NOTICE OF ANNUAL MEETING
To the Stockholders of
Grand Premier Financial, Inc.
The Annual Meeting of Stockholders of Grand Premier Financial,
Inc. a Delaware corporation (the "Company"), will be held at the
Niles, office of Grand National Bank, 7100 West Oakton, Niles,
Illinois, 60714-3047, at 10:00AM (local time) on Wednesday, May 28,
1997 for the following purposes:
1. To elect six (6) Class I directors for a term of three years.
2. To consider and vote upon a proposal to ratify and approve the
1996
Non-qualified Stock Option Plan, which was adopted by the Board of
Directors effective August 22, 1996.
3. To transact and act upon such other matters or business as may
properly come before said meeting, or any adjournment or adjourn-
ments thereof. The Board of Directors of the Company does not
know of any other matters requiring action by the stockholders to
come before the Annual Meeting.
A complete list of stockholders entitled to vote at the meeting
shall be open for examination by any stockholder for any purpose
germane to the meeting, during ordinary business hours for a period of
ten days prior to the meeting at Grand Premier Financial Inc s.
corporate office, 486 West Liberty Street, Wauconda, Illinois. The
close of business on March 31, 1997 has been selected by the Board of
Directors as the record date for the determination of stockholders
entitled to notice of and to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Alan J. Emerick ***IMPORTANT***
Secretary WHETHER OR NOT YOU EXPECT TO
ATTEND THE MEETING IN PERSON,
PLEASE SIGN THE ACCOMPANYING
PROXY AND MAIL IT NOW IN THE
April 14, 1997 ENCLOSED ENVELOPE.
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of Grand
Premier Financial, Inc. (the "Company") for use at the 1997 Annual
Meeting of Stockholders, (the "Annual Meeting"), and any adjournment
or adjournments thereof, to be held on Wednesday, May 28, 1997, at
10:00 A.M., local time, at the Niles office of Grand National Bank,
7100 West Oakton, Niles, Illinois, 60714-3047.
Only holders of record of shares of common stock of the Company
(the "Common Stock") at the close of business on March 31, 1997 will
be entitled to notice of and to vote at the Annual Meeting, each share
being entitled to one vote. On such date there were 20,002,563 shares
of Common Stock outstanding. The presence at the Annual Meeting,
either in person or by proxy, of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote is necessary
to constitute a quorum for the transaction of business. The
inspectors of election will treat abstentions and broker non-votes
(i.e., shares held by a broker in street name and represented by a
proxy indicating that the broker does not have discretionary authority
to vote on a particular proposal) as shares present for purposes of
determining the existence of a quorum.
Any stockholder who executes the enclosed proxy may revoke it any
time before it has been exercised by a later dated proxy or by giving
notice of such revocation to the Company in writing or in an open
meeting before such proxy is voted. Attendance at the meeting will
not in and of itself constitute the revocation of a proxy. Otherwise,
all properly executed proxies received at or before the meeting will
be voted in accordance with the instructions contained therein. If no
instructions are given, such proxies will be voted: (1) FOR the
election of directors as stated below, (2) FOR the proposal to ratify
and approve the 1996 Non-qualified Stock Option Plan, and (3) in the
discretion of the named proxies, upon such other matters as may
properly come before the meeting.
The cost of solicitation will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by persons
regularly employed by the Company or its subsidiaries, by personal
interview, telephone or telegraph, without compensation, other than
the compensation such persons otherwise receive for their services as
employees. Arrangements may also be made with brokerage houses and
other custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of the stock held of
record by such persons, and the Company may reimburse such brokerage
1
houses, custodians, nominees and fiduciaries for reasonable out-of-
pocket expenses incurred by them in connection therewith.
A copy of the Company's Annual Report for the year ended December
31, 1996, including audited financial statements, is included with
this proxy. The approximate date on which this proxy statement, form
of proxy and annual report were first sent to stockholders was April
14, 1997.
PROPOSAL 1: ELECTION OF DIRECTORS
INFORMATION CONCERNING NOMINEES
The Company's Amended and Restated Certificate of Incorporation
provides that the business and affairs of the Company shall be managed
by and under the direction of a Board of Directors. Until the annual
meeting of stockholders in 1999 the number of directors comprising the
full Board of Directors is set at sixteen (16), which number may not
be increased or decreased except by amendment to the Certificate of
Incorporation. The Amended and Restated Certificate of Incorporation
further provides that the Board of Directors is to be divided into
three classes that are to be as nearly equal in number as possible.
The terms of six (6) directors who are presently serving on the Board,
Brenton J. Emerick, Robert W. Hinman, Donald E. Bitz, Edward G. Maris,
Joseph C. Piland, and John Simcic expire at the Annual Meeting. One
of the directors, Donald E. Bitz, will be retiring from the Board.
The Board of Directors has renominated Messrs. Emerick, Hinman, Maris,
and Piland, who have served on the Board since its inception, for
election as Class I directors for a term ending at the Annual Meeting
in 2000 or until their successors are elected and qualified.
