ratios (set forth in the table below) of total and Tier 1 capital (as defined in
the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as
defined) to average assets (as defined). Management believes, as of December
31, 1996 the Company and its banking subsidiaries met all capital adequacy
requirements which they are subject. As of December 31, 1996, the Company and
it s banking subsidiaries were all categorized as well capitalized under the
regulatory framework. There are no conditions or events since year end that
management believes have changed the Company and it s banking subsidiaries
category.
<TABLE>
(Amounts in thousands)
As of December 31, 1996:
To Be Well
<CAPTION> Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions:
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to risk weighted assets):
Grand Premier Financial, Inc. 139,010 12.61% 88,193 8.00% 110,241 10.00%
Grand National Bank 79,080 11.35 55,728 8.00 69,660 10.00
First Bank North 16,845 11.40 11,818 8.00 14,772 10.00
First Bank South 9,572 11.27 6,795 8.00 8,493 10.00
First National Bank of Northbrook 17,424 13.83 10,075 8.00 12,594 10.00
First Security Bank of Cary Grove 6,040 15.70 3,078 8.00 3,847 10.00
Tier 1 Capital (to risk weighted assets):
Grand Premier Financial, Inc. 128,894 11.69 44,096 4.00 66,145 6.00
Grand National Bank 72,726 10.44 27,864 4.00 41,796 6.00
First Bank North 15,445 10.46 5,909 4.00 8,863 6.00
First Bank South 8,849 10.42 3,397 4.00 5,096 6.00
First National Bank of Northbrook 16,062 12.75 7,908 4.00 7,557 6.00
First Security Bank of Cary Grove 5,764 14.98 1,539 4.00 2,308 6.00
Tier 1 Capital (to average assets):
Grand Premier Financial, Inc. 128,894 7.94 64,926 4.00 81,158 5.00
Grand National Bank 72,726 7.60 38,293 4.00 47,866 5.00
First Bank North 15,445 6.50 9,507 4.00 11,884 5.00
First Bank South 8,849 5.63 6,284 4.00 7,855 5.00
First National Bank of Northbrook 16,062 8.12 7,908 4.00 9,885 5.00
First Security Bank of Cary Grove 5,764 7.63 3,022 4.00 3,777 5.00
As of December 31, 1995:
Total Capital (to risk weighted assets):
Grand Premier Financial, Inc. 134,159 12.89 83,290 8.00 104,112 10.00
Grand National Bank 82,073 12.58 52,185 8.00 65,231 10.00
First Bank North 16,521 11.54 11,458 8.00 14,322 10.00
First Bank South 9,288 11.57 6,423 8.00 8,029 10.00
First National Bank of Northbrook 17,134 15.10 9,075 8.00 11,343 10.00
First Security Bank of Cary Grove 5,630 16.67 2,702 8.00 3,377 10.00
Tier 1 Capital (to risk weighted assets):
Grand Premier Financial, Inc. 124,724 11.98 41,645 4.00 62,467 6.00
Grand National Bank 76,467 11.72 26,093 4.00 39,139 6.00
First Bank North 15,283 10.67 5,729 4.00 8,593 6.00
First Bank South 8,557 10.66 3,212 4.00 4,817 6.00
First National Bank of Northbrook 15,716 13.85 4,537 4.00 6,806 6.00
First Security Bank of Cary Grove 5,318 15.75 1,351 4.00 2,026 6.00
Tier 1 Capital (to average assets):
Grand Premier Financial, Inc. 124,724 7.81 63,856 4.00 79,820 5.00
Grand National Bank 76,467 8.14 37,558 4.00 46,947 5.00
First Bank North 15,283 6.67 9,169 4.00 11,462 5.00
First Bank South 8,557 5.61 6,106 4.00 7,632 5.00
First National Bank of Northbrook 15,716 7.88 7,976 4.00 9,970 5.00
First Security Bank of Cary Grove 5,318 8.20 2,594 4.00 3,242 5.00
</TABLE>
11. Income Taxes
The components of the consolidated income tax expense (benefit)for the
years ended December 31, 1996, 1995, and 1994 are as follows (in thousands):
1996 1995 1994
Current $10,450 $11,634 $1,671
Deferred (5,165) (5,478) 2,878
Total income tax expense $5,285 $6,156 $4,549
The actual tax expense differs from the expected tax expense computed by
applying the Federal Corporate tax rate of 34% to earnings before income taxes
as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Federal income tax expense at statutory rate $7,278 $7,882 $6,083
Tax-exempt interest income, net of disallowed interest
deduction (2,650) (2,271) (2,495)
State income tax expense (benefit), net of federal
income tax 1,369 398 (88)
Nondeductible expenses - 430 609
Adjustment of prior year - - (96)
Valuation allowance on state NOLs (763) - -
Other, net 51 (283) 536
Total income tax expense $5,285 $6,156 $4,549
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1996 and 1995 are presented below (in thousands):
1996 1995
Deferred tax assets
Securities, sections 475 and 481
adjustments $5,105 $2,743
Other real estate owned - 32
Net operating loss carry forwards 832 910
Loans, principally due to allowance for
losses 4,142 3,199
Deferred loan fees - 32
Land write-down 994 -
Other 1,378 1,318
Total gross deferred tax assets 12,451 8,234
Less: Valuation allowance - (763)
Net deferred tax assets $12,451 $7,471
Deferred tax liabilities: 1996 1995
Security accretion $ 129 $ 165
Tax depreciation in excess of
book depreciation 51 300
Difference between tax and
book basis of assets acquired 1,147 1,322
Deferred loan fees 274 109
Other 136 26
Total gross deferred tax
liabilities 1,737 1,922
Net deferred tax asset 10,714 5,549
Unrealized gain on securities
available for sale (6,305) (6,210)
Net deferred tax asset
(liability) $ 4,409 $ ( 661)
At December 31, 1996 and 1995, the Company had net operating loss carryforwards
for Illinois state income tax purposes of approximately $17.8 million and
$19.6 million respectively. These carryforwards will expire at various dates
through the year 2007.
12. Financial instruments with off-balance sheet risk and contingencies
The company utilizes various financial instruments with off-balance sheet
risk to meet the financing needs of its customers, to generate profits and to
reduce its own exposure to fluctuations in interest rates. These financial
instruments, many of which are so-called "off-balance sheet" transactions,
involve to varying degrees, credit and interest rate risk in excess of the
amount recognized as either an asset or liability in the consolidated balance
sheets.
Credit risk is the possibility that a loss may occur because a party to a
transaction failed to perform according to the terms of the contract.
Interest rate risk is the possibility that future changes in market interest
rates will cause a financial instrument to be less valuable or more onerous.
The Company controls the credit risk arising from these instruments through
its credit approval process and through the use of risk control limits and
monitoring procedures. The Company uses the same credit policies when
entering into financial instruments with off-balance sheet risk as it does for
on-balance sheet instruments. At December 31, 1996 and 1995, such commitments
and off-balance sheet financial instruments are as follows (in thousands).
1996 1995
Letters of credit $14,018 $18,928
Lines of credit and other loan commitments 256,654 237,826
$270,672 $256,754
Letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing standby letters of credit is essentially the same as that
involved in extending loan facilities to customers.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.
There are various claims pending against the Company and its subsidiaries
arising in the normal course of business. Management believes, based upon the
opinion of counsel, that liabilities arising from these proceedings, if any,
will not be material to the Company's financial position.
13. Disclosures about fair value of financial instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practical to estimate that
value:
Securities - For U.S. Treasury and U.S. Government Agency securities, fair
values are based on market prices or dealer quotes. For other investment
securities, fair value equals quoted market price if available. If a quoted
market price is not available, fair value is estimated using quoted market
prices for similar securities.
Loans - The fair value of loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities.
Deposits - The fair value of demand deposits, savings accounts, NOW and money
market accounts is the amount payable on demand at the reporting date. The fair
value of fixed-maturity certificates of deposit is estimated using the rates
currently offered for deposits of similar remaining maturities.
Short-term and Long-term Borrowings - The fair value of short-term and long-term
borrowings is estimated by discounting the future cash flows using the current
interest rates at which similar borrowings could be made for the same
maturities.
Commitments to Extend Credit and Standby Letters of Credit - The fair value of
commitments is estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
present creditworthiness of the counter parties. For fixed-rate loan
commitments, fair value also considers the difference between current levels of
interest rates and the committed rates. The fair value of letters of credit is
based on fees currently charged for similar agreements or on the estimated cost
to terminate them or otherwise settle the obligations with the counter parties
at the reporting date.
The estimated fair value of the Company's financial instruments at
December31,1996 follows (in thousands):
1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial Assets:
Cash $ 49,441 $ 49,441 $ 65,279 $65,279
Interest Bearing Deposits 3,114 3,114 5,524 5,524
Securities 535,687 535,687 598,570 598,570
Federal Funds Sold and
Securities purchased under
agreement to resell 17,805 17,805 6,500 6,500
Loans 965,482 963,907 874,752 870,827
Less Allowance for possible
loan losses (10,116) - (9,435) -
Financial Liabilities:
Deposits 1,417,394 1,420,663 1,351,657 1,358,654
Short-term borrowings 23,486 23,506 88,232 88,338
Long-term debt 30,000 29,589 11,588 11,611
Off Balance Sheet Items:
Commitments to extend credit - * - *
Standby letters of credit - * - *
* Amount is not material.