The Board of Directors has also nominated Mr. Thomas D. Flanagan,
who would be new to the Board, and Mr. John Simcic, who was appointed
by the Board to fill the unexpired term of Mr. Harry J. Bystricki who
passed away in February, 1997 for election as Class I directors.
Under the terms of the agreement governing the merger of Premier
Financial Services, Inc. ( Premier ) and Northern Illinois Financial
Corporation ( Northern Illinois ) with and into the Company on August
22, 1996, (the Merger ), Northern Illinois and Premier each had the
right to designate 8 of the 16 members of the Company s initial Board
of Directors. The Company s Amended and Restated Certificate of
Incorporation provides that, until the annual meeting of stockholders
to be held in 1999, a majority of those persons who were initially
2
appointed as directors of the Company by Premier or their nominees
(the Premier Directors ) will have the right to designate the person
or persons to fill any vacancies on the Board of Directors created by
the death, resignation or removal of the Premier Directors, and a
majority of those persons who were initially appointed as directors by
Northern Illinois or their nominees (the Northern Illinois
Directors ) will have the right to designate the person or persons to
fill any vacancies on the Board of Directors created by the death,
resignation or removal of the Northern Illinois Directors. In
accordance with that provision, the Premier Directors designated Mr.
Flanagan to fill the position formerly held by Mr. Bitz and the
Northern Illinois Directors designated Mr. Simcic to fill the position
formerly held by Mr. Bystricky.
Thomas D. Flanagan was born in 1937 in Chicago, Illinois. After
receiving his undergraduate degree from Loyola University, Mr.
Flanagan attended Chicago Kent Law School, Chicago, Illinois, where he
was awarded a degree in law. Upon completing his studies, Mr.
Flanagan served as an Assistant States Attorney, Cook County,
Illinois, from 1963 to 1968. In 1968, he became a founding partner
and attorney with Flanagan, Bilton & Branagan, Chicago, Illinois. Mr.
Flanagan specializes in real estate tax law, and has been with the
firm since its inception.
John Simcic was born August 4, 1929 in Waukegan, Illinois. He is
a graduate of the University of Wisconsin with a degree in light
building. Mr. Simcic began his career in construction in 1956, when
he organized and started his own business specializing in residential,
commercial and light industrial remodeling and renovation. He became
a partner in Century 21 Maki & Paulson in 1985, and subsequently, in
1991, assumed ownership of the business. In 1996, Mr. Simcic
developed a corporate group known as the United Group under Century
21, and with two other partners owns and manages four offices in Lake
County, Illinois.
Unless otherwise indicated, proxies will be voted for the
election of the nominees below. If a nominee becomes unable or
unwilling to serve, proxies will be voted for such persons, if any, as
shall be designated by the Board. Each nominee has agreed to serve as
a director, if elected, and the Board of Directors does not presently
know of any circumstances which would render any nominee named herein
unavailable.
The Company's by-laws provide that all elections of directors
shall be decided by a plurality vote. Since six (6) positions are to
be filled on the Board of Directors, the six (6) nominees receiving
the highest number of votes cast at a meeting at which a quorum is
present will be elected as directors. Abstentions (including broker
non-votes, if any) will not be counted in determining the number of
votes received by any nominee.
3
Class I Nominees (If elected, term will expire in 2000)
Principal Occupation and Year
Name Age First Elected a Director (1)
Brenton J. Emerick 72 Executive Vice President of Grand
National Bank, a subsidiary of the
Company - 1996
Thomas D. Flanagan 59 Founding Partner, Flanagan, Bilton
& Branagan (law firm).
Robert W. Hinman 51 President and Chief Operating
Officer of the Company, and
Chairman of the Board, and
President of all of the Grand
Premier Banks - 1996
Edward G. Maris 61 Private Investor - 1996
Joseph C. Piland 64 Educational Consultant and retired
President, Highland Community
College
- 1996
John Simcic 67 Chairman of the Board, J. Simcic,
Inc. (remodeling/construction
company), and Chairman of the
Board, Maki & Associates, Inc.
(d/b/a/ Century 21 United - real
estate sales). - 1997
- - - - - - - - - - - - Continuing Directors - - - - - - - - - - - - -
-
Class II (Term expires 1998)
Principal Occupation and Year
Name Age First Elected a Director (1)
Jean M. Barry 42 Senior Investment Officer of the
Company - 1996
4
James Esposito 64 Executive Vice President of Grand
National Bank, a subsidiary of the
Company - 1996
R. Gerald Fox 61 President and Chief Executive
Officer, F.I.A. Publishing
Company. (publisher of financial
books and periodicals) - 1996
David L. Murray 54 Senior Executive Vice President
and Chief Financial Officer of the
Company, and President, Grand
Premier Operating Systems, Inc. -
1996
Stephen J. Schostok 60 Attorney and partner, Dimonte
Schostok & Lizak, attorneys at
law. - 1996
Class III (Term expires 1999)
Frank J. Callero 69 Partner, Callero and Callero LLP.
(certified public accountants).
- 1996
Alan J. Emerick 53 Executive Vice President and Chief
Administrative Officer of the
Company - 1996
Howard A. McKee 81 Attorney at Law - 1996
Richard L. Geach 56 Chairman of the Board and Chief
Executive Officer of the Company
- 1996
H. Barry Musgrove 62 Chairman of the Board and
President, Frantz Manufacturing
Company. (manufacturer of anti-
friction products) - 1996
(1) Each director has engaged in the principal occupation indicated
for at least five years, except as follows:
- Jean M. Barry was Vice President, Northern Illinois Financial
Corporation, from 1989-1996.
5
- Alan J. Emerick was Executive Vice President of Northern Illinois
Financial Corporation from 1994-1996, Chief Executive Officer of Grand
National Bank-Niles from 1991-1996, and President, Grand National
Bank-Waukegan, from 1995-1996.
- Brenton J. Emerick was Chairman of the Board, Grand National Bank-
Waukegan, from 1967-1996.
- James Esposito was Chief Executive Officer of Grand National Bank-
Crete from 1974-1996.
- Robert W. Hinman was President & Chief Executive Officer of Northern
Illinois Financial Corporation from 1988 to 1996.
- Richard L. Geach was President and Chief Executive Officer of
Premier Financial Services, Inc. From 1982-1996.
- Edward G. Maris was Senior Vice President, Chief Financial Officer,
Secretary & Treasurer, Northwestern Steel and Wire Company, from 1986-
1996.
- David L. Murray was Executive Vice President/Chief Financial Officer
of Premier Financial Services, Inc. and President, Premier Operating
Systems, Inc., from 1970-1996.
- Stephen J. Schostok was an attorney with Laser Schostok Kolman and
Frank from 1964-1994.
BOARD AND COMMITTEE MEETINGS
Since its formation in August, 1996, the Board of Directors held
5 regular meetings. Each Director attended more than 75% of the
aggregate of the total number of meetings of the Board of Directors
and the total number of meetings held by all committees of the Board
of Directors on which he or she served.
The Board of Directors has established several committees to
assist in the discharge of its responsibilities.
The Executive Committee meets in situations where it is
impractical and/or unnecessary to meet as a full Board of Directors.
Current members of the committee are Howard A. McKee, who serves as
Chairman, Richard L. Geach, Robert W. Hinman and David L. Murray. The
6
Committee met 3 times in 1996.
The Governance Committee evaluates and makes recommendations
regarding Board composition, qualifications of directors and other
administrative issues with respect to the Board and Boards of
Directors of the Company s subsidiaries. Current members are R.
Gerald Fox, Chairman, Frank J. Callero, H. Barry Musgrove, Joseph D.
Piland and John Simcic. Among other functions, the Committee serves
as a nominating committee which selects and nominates members of the
Board of Directors. Nominees recommended by stockholders in writing
to the Secretary of the Company at 486 West Liberty Street, Wauconda,
Illinois, 60084-2489, in accordance with the procedures set forth
below under "Notice Provisions for Stockholder Proposals and
Nominations of Directors", will be considered by the Committee. The
Committee met once in 1996.
The current members of the Compensation Committee are Messrs.
Edward G. Maris, Chairman, Frank J. Callero, Stephen J. Schostok and
John Simcic. Among other functions, the Committee makes
recommendations to the Board of Directors as to the compensation of
the Executive Officers and outside Directors as well as with respect
to the Company's benefit programs. The Committee also interprets and
administers the Company's benefit plans. The Committee met once in
1996.
The Audit Committee consists of four permanent members and other
outside directors on a rotating basis. Messrs. Frank J. Callero,
Chairman, Donald E. Bitz, Joseph C. Piland, and John Simcic currently
serve as permanent members. The Committee reviews the financial
audits of the Company and its subsidiaries, both internal and
independent, and examines matters relating to the financial statements
of the Company. The Committee held two meetings in 1996.
DIRECTORS FEES AND COMPENSATION
As of December 31, 1996, Directors who were not employees of the
Company were paid an annual retainer of $ 12,000 and $ 500 per meeting
attended for board and committee participation. Directors who are
employees of the Company are paid $500 per board meeting attended.
Under the Company s Deferred Compensation Plan, directors may elect to
defer receipt of up to 100% of fees earned. The Company will match
25% of the amount deferred.
Howard A. McKee is retained by Grand National Bank pursuant to a
consulting agreement which expires February 17, 2000 or earlier upon
mutual agreement of the parties. Mr. McKee receives a consulting fee
of $80,000 per year for his services. In addition, Mr. McKee, who is
also an attorney, received legal fees for his services to Northern
Illinois subsidiary banks totaling $69,289 for the year ended
December 31, 1996. Mr. McKee was an executive officer of Northern
7
Illinois prior to the Merger and received, for his services, a salary
and benefits under certain benefit programs of Northern Illinois.
Following the Merger, the Company continued such payments to Mr.
McKee. Mr. McKee s compensation under these programs for the year
ended December 31, 1996 included $200,000 in salary, a bonus of
$11,960, and contributions totaling $20,040 to the Northern Illinois
Financial Profit Sharing and Deferred Compensation Plans. Mr. McKee
is furnished with a Company leased automobile and a driver, and
reported $1,124 in taxable compensation for personal use in 1996. Mr.