14. Condensed financial information (Parent Company only)
The following is a summary of condensed financial information for the Parent
Company only (in thousands):
Condensed balance sheets December 31,
1996 1995
Assets
Investment in subsidiaries $147,887 $151,517
Cash & interest bearing deposits 751 482
Securities available for sale 7,590 10,423
Premises and equipment 1,866 5,722
Other assets 7,406 6,987
Total assets $165,500 $175,131
Liabilities and stockholders' equity
Short-term borrowings $ - $13,250
Other liabilities 7,411 5,878
Total liabilities 7,411 19,128
Stockholders' equity 158,089 156,003
Total liabilities and stockholders' $165,500 $175,131
equity
Condensed statements of earnings
For the years ended December 31,
1996 1995 1994
Income:
Dividends from subsidiaries $ 22,285 $14,913 $10,795
Investment security gains, net 2,513 2,183 1,382
Other 8,504 6,482 4,572
33,302 23,578 16,749
Expenses:
Interest on borrowings 924 1,102 1,099
Salaries 7,372 5,536 5,136
Other 9,757 4,767 3,565
18,053 11,405 9,800
Earnings before income tax benefit and
equity in undistributed earnings of 15,249 12,173 6,949
subsidiaries
Income tax benefit 2,298 987 1,114
Earnings before equity in undistributed
earnings of subsidiaries 17,547 13,160 8,063
Equity in undistributed earnings of
subsidiaries (4,230) 3,869 5,281
Net earnings $ 13,317 $ 17,029 $13,344
Condensed statements of cash flows
For the years ended December 31,
1996 1995 1994
Operating activities:
Net cash provided by operating activities $19,276 9,909 $ 6,372
Investing activities:
Sale of securities available for sale 7,077 5,432 2,317
Maturity of securities available for sale - 525 -
Purchase of securities available for sale (3,459) (7,349) (2,643)
Purchase of bank premises and equipment (894) (247) (746)
Net cash provided by (used in) investing
activities 2,724 (1,639) (1,072)
Financing activities:
Increase (decrease) in short-term debt (13,250) (1,985) 625
Redemption of preferred stock (5,000) - (1,950)
Purchase of treasury stock - (1,374) (600)
Reissuance of treasury stock - 149 59
Dividends paid (6,322) (4,864) (4,640)
Other 2,841 (43) 443
Net cash used in financing activities (21,731) (8,117) (6,063)
Increase (decrease) in cash $ 269 $153 $(763)
Cash paid (received) for:
Interest $ 985 $ 769 $966
Income taxes (1,453) (3,821) (2,332)
15. Quarterly Financial Information (unaudited)
First Second Third Fourth
1996 Quarter Quarter Quarter
Quarter
Interest income $28,047 $28,255 $28,994 $29,074
Interest expense 13,893 13,761 14,378 14,526
Net interest income 14,154 14,494 14,616 14,548
Provision for loan losses 406 514 1,505 450
Other operating income 3,415 4,215 3,878 6,208
Other operating expense 12,239 12,921 16,359 12,532
Income before income taxes 4,924 5,274 630 7,774
Provision for income taxes 1,393 1424 35 2,433
Net income $3,531 43,850 $595 $5,341
Net income per share $.16 $.18 $.02 $.26
First Second Third Fourth
1995 Quarter Quarter Quarter Quarter
Interest income $25,632 $26,930 $27,985 $28,235
Interest expense 12,087 13,342 13,945 14,167
Net interest income 13,545 13,588 14,040 14,068
Provision for loan losses 115 81 394 845
Other operating income 3,342 4,025 4,052 5,756
Other operating expense 12,132 12,463 11,511 11,690
Income before income taxes 4,640 5,069 6,187 7,289
Provision for income taxes 1,173 1,216 1,475 2,292
Net income $3,467 $3,853 $4,712 $4,997
Net income per share $.16 $.18 $.22 $.23
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
The discussion presented below provides an analysis of the Company's financial
condition and results of operations for the past three years, and is intended
to cover significant factors affecting the Company's overall performance during
that time. It is designed to provide shareholders with a more comprehensive
review of the operating results and financial condition than could be obtained
from an examination of the financial statements alone, and should be read in
conjunction with the consolidated financial statements, accompanying notes and
other financial information presented in the 1996 Annual report to
shareholders. All financial statements and information have been restated to
reflect the merger of Northern Illinois Financial Corporation and Premier
Financial Services, Inc. with and into Grand Premier Financial, Inc.
consummated on August 22, 1996. The merger was accounted for as a pooling of
interests.
Results of Operations
Net earnings in 1996 totaled $13.3 million, or $.62 per share, as compared to
slightly over $17.0 million, or $.79 per share, in 1995. Current year earnings
were affected significantly by a number of non-recurring items, many of them
related to the Company s formation and organization as a result of the merger.
Included were charges for contract and lease terminations, severance benefits
related to staff reductions, and investment banking and professional fees. In
addition, the Company recorded a write-down on a parcel of real estate which had
previously been held for future development. In total, these non-recurring
items reduced 1996 net earnings by approximately $4.1 million, or $.20 per
share. The year-to-year increase in net earnings from 1994 to 1995 was
primarily due to increases in net interest income after provision for possible
loan losses and net gains from sales of investment securities.
Net Interest Income
Tax equivalent net interest income totaled $61.7 million for 1996, up $2.7
million (4.6%) from $59.0 million in 1995 and $4.6 million (8.1%) from $57.1
million in 1994. The year-to-year increases were primarily the result of growth
in earning assets. Average earning assets totaled $1.49 billion in 1996 versus
$1.40 billion and $1.32 billion in 1995 and 1994, respectively. Earning assets
as a percentage of total average assets at December 31, 1996, 1995 and 1994 were
91.9%, 91.3% and 90.8%, respectively. Average loans, which are generally the
highest yielding component of earning assets, increased by $215.9 million over
the three year period and represented 61.1% of total earning assets at December
31, 1996, 57.6% of average earning assets at December 31, 1995 and 55.8% of
average earning assets at December 31, 1994. Average investments and other
short-term earning assets (interest bearing deposits, federal funds sold and
securities purchased under agreements to resell) as a percentage of total
average earning assets declined from 44.2% in 1994 to 42.4% in 1995 and 38.9% in
1996.