McKee also received committee and directors fees paid by subsidiary
banks of Northern Illinois Financial Corporation and board attendance
fees paid by the Company totaling $6,100 in 1996.
Brenton J. Emerick was also an executive officer of Northern
Illinois prior to the Merger and received, for his services, a salary
and benefits under certain benefit programs of Northern Illinois.
Following the Merger, the Company continued such payments to Mr.
Emerick. Mr. Emerick s compensation under these programs for the year
ended December 31, 1996 included $223,000 in salary, a bonus of
$13,477, and contributions totaling $25,559 to the Northern Illinois
Financial Profit Sharing and Deferred Compensation Plans. Mr. Emerick
is furnished with a Company owned automobile, and reported $1,871 in
taxable compensation for personal use in 1996. Mr. Emerick also
received committee and directors fees paid by subsidiary banks of
Northern Illinois Financial Corporation and board attendance fees paid
by the Company totaling $9,500 in 1996.
Two other directors, James Esposito and Jean M. Barry, are full-
time employees of the Company who served as executive officers of
Northern Illinois Financial prior to the Merger. For the year ended
December 31, 1996, Mr. Esposito received $120,000 in salary, a bonus
of $10,183, and contributions totaling $23,545 to the Northern
Illinois Financial Profit Sharing and Deferred Compensation Plans.
Mr. Esposito is furnished with a Company leased automobile, and
reported $1,673 in taxable compensation for personal use in 1996. Mr.
Esposito also received committee and directors fees paid by subsidiary
banks of Northern Illinois Financial Corporation and board attendance
fees paid by the Company totaling $6,100 in 1996. For the year ended
December 31, 1996, Ms. Barry received $73,876 in salary, a bonus of
$4,627, and contributions totaling $10,295 to the Northern Illinois
Financial Profit Sharing and Deferred Compensation Plans. Ms. Barry
is furnished with a Company leased automobile, and reported $3,510 in
taxable compensation for personal use in 1996. Ms. Barry also
received committee and directors fees paid by subsidiary banks of
Northern Illinois Financial Corporation and board attendance fees paid
by the Company totaling $6,100 in 1996.
For information concerning the compensation members of the Board
of Directors who are also executive officers of the Company received,
8
see Executive Compensation .
EXECUTIVE OFFICERS
The following table sets forth the names and ages of the
executive officers of the Company, as well as their respective
positions with the Company and its subsidiaries: (1)
Name Age Position(s) (1)(2)
Richard L. Geach 56
Chairman of the Board & Chief
Executive Officer of the Company
and a director of all of the
Company s subsidiaries.
9
Robert W. Hinman 51 President, Chief Operating Officer
and a director of the Company,
President and Chief Executive
Officer of all of the Company s
subsidiary banks, and a director
of all of the Company s
subsidiaries.
David L. Murray 54 Senior Executive Vice President,
Chief Financial Officer and a
director of the Company, President
and Chief Executive Officer of
Grand Premier Operating Systems,
Inc., and a director of all of
the Company s subsidiaries.
Alan J. Emerick 53 Executive Vice President, Chief
Administrative Officer and a
director of the Company, and a
director of all of the Company s
subsidiaries.
William T. Theobald 48 Senior Vice President and Chief
Credit Officer of the Company and
a director of all of the Company s
subsidiary banks.
Larry W. O Hara 37 Senior Vice President and Director
of Marketing of the Company
Kenneth A. Urban 59 President and Chief Executive
Officer and a Director of Grand
Premier Trust and Investment,
Inc., and Division Head, Non-bank
Products Division of the Company.
Jack J. Emerick 39 Regional President, Region 1
Banking/Sales Offices.
Ralph M. Zicco 53 Regional President, Region 2
Banking/Sales Offices.
Reid L. French 43 Regional President, Region 3
Banking/Sales Offices.
Joseph E. Esposito 36 Regional President, Region 4
Banking/Sales Offices.
10
Scott Dixon 43 Regional President, Region 5
Banking/Sales Offices.
(1) The Company's current subsidiaries are Grand National Bank, Grand
Premier Trust and Investment, Inc., Grand Premier Insurance, Inc., and
Grand Premier Operating Systems, Inc. Northern Illinois Financial
Corporation merged all of its subsidiary banks into Grand National
bank in February, 1996. Effective with the Merger, the Company s
subsidiary banks included Grand National Bank, First Bank North, First
Bank South, First National Bank of Northbrook and First Security Bank
of Cary-Grove, all of which have been or will be merged into Grand
National Bank on or before April 21, 1997.
(2) Each executive officer has held the position or office indicated,
or other comparable responsible position(s) with the Company,
since the Merger. For at least five years prior to the Merger, the
officers held the following positions, or comparable responsible
positions, with Premier Financial Services, Inc. or Northern Illinois
Financial Corporation which were merged into the Company in August,
1996:
- Richard L. Geach was Chairman of the Board, President & Chief
Executive Officer of Premier Financial Services, Inc.
- Robert W. Hinman was President & Chief Executive Officer and a
director of Northern Illinois Financial Corporation.
- David L. Murray was Executive Vice President/Chief Financial Officer
and a director of Premier Financial Services, Inc., and President,
Premier Operating Systems, Inc.
- Alan J. Emerick was Executive Vice President of Northern Illinois
Financial Corporation from 1994-1996 and a director in 1996,
President, Grand National Bank-Waukegan from 1995-1996, and Chief
Executive Officer of Grand National Bank-Niles from 1991-1996.
- William T. Theobald was President, Grand National Bank-South region
from 1992-1996 and Executive Vice President/Chief Credit Officer,
Grand National Bank-South region in 1996.
- Larry W. O Hara was Senior Vice President/Marketing, Northern
Illinois Financial Corporation.
- Kenneth A. Urban was Division Head, Non-bank Products Division of
Premier Financial Services, Inc., and President, Premier Trust
Services, Inc.
- Jack J. Emerick was Vice President, Grand National Bank-East region
11
from 1992-1995 and Area Sales Manager, Grand National Bank-East region
from 1996-1996. Jack J. Emerick is Brenton J. Emerick s son and Alan
J. Emerick s brother.
- Ralph M. Zicco was President, Grand National Bank-Wauconda and Grand
National Bank-Crystal Lake from 1992-1996 and Executive Vice
President-Sales, Grand National Bank-East Region in 1996.
- Reid L. French was Executive Senior Vice President, Grand National
Bank-West region from 1992-1996.
- Joseph E. Esposito was Assistant Vice President, Grand National
Bank-South region from 1992-1996 and Senior Retail Manager, Grand
National Bank-South region in 1996. Joseph E. Esposito is James
Esposito s son.
- Scott Dixon was President, Region 2 Banking/Sales offices of Premier
Financial Services, Inc.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the shares
of Grand Premier Financial, Inc. common stock beneficially owned, by
holders known to the Company to have beneficially owned more than 5%
of the voting securities as of March 31, 1997:
Amount &
Title of Name and Address of Beneficial Nature of Per
Class Owner Beneficial Cent of
Ownership Class
Common Howard A. McKee 6,518,853 32.59%
26990 Countryside Lake Drive (1)
Mundelein, Illinois 60060
Grand Premier Trust and 1,388,258 6.94%
Investment, Inc. (2)
110 West Main Street
Freeport, IL 61032
12
Amount &
Title of Name and Address of Beneficial Nature of Per
Class Owner Beneficial Cent of
Ownership Class
Northland Insurance Agency, Inc. 1,096,729 5.48%
20 South Clark Street, Suite (3)
2310
Chicago, Illinois 60603
Keeco, Inc. 1,060,328 5.30%
20 South Clark Street, Suite (3)
2310
Chicago, Illinois 60603
(1) Excludes 156,880 shares held by Mr. McKee s spouse, as to all of
which Mr. McKee disclaims beneficial ownership. Includes 1,096,729
shares held by Northland Insurance Agency, Inc. and 1,060,328 shares
held by Keeco, Inc., as to which Mr. McKee shares investment power
(see Note 3 below). Excludes 504,666 shares held by corporations that
Mr. McKee s family members and/or business interests control, as to
all of which Mr. McKee disclaims beneficial interest.
(2) The shares listed in the table are held in various capacities with
Grand Premier Trust and Investment, Inc.( Trust ), and include 791,575
shares held in the Company s Savings and Stock Plan (the Savings and
Stock Plan ) for which Trust serves as trustee. Of the 1,388,258
shares listed in the table, Trust has sole investment power with
respect to 597,214 shares, shared investment power with respect to
568,264 shares (including 535,814 shares held in individual
participant accounts in the 401(k) and profit sharing portion of the
Savings and Stock Plan), and no investment power over the remaining
222,780 shares. Trust has sole voting power with respect to 454,058
shares, and no voting power with respect to 142,625 shares.
Participants are entitled to direct the trustee as to the voting of
shares held in their accounts in either the ESOP (255,761 shares) or
401(k) (535,814 shares) portions of the Savings and Stock Plan.
Shares held in individual participant accounts for which no directions
are received will not be voted by the trustee, unless such failure to
vote would be inconsistent with the trustee s fiduciary
responsibilities. Participants have the right to direct the
disposition of shares held in the 401(k) and profit-sharing portion of
the Savings and Stock Plan, but no right to direct the disposition of
shares held in the ESOP portion until such time as an individual
participant has a right to the distribution of such shares under the
terms of the ESOP. Premier Trust, as trustee, has the right to
13
determine whether or not to tender any of the shares held in the
Savings and Stock Plan.
(3) Mr. McKee owns individually 34.0% of the outstanding Common Stock
of Northland Insurance Agency, Inc., and with his family and
associates controls 100.0%. Mr. McKee also owns individually 49.9% of
the outstanding Common Stock of Keeco, Inc., and with his family and
associates controls 100.0%. The shares shown in the table as
beneficially owned by Northland Insurance Agency, Inc. and Keeco, Inc.
are also included in the shares shown as beneficially owned by Mr.
McKee.