Grand Premier s net interest margin was 4.14% at December 31, 1996, reflecting a
decline from 4.21% at December 31, 1995 and eighteen basis points lower than the
4.32% at December 31, 1994. The compression on net interest margin from 1995 to
1996 was primarily the result of yields on average earning assets declining from
8.03% in 1995 to 7.94% in 1996, while cost of funds declined only two basis
points, from 3.82% at December 31, 1995 to 3.80% at December 31, 1996. The
yield decline on average earning assets was essentially due to lower overall
market rates in 1996 as compared to 1995, whereas the minimal decrease in cost
of funds reflected a shift toward longer-term funding sources as the Company
took steps during the year to moderate interest rate risk and increase general
liquidity. The decrease in net interest margin from 1994 to 1995 was the result
of market reactions to 1994 monetary policy implemented by the Federal Reserve
Board of Governors wherein interest rates were raised repeatedly in order to
slow economic activity and inflationary trends. From 1994 to 1995, Grand
Premier experienced a 76 basis point increase in the average yield on earning
assets while the average cost of funds increased 87 basis points. Management
anticipates that the Company s net interest margin will continue to be
influenced by competitive and market pressures in the future.
Interest Rate Risk Management
One of the Company s primary objectives is to manage the volatility in net
interest income resulting from changes in interest rates. This is accomplished
by actively managing the repricing characteristics of its interest earning
assets and interest bearing liabilities in a dynamic environment. Grand Premier
uses simulation modeling to analyze the effect of predicted or assumed changes
in interest rates on balances and subsequently net interest income. The model
provides for simultaneously comparing three different interest rate scenarios
and their impact on net interest income over a two year horizon. A "rising" and
a "declining" rate scenario are used to identify the potential impact of rapid
changes, up or down, from current rates. The third scenario, i.e. the "base" or
flat rate" simulation, (more traditionally known as "gap measurement") is used
as a control to quantify the effect of changes in net interest income caused
solely by repricing existing balances at market rates as they mature. Changes
in balances reflecting repayment risk, likely changes in customer behavior under
different interest rate environments and other "what if" assumptions are also
simulated under each scenario. Interest sensitivity, i.e., the Company s
exposure to changes in net interest income is measured over a rolling 12 month
period under the rising and declining rate scenarios and compared to the base
case forecast. Generally, Grand Premier s policy is to maximize net interest
income while limiting negative interest sensitivity ( i.e., a decline in net
interest income) to no more than 10% of after tax earnings under any interest
rate scenario. In January, 1997, the simulation model indicated minimal rate
sensitivity (i.e., less than a 2.00% change in net interest income) in either a
rising or declining rate environment.
The following table shows the Company s base or flat rate measurement (i.e.,
"gap position") as of December 31, 1996:
Volumes Subject to Repricing
within within within over
90 days 1 year 5 years 5 years
($ in thousands)
Loans (net of unearned
income) .................... $372,381 $116,527 $372,869 $103,705
Investment securities ....... 65,307 55,596 236,857 177,927
Other earning assets ........ 28,498 - - -
Total earning assets ...... 466,186 172,123 609,726 281,632
Transaction accounts......... 24,215 24,215 - 145,293
Savings accounts............. 75,273 40,793 - 244,765
Time deposit accounts ....... 186,809 279,436 186,034 10,419
Short-term borrowing ....... 19,199 4,287 - -
Long-term borrowing......... - - 30,000 -
Total interest-bearing
liabilities ............... 305,496 348,731 216,034 400,477
Asset (liability) gap...... 160,690 (176,608) 393,692 (118,845)
Cumulative asset (liability)
gap..................... $160,690 ($ 15,918) $377,774 $258,929
In reviewing the table, it should be noted that the balances are shown for a
specific point in time and because the interest sensitivity position is dynamic,
it can change significantly over time. Furthermore, the balances reflect both
contractual repricing of deposits and management's repricing assumptions on
certain deposits where discretion is permitted. Seventy five percent (75.0%)
of core demand deposit accounts and regular savings accounts have been
classified as repricing beyond one year. While these accounts are subject to
immediate withdrawal, experience indicates they are relatively rate insensitive.
Provision for Possible Loan Losses
The amount of the provision for possible loan losses is based on periodic (but
no less than quarterly) evaluations by management. In these evaluations,
numerous factors are considered including, but not limited to, current economic
conditions, loan portfolio composition, prior loan loss experience, and an
estimation of potential losses.
Each loan in the portfolio is graded according to specific financial, risk and
repayment criteria. The aggregate required reserve balance for the entire
portfolio is maintained through earnings provisions as required. The provision
for loan losses in 1996 totaled $2.9 million as compared to $1.4 million and
$555,000 in 1995 and 1994, respectively.