The following table sets forth information regarding the shares
of Grand Premier Financial, Inc. common stock beneficially owned by
each director, nominee for director, the named executive officers of
the Company, and all of the Company s directors, nominees and officers
as a group, as of March 31, 1997:
<TABLE>
Title of Name of Beneficial Amount & Nature of Per Cent
Class Owner Beneficial Ownership of Class
(1) (2)
<S> <C> <C> <C>
Common Jean M. Barry 527,743 (3) (6) 2.64%
Frank J. Callero 106,500 (3) (7) *
Alan J. Emerick 57,449 (3) (8) *
Brenton J. Emerick 683,922 (3) (9) 3.42%
James Esposito 29,830 (3) (10) *
Thomas D. Flanagan 822,315 (11) 3.95%
R. Gerald Fox 47,118 (3) (12) *
Richard L. Geach 321,031 (3) (4) (5) (13) 1.60%
Robert W. Hinman 556,295 (3) (14) 2.78%
Edward G. Maris 3,584 (3) *
Howard A. McKee 6,518,853 (3) (15) 32.59%
David L. Murray 75,374 (3)(4)(5)(16) *
H. Barry Musgrove 33,739 (3) *
Joseph C. Piland 7,812 (3)(17) *
Stephen J. Schostok 4,758 (3) *
John Simcic 278,222 1.39%
All 24 Directors, 10,359,505 (3)(4)(5)(18) 49.19%
Nominees &
Executive Officers
as a group
(including those
individuals named
above)
<F >
* Indicates less than 1% of class.
(1) The information shown in this column is based upon information
furnished to Grand Premier Financial, Inc. by the individuals named in
the table. Except as set forth in the following notes, each
individual has sole voting power and investment power with respect to
the shares owned by him or her.
(2) Based upon 20,002,563 shares outstanding plus, with respect to
each beneficial owner and the group, the shares each beneficial owner
has the right to acquire within 60 days of March 31, 1997 pursuant to
the exercise of stock options or conversion of Series B Preferred
Stock.
(3) The shares listed do not include 49,737 shares held in the trust
established pursuant to the Deferred Compensation Plan over which
Grand Premier Financial, Inc. shares investment power with the
trustee. Each of the directors of the Company, in his or her capacity
as a director, may be deemed to share the Company s investment power
with the other members of the board of directors with respect to
15
those shares.
(4) Includes shares held in the Savings and Stock Plan over which the
individual executive officer has sole voting power and shared
investment power as follows: Mr. Geach, 82,818 shares, Mr. Murray
6,341 shares; Mr. Flahaven, 14,553 shares; all executive officers and
directors as a group, 202,600 shares. See also Note 2 to the
Beneficial Ownership Table on page 9.
(5) Includes shares that could be acquired within 60 days of March
31, 1997 pursuant to the exercise of stock options as follows; Mr.
Geach, 94,601 shares; Mr. Murray, 51,982 shares; all executive
officers and directors as a group, 234,705 shares.
(6) Includes 6,123 shares held by Ms. Barry as custodian for minor
children. Includes 482,107 shares held by Municipal Insurance
Company and 22,559 shares held by Public Service Investment &
Management Corporation in which Ms. Barry shares investment power.
Ms. Barry is Mr. McKee s daughter.
(7) Excludes 10,880 shares held by Mr. Callero s spouse, as to all of
which Mr. Callero disclaims beneficial ownership.
(8) Excludes 19,225 shares held by Mr. Emerick s spouse, as to all of
which Mr. Emerick disclaims beneficial ownership. Alan J. Emerick is
Brenton J. Emerick s son.
(9) Excludes 145,307 shares held by Mr. Emerick s spouse, as to all
of which Mr. Emerick disclaims beneficial ownership.
(10) Includes 28,313 shares held jointly with Mr. Esposito s spouse.
(11) Represents shares of Grand Premier Financial, Inc. Common Stock
issuable within 60 days upon conversion of $7,000,000 in stated value
of the Grand Premier Financial, Inc. Series B Preferred Stock, which
is convertible into Common Stock at $8.51255 per share. Mr. Flanagan
has full investment power over the Series B Preferred Stock.
(12) Excludes 5,022 shares held by Mr. Fox s spouse, as to all of
which Mr. Fox disclaims beneficial ownership.
(13) Excludes 201,362 shares held by Mr. Geach s spouse, as to all of
which Mr. Geach disclaims beneficial ownership.
(14) Excludes 74,987 shares held by Mr. Hinman s spouse, as to all of
which Mr. Hinman disclaims beneficial ownership. Includes 482,107
shares held by Municipal Insurance Company in which Mr. Hinman shares
investment power, the shares of which are also included in the
beneficial interest ascribed to Ms. Barry. Mr. Hinman is Mr. McKee s
son-in-law.
16
(15) Excludes 156,880 shares held by Mr. McKee s spouse, as to all of
which Mr. McKee disclaims beneficial ownership. Includes 1,096,729
shares held by Northland Insurance Agency, Inc. and 1,060,328 shares
held by Keeco, Inc., as to which Mr. McKee shares investment power.
Excludes 504,666 shares held by corporations that Mr. McKee s family
members and/or business interests control, as to all of which Mr.
McKee disclaims beneficial interest.
(16) Excludes 4,460 shares held by Mr. Murray s spouse, as to all of
which Mr. Murray disclaims beneficial ownership.
(17) Excludes 850 shares held by Mr. Piland s spouse, as to all of
which Mr. Piland disclaims beneficial ownership.
(18) Excludes 655,727 shares held by or for the benefit of spouses of
directors, nominees or executive officers, as to all of which
directors, nominees and executive officers disclaim beneficial
ownership. Includes 234,705 shares which executive officers could
acquire within 60 days of March 31, 1997 pursuant to the exercise of
stock options (see note 5 above), and 822,315 shares issuable within
60 days of March 31, 1997 pursuant to conversion of Grand Premier
Financial, Inc. Series B Preferred Stock (see note 11 above).
</TABLE>
EXECUTIVE COMPENSATION
The following table sets forth a three-year summary of
compensation for the Chief Executive Officer and each of the four most
highly compensated executive officers of the Company whose total
salary and bonus payments exceeded $100,000 in the year ended December
31, 1996. Compensation includes amounts paid by Premier Financial
Services, Inc. and Northern Illinois Financial Corporation prior to
August 22, 1996, the effective date of the Merger.
<TABLE>
Annual Compensation Long Term Compensation
Awards Payouts
Other Annual Securities Long Term All
Name and Compensation Underlying Incentive Other
Principal Position Year Salary Bonus Options Payouts
($) ($) ($) (1) (#) ($) (2) (3)
<S> <C> <C> <C> <C> <C> <C> <C>
Richard L. Geach, 1996 221,667 0 7,300 120,000 0 13,922
Chief Executive 1995 176,292 0 4,800 15,000 0 8,296
Officer of the 1994 176,292 0 4,800 0 36,838 9,355
Company
Robert W. Hinman, 1996 232,000 14,014 6,300 15,280 0 27,858
President & Chief 1995 219,000 1,095 9,750 0 0 24,000
Operating Officer 1994 210,000 31,203 11,650 0 0 30,972
of the Company
David L. Murray, 1996 150,333 0 7,300 10,180 0 14,020
Sr. Executive Vice 1995 130,008 0 4,800 11,100 0 8,296
President & Chief 1994 123,495 0 4,800 0 27,963 7,551
Financial Officer
of the Company
Alan J. Emerick, 1996 145,217 10,203 7,450 9,020 0 27,122
Executive Vice 1995 136,000 35,782 6,500 0 0 24,781
President & Chief 1994 130,000 32,000 5,000 0 0 28,608
Administrative
Officer of the
Company
Steve E. Flahaven, 1996 117,333 55,000 4,800 7,250 0 8,375
Regional President, 1995 110,608 0 4,800 8,600 0 6,087
Region 3 Sales 1994 103,453 0 4,800 0 22,208 3,905
Offices (4)
18
<F >
(1) Other annual compensation consists of board attendance fees paid
by the Company in 1996 (Messrs. Geach, Hinman, Murray and Emerick),
1996 committee and directors fees paid by subsidiary banks of
Northern Illinois Financial, Inc. (Messrs. Hinman and Emerick), and a
1996 taxable allowance for use of automobiles owned by the executive
officer for business purposes (Messrs. Geach, Murray and Flahaven).
(2) Premier Financial Services, Inc. terminated its 1990 Performance
Unit Plan in 1994. The amount shown for Messrs. Geach, Murray and
Flahaven was the discounted present value, as determined by the Board
of Directors, of outstanding grants as of December 31, 1994. No
payouts were made prior to 1994, and subsequent to payment all
outstanding grants were canceled.
(3) Amounts accrued for the benefit of the individuals under the
Premier Financial Services, Inc. Savings and Stock Plan (Messrs.
Geach, Murray and Flahaven), the Northern Illinois Financial, Inc.
Profit Sharing Plan (Messrs. Hinman and Emerick), and for all of the
named individuals under Northern Illinois and Premier s respective
Non-qualified Deferred Compensation Plans. Also includes taxable
compensation for personal use of Company owned automobiles (Messrs.
Hinman and Emerick).
(4) Steve E. Flahaven resigned his position with the Company effective
March 7, 1997.
</TABLE>
The following table sets forth information regarding stock
options exercised by each of the named executive officers during the
year ended December 31, 1996, as well as the value of unexercised
stock options outstanding at fiscal year end.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND
FISCAL YEAR-END OPTION VALUES
<CAPTION>
Number of Unexercised Value of Unexercised
Options In-the-Money Options
at Fiscal Year-End(#) at Fiscal Year-End($)
(1)
Shares
Acquired
on Value
Exercise Realized Not Not
Name (#) ($) Exercisable Exercisable Exercisable Exercisable
<S> <C> <C> <C> <C> <C> <C>
Richard L. Geach - - 91,949 139,485 613,311 73,240
Robert W. Hinman - - - 15,280 - -
David L. Murray 17,051 114,746 50,020 23,284 328,114 49,489
Alan J. Emerick - - - 9,020 - -
Steve E. Flahaven 34,488 296,723 - 16,987 - 36,855
<F >
(1) Based on the fair market value (closing bid price) of the Common
Stock of the Company on December 31, 1996, as reported on The Nasdaq
Stock Market s National Market.