The increased year-to-year provisions are primarily the result of loan portfolio
growth. Loans, net of unearned discount, totaled $965.5 million, $874.8 million
and $762.7 million at year end 1996, 1995 and 1994 respectively. At December
31, 1996 the allowance for possible loan losses totaled $10.1 million (1.05% of
gross loans), compared to $9.4 million (1.08% of gross loans) at December 31,
1995 and $9.7 million (1.27% of gross loans) at December 31, 1994. Net charge-
offs as a percentage of average loans were .24% in 1996, compared with .22% and
.19% in 1995 and 1994, respectively. Although management believes that the
present level of the Allowance for Possible Loan Losses is a conservative
assessment of the risk inherent in the loan portfolio, there can be no assurance
that significant provisions for losses will not be required in the future based
on factors such as portfolio growth, deterioration of market conditions, major
changes in borrowers' financial conditions, delinquencies and defaults. Future
provisions will continue to be determined in relation to overall asset quality
as well as other factors mentioned previously.
Other Income
Other income (excluding net gains from sales of investment securities) increased
$749,000, or 5.7%, in 1996 over 1995 following a $1.4 million, or 11.5%,
increase in 1995 over 1994. Service charges on deposits and trust fees continue
to be the primary components of Non-Interest income. Revenue from other fee-
based services and products also increased modestly.
Service charges on deposit accounts, which represents Grand Premier s largest
fee-based source of income totaled $6.4 million, $5.3 million and $5.0 million
in 1996, 1995 and 1994, respectively. The $1.1 million increase from 1995 to
1996 was primarily due to standardization of fee schedules among four subsidiary
banks which were merged into a single charter in February, 1996.
Trust fees totaled $3.2 million in 1996, a 10.0% increase over 1995. This
increase followed revenue growth of 6.8% in 1994. The growth in 1996 and 1995
was primarily due to favorable performance of trust assets under administration
and an increasing customer base. Trust fees are based on providing fiduciary,
investment management, custodial and related services to corporate and personal
clients. As of December 31, 1996, the market value of total managed assets
approximated $.65 billion. Management anticipates continued growth in
relationships and fees in 1997.
Net investment security gains were $3.8 million in 1996 as compared to $4.0
million in 1995 and $1.4 million in 1994. Securities available for sale are
utilized to manage interest rate risk, to provide liquidity, and as an important
contributor to earnings. As conditions change over time, overall interest rate
risk, liquidity demands and return on the investment security portfolio will
vary. The Company will continue to use its securities available for sale
portfolio to manage interest rate risk, meet liquidity needs and optimize
overall investment returns.
Other operating income in 1996 decreased $662,000 as compared to 1995, following
an increase of $846,000 in 1995 from 1994. The decline from 1995 to 1996 was
due to reduced revenues associated with residential mortgage originations and
mortgage servicing. Contributing to the 1995 increase were fees from mortgage
origination, loan servicing, credit card processing and safe deposit box
rental.
Other Expenses
Total other expenses in 1996 increased by $6.3 million, or 13.1% over 1995.
Increases of approximately $7.7 million were partially offset by a $1.4 million
reduction in FDIC insurance premiums. In 1994 other expenses totaled $47.9
million.
Salaries and benefits, the largest component of other expense, totaled $26.6
million in 1996, an increase of $2.5 million (10.4%) over $24.1 million in 1995,
following a $884,000 increase (3.8%) in 1995 over 1994.
In 1996, $350,000 in severance benefits were paid to employees whose positions
were eliminated as a result of merging four subsidiary banks into one charter in
February, 1996 and $614,000 was recorded as an expense in recognition of the
Company s liability for earned vacation pay as of December 31, 1996. In
addition, Grand Premier accrued an expense of $700,000 for anticipated severance
payments to employees whose positions will be eliminated as the Company
completes consolidating its operations in early 1997. Three employee groups,
including officials and managers, technicians, and office and clerical totaling
46 employees are included in the restructuring plan. Management expects to
complete the consolidation plan during the first half of 1997. No payments were
made against the severance liability in 1996. The increase from 1994 to 1995
reflects higher incentive payments and increased costs associated with medical
insurance premiums.
Employee benefits were 21.10% of compensation expense in 1996 compared with
24.06% in 1995 and 24.56% in 1994. At December 31, 1996, full-time equivalent
employees totaled 642, as compared to 711 and 696 at year end 1995 and 1994,
respectively.
Combined net occupancy and furniture and fixture expense increased $409,000 and
$360,000 in 1996 and 1995, respectively. The increase in 1996 over 1995 was
primarily the result of relocating the Company's operating subsidiary to its new
facility in Vernon Hills, Illinois during the fourth quarter, 1996 as a part of
the Company s plans to consolidate and centralize back-office servicing. The
increase in combined net occupancy and furniture and fixture expense in 1995 was
the result of opening three new financial service offices.
In 1996, Grand Premier s subsidiary banks paid $95,000 for federal deposit
(FDIC) insurance as compared to $1.5 million in 1995 and $2.8 million in 1994.
The year-to-year decreases reflect the fully funded position of the Bank
Insurance Fund ( BIF ) in 1995. The FDIC insurance premium expense in 1996
reflects a one time charge of $59,000 on OAKAR deposits (i.e., deposits acquired
by the Company from a savings association through a branch acquisition) by the
Company for recapitalization of the Savings and Loan ( SAIF ) insurance fund.
The Company owns 5.5 acres of property in Riverwoods, Illinois which it acquired
in 1993 for possible future expansion. In October, 1996, Grand Premier decided
that developing the property was no longer consistent with its long-term plans.
The Company recorded a $2.5 million charge to 1996 pre-tax earnings reflecting
the write-down of the property to approximate fair value. The property is
currently being marketed for sale.
Other expenses increased by $2.2 million in 1996 over 1995 and 1994. A major
portion of the increase (just under $2.0 million) was the result of several non-
recurring items; 1) expenses of approximately $750,000 for contract and lease
terminations, and 2) $1.2 million in investment banking, professional expenses
and other organizational start up costs associated with the merger.
Miscellaneous expenses such as forms reprinting, marketing, establishing inter-
company communications systems, etc. were primarily responsible for the
remainder of the year-to-year increase.
Income Taxes
Income taxes for 1996 totaled $5.3 million as compared to $6.2 million in 1995
and $4.5 million in 1994. The decrease in the tax provision from 1995 to 1996
is due to lower taxable earnings. Grand Premier s effective tax rate was 28.4%
in 1996, 26.5% in 1995 and 25.4% in 1994.
Financial Condition
At December 31, 1996, Grand Premier had total assets of $1.64 billion, an
increase of $17.9 million as compared to $1.62 billion at December 31, 1995.
Average total assets for 1996 increased $85.6 million, or 5.6%, over 1995.
Although asset growth was modest from year end 1995 to 1996, balance sheet
composition changed significantly. Loans, which totaled $876.3 million as of
December 31, 1995, grew by $90.0 million to just over $966.3 million at year end
1996. The change in asset mix is reflected in securities available for sale,
which declined by $62.8 million and a $15.8 million decrease in cash and non-
interest bearing deposits. The mix of funding sources also changed, with
deposits increasing $65.8 million, to $1.42 billion at December 31, 1996, and
long-term borrowings rising by $18.4 million, offset by a $64.7 million decrease
in short-term borrowings.
Securities
Grand Premier s securities available for sale portfolio is used by the Company
as an integral part of its interest rate risk management, earnings and tax
planning strategies. The portfolio consists of debt and equity securities, any
of which may be sold in response to changes in interest rates, for liquidity, or
for tax purposes. At December 31, 1996, $535.7 million was invested in
securities available for sale, compared to $598.6 million at year end 1995. The
decline occurred as proceeds from maturing securities were used to fund loans
instead of being reinvested in the portfolio.
At December 31, 1996, approximately 25% of the total carrying value of
securities available for sale consisted of U. S. Treasury and U.S. government
agency securities, 25% of obligations of states and political subdivisions, 40%
of mortgage-backed securities, 3% of corporate and foreign debt securities, and
7% of equity securities. Of the 40% of mortgage-backed securities the Company
had $118.4 million invested in collateralized mortgage obligations ("CMO's") and
$97.0 million in other mortgage-backed securities. A CMO is a mortgage-backed
security that consists of classes of bonds created by prioritizing the cash
flows from the underlying mortgage pool to meet different investors objectives.
Other mortgage-backed securities depend on an underlying pool of mortgage loans
to provide a cash flow "pass through" of principal and interest, without
prioritization by class. The CMO s held by the Company are primarily shorter-
maturity class bonds structured to provide more predictable cash flows by being
less sensitive to prepayments during periods of changing interest rates. At
December 31, 1996, substantially all of the mortgage-backed securities held by
the Company were issued or backed by U.S. Federal Government Agencies.
Loans
The Company s lending strategy stresses quality growth, diversified by product,
geography and industry. Loans represent the largest component of Grand
Premier s earning assets. At December 31, 1996, loans outstanding totaled
$966.3 million, a $90.0 million (10.26%) increase as compared to year end 1995.
The growth was primarily in the commercial real estate portfolio, which
represented 38.5% of loans at year end. At December 31, 1996, the loan portfolio
consisted of 23.7% commercial, 4.4% construction, 38.5% commercial real estate,
26.3% residential real estate, and 7.1% to individuals. Management anticipates
that growth in total loans will continue in 1997.
Asset Quality
Over the past several years, aggressive collection actions combined with a
healthy local and national economy have improved asset quality significantly.
At year end 1996, non-performing assets declined to $9.4 million, or .57% of
total assets, down from $10.9 million, or .67% of total assets at December 31,
1995. Non-performing assets consist of loans 90 days or more past due, loans
and investments not accruing interest, loans with renegotiated credit terms, and
other real estate owned. Non-accruing loans decreased from $6.1 million at year
end 1995 to $4.7 million at December 31, 1996, loans past due 90 days or more
and still accruing increased from $539,000 at year end 1995 to $1.9 million at
December 31, 1996, and renegotiated loans decreased from $551,000 at year end
1995 to $510,000 at December 31, 1996. Other real estate owned totaled $2.2
million and $3.1 million at December 31, 1996 and 1995, respectively.
Sources of Funds
The Company considers core deposits, which include transaction accounts, savings
deposit accounts, and consumer time deposits less than $100,000 as our most
stable source of funding. These core deposits are supplemented by time deposits
from governmental entities, time deposits greater than $100,000 and securities
sold under agreements to repurchase. Other short-term borrowings and
stockholders' equity comprise the remainder of the Company s funding sources.
Total deposits increased $65.8 million, (4.9%) to $1.42 billion at December 31,
1996 compared with $1.35 billion at December 31, 1995. Non-interest bearing
deposits were 14.9% and 14.5% of total deposits at December 31, 1996 and 1995,
respectively. Total short-term borrowings, including repurchase agreements,
were $23.5 million at December 31, 1996 compared with $88.2 million at December
31, 1995. The $64.7 million decline from year end 1995 is a result of the
Company taking steps to lengthen its interest-bearing liabilities to moderate
interest rate risk. The Company also paid off its short-term lines of credit
with unaffiliated banks, encouraged holders of securities sold under agreements
to repurchase to reinvest proceeds in interest bearing time deposits and
replaced short-term advances from the Federal Home Loan Bank with long-term
advances. Long-term borrowings increased from $11.6 million at December 31,
1995 to $30.0 million at December 31, 1996, reflecting an increase of $18.4
million in advances from the Federal Home Loan Bank as compared to year end
1995.
Liquidity
Grand Premier defines liquidity as having funds available to meet cash flow
requirements. Effective management of balance sheet liquidity is necessary to
fund growth in earning assets, to pay liabilities, to satisfy depositors'
withdrawal requirements and to accommodate changes in balance sheet mix. The
Company has three major sources for generating cash other than through
operations: 1) primary and secondary market deposits, 2) securities available
for sale, and 3) lines of credit from unaffiliated banks. Liquid assets are
compared to the potential needs for funds on an ongoing basis to determine if
the Company has sufficient coverage for future liquidity needs. Management
maintains a primary and total liquidity position that provides for a minimum
100% coverage relative to the anticipated likelihood of potential events taking
place. At year end, our liquidity coverage exceeded this position.
Stockholders' Equity
Stockholders' equity increased by $2.1 million during 1996, from $156.0 million
at December 31, 1995 to $158.1 million in 1996. The increase was primarily due
to retained net earnings of $7.0 million (net income of $13.3 million less total
common and preferred stock dividends of $6.3 million) offset by redemption of
$5.0 million Series A Preferred stock.
The Federal Reserve Board currently specifies three capital measurements under
their risk-based capital guidelines: 1) "tier 1 capital" (i.e., stockholders'
equity less goodwill to risk-adjusted assets), 2) "total risk based capital"
(i.e., tier 1 capital plus the lesser of 1.25% of risk-adjusted assets or the
allowance for possible loan losses to risk-adjusted assets), and 3) "tier 1
leverage ratio" (i.e., stockholders' equity less goodwill to total assets less
goodwill). Bank holding companies are required to maintain minimum risk-based
capital ratios of 4% for "tier 1 capital", 8% for "total risk based capital,"
and a "Tier 1 leverage ratio of 3% or greater. At December 31, 1996, Grand
Premier s "tier 1 capital" ratio was 11.69%, well above the regulatory minimum.
The Company s "total risk based capital" and tier 1 leverage ratios were
12.61% and 7.94% respectively, also considerably better than required. All of
the Company s banking subsidiaries met the definition of "well-capitalized"
under the FDIC's risk related premium system at December 31, 1996.
Current Accounting Developments
In June 1996, the FASB issued SFAS No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No.
125, among other things, applies a financial-components approach that focuses
on control, whereby an entity recognizes the financial and servicing assets it
controls and the liabilities it has incurred, derecognizes assets when control
has been surrendered, and derecognizes liabilities when extinguished. SFAS No,
125 provides consistent standards for distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings. SFAS No. 125
is effective for transfers and servicing of financial assets and extinguishments
of liabilities occurring after December 31, 1996. The Company does not expect
this pronouncement to have a significant impact on its consolidated financial
condition or results of operations.
Overview
1996 was a year of significant change for Grand Premier Financial; that change
will continue, and accelerate, in 1997. An aggressive schedule has been
established for converting the Company to one data processing system, completing
the centralization of operational processes and combining Grand Premier s
catalogue of products and services. Management anticipates improvements in
service level and earnings as these tasks are completed.
Supplementary Business Information
GRAND PREMIER FINANCIAL, INC. is a registered bank holding company and was
established under Delaware Law. The operations of Grand Premier and its
subsidiaries consist primarily of financial activities common to the commercial
banking industry, as well as trust and investment services, data processing and
electronic banking services and insurance. Services are extended to
individuals, businesses, local government units and institutional customers
throughout Northern Illinois.
Stock information
The Company s common stock is traded on the NASDAQ National Over-the-Counter
market and is listed under the symbol GPFI. As of December 31, 1996 there were
1,231 shareholders of record. A two-year record, by quarter, of high and low
bid prices, as well as cash dividends
declared, is as follows:
1996 1995
Cash Cash
Quarter High Low Dividend Quarter High Low Dividend
1st 10.25 8.25 .045 1st 7.50 6.50 .0425
2nd 10.75 9.50 .045 2nd 8.25 7.25 .0425
3rd 13.00 10.25 .10 3rd 8.00 6.75 .0425
4th 11.50 9.00 .08 4th 9.75 7.75 .0625
Total .27 Total .19
A three-for-one stock split in the form of a 200% stock dividend was declared
and distributed as follows:
1994
Declaration date April 28, 1994
Record date June 8, 1994
Payable date July 1, 1994
10K notice
The Annual Report to the Securities and Exchange Commission, Form
10-K, may be obtained by shareholders free of charge upon written
request to Alan J. Emerick, Secretary of the Corporation, Grand Premier
Financial, Inc., 486 West Liberty Street, Wauconda, Illinois 60084.
Five Year Summary of Selected Financial Data
Earnings 1996 1995 1994 1993 1992
Interest income $114,370 $108,782 $92,166 $84,801 $86,422
Interest expense 56,558 53,541 38,928 37,059 42,185
Net interest income 57,812 53,241 53,238 47,742 44,238
Provision for possible
loan losses 2,875 1,435 555 2,982 4,499
Earnings before income
taxes and cumulative
effect of change in
accounting for income
taxes 18,602 23,185 17,893 13,862 13,401
Earnings before cumulative
effect of change in
accounting for income
taxes 13,317 17,029 13,344 11,398 10,600
Cumulative effect of
change in accounting for
income taxes - - - 898 -
Net earnings 13,317 17,029 13,344 12,296 10,600
Net earnings available to
common shareholders $12,378 $15,923 $12,140 $11,704 $10,600
Per common share
statistics* 1996 1995 1994 1993 1992
Net earnings before
cumulative effect of change
in accounting for income
taxes $.62 $.79 $ .60 $ .54 $ .53
Cumulative effect of change
in accounting for income
taxes - - - .05 -
Net earnings .62 .79 .60 .59 .53
Cash dividend declared .27 .19 .18 .16 .15
Book Value 7.45 7.13 5.63 5.80 5.13
1996 1995 1994 1993 1992
Common shares outstanding
- -year end 19,983,679 19,869,823 20,036,969 20,118,626 19,419,295
1996 1995 1994 1993 1992
Rate earned on beginning
stockholders' equity 8.54% 13.39% 10.03% 12.34% 11.41%
Financial position - year
end 1996 1995 1994 1993 1992
Securities held-
to-maturity $ - $ - $114,174 $129,661 $361,736
Securities available
for sale 535,687 598,570 457,161 403,487 77,521
Loans, net 955,366 865,317 752,973 756,821 613,520
Allowance for possible
loan losses 10,116 9,435 9,738 10,595 8,160
Excess cost over fair
value of net
assets acquired 18,489 20,227 21,601 23,193 3,010
Noninterest bearing
deposits 211,015 196,534 198,659 214,161 151,147
Interest bearing
deposits 1,206,379 1,155,123 1,066,735 1,033,096 857,459
Total deposits 1,417,394 1,351,657 1,265,394 1,247,257 1,008,606
Short-term borrowings - 38,475 29,210 22,785 12,377
Securities sold under
agreements to repurchase 23,486 49,757 53,638 55,532 43,974
Long-term borrowing 30,000 11,588 5,650 300 153
Stockholders' equity 158,089 156,003 127,136 132,976 99,679
Total assets $1,642,538 $1,624,673 $1,493,067 $1,470,393 $1,174,347
* Per share statistics have been adjusted to reflect a 10% stock dividend to
shareholders of record February 28, 1992, and a three-for-one stock split in
the form of a 200% stock dividend to shareholders of record June 8, 1994.
Board of Directors
Jean M. Barry Senior Investment Officer
Donald E. Bitz Retired Chairman of the Board and CEO
Harry J. Bystricky President BIWAX Corporation Chemical Manufacturer
Frank J. Callero Partner, Callero and Callero LLP, CPA
Alan J. Emerick EVP and Chief Administrative Officer
Brenton J. Emerick Senior Vice President, Grand National Bank
James Esposito Executive Vice President, Grand National Bank
R. Gerald Fox President and CEO, F.I.A. Publishing Company
Richard L. Geach Chairman of the Board and CEO
Robert J. Hinman President and Chief Operating Officer
Edward G. Maris Private Investor
Howard A. McKee Attorney at Law
David L. Murray Senior Executive Vice President and CFO
H. Barry Musgrove Chairman of the Board and President, Franz
Manufacturing Company
Joseph C. Piland Educational Consultant and retired President
Highland Community College
Stephen J. Schostock Attorney and Partner
Dimonte Schostock & Lizak, Attorneys at Law
Executive Officers
Richard L. Geach Chairman of the Board and Chief Executive Officer
Robert W. Hinman President and Chief Operating Officer
David L. Murray Senior Executive Vice President and CFO
Alan J. Emerick Executive Vice President and Chief
Administrative Officer
William T. Theobald Senior Vice President and Chief Credit Officer
Larry W. O Hara Senior Vice President and Director of Marketing
Kenneth A. Urban President, Grand Premier Trust and Investment, Inc.
Jack J. Emerick Regional President
Ralph M. Zicco Regional President
Reid L. French Regional President
Joseph E. Esposito Regional President
Scott Dixon Regional President