</TABLE>
The following table sets forth awards made under the Company s 1996
Non-qualified Stock Option Plan during the fiscal year ended December
31, 1996. All such awards have been made subject to shareholder
approval of the 1996 Non-qualified Stock Option Plan. See PROPOSAL 2:
ADOPTION of the 1996 NON-QUALIFIED STOCK OPTION PLAN.
<TABLE>
STOCK OPTIONS AWARDED IN LAST FISCAL YEAR (1)
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term (2)
Number % of Total
of Options
Securities Granted to Exercise
Underlying Employees Or Base
Options In Price
Granted Fiscal ($/Share) Expiration
Name (#) Year (2) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Richard L. Geach 120,000 55.5 % $10.75 09/23/06 811,268 2,055,925
Robert W. Hinman 15,280 7.1 10.75 09/23/06 103,301 261,788
David L. Murray 10,180 4.7 10.75 09/23/06 68,823 174,411
Alan J. Emerick 9,020 4.2 10.75 09/23/06 60,980 154,537
Steve E. Flahaven 7,250 3.4 10.75 09/23/06 -0-(3) -0-(3)
------------------------------------------------------------------------------------
All executive 209,030 96.7 10.75 09/23/96 1,413,162 3,581,250
officers as a
group
All directors who 7,250 3.3 10.75 09/23/96 49,014 124,213
are not executive
officers as a
group
<F >
(1) The Company s 1996 Non-Qualified Stock Option Plan provides that
the Board of Directors may grant options to key employees to purchase
shares of Common Stock. Non-employee directors are not eligible to
participate in the Plan. Up to 400,000 shares of Common Stock have
been authorized for issuance pursuant to the Plan. Options may be
granted from time-to-time for any number of shares, and upon such
terms and conditions that the Board of Directors judges desirable,
provided that no options may be granted after August 22, 2006. The
21
number of shares available for grant is adjusted annually on January 1
to the greater of 4% of the outstanding shares on that date or
400,000. Each option granted under the Plan is evidenced by an
agreement subject to, among others, the following terms and
conditions; 1) the option price may not be less than the fair market
value of the shares on the date of grant, 2) exercised options must be
paid for in full at the time of exercise in a form as specified in the
Plan, and 3) options granted will expire as specified in the
agreement, but in no case later than 10 years from the date of grant.
(2) The fair market value of the Common Stock of the Company (i.e. the
average of the high and low sales prices per share of Common stock) as
reported on The Nasdaq Stock Market s National Market on September 23,
1996, the date of grant.
(3) Steve E. Flahaven forfeited options granted to him in 1996
concurrent with his resignation from the Company effective March 7,
1997.
</TABLE>
Prior to 1994, Premier Financial Services, Inc. provided a
defined benefit Pension Plan for its employees. Benefits were
calculated under a formula based upon the 5 highest of the last 10
years of service. Effective July 1, 1994, benefits accumulating to
Plan participants were frozen. Accrued benefits as of that date were
fully funded. The following table sets forth the annual benefits
payable upon retirement at age 65 to Messrs. Geach, Murray and
Flahaven:
Name Amount Payable
Annually upon
Retirement
Richard L. Geach $ 26,342
David L. Murray 30,122
Steve E. Flahaven 10,350
The Company has entered into Change in Control and Termination
Agreements ("Agreements") dated October, 1996 with certain executive
officers, including Messrs. Geach, Hinman, Murray, Emerick and
Flahaven. Each Agreement has a term of 36 months, subject to
automatic extension, unless either party gives the other party notice
if its election to terminate such automatic extension. If such notice
is given, the Agreement will terminate 36 months from the date such
notice is given. The agreements provide for certain benefits during a
severance period (12 months) following either 1) a change of control
and termination of employment for any reason other than good cause (as
22
defined in the Agreements) at any time during the 24 months after a
change of control occurs, or 2) termination of employment by the
executive officer for good reason (as defined in the Agreements) at
any time during the 24 months following a change of control. A
change of control will be deemed to have occurred for purposes of
the Agreements if any of those same events constituting a change of
control under the 1996 Non-qualified Stock Option Plan have occurred
and are continuing. See PROPOSAL 2: ADOPTION of the 1996 NON-
QUALIFIED STOCK OPTION PLAN...Change of Control Provisions.
Subsequent to such change of control and termination, the
executive is entitled to receive the following benefits; 1) a lump sum
payment equal to monthly base salary at the date of termination
multiplied by 12, 2) continuation of coverage for the executive, his
or her spouse and dependents (for 12 months) under all Company welfare
plans in which the executive participated prior to termination, except
that substantially identical benefits will be provided for any welfare
plan in which participation is no longer possible, 3) a lump sum
payment equal to the amount of a bonus that would have been paid under
any Incentive Plan during the year of termination, pro rated for the
number of months actually employed, plus an amount equal to the
average bonus paid to the executive for the three years preceding
termination, 4) any benefits accrued under any retirement, welfare or
incentive plan in which the executive participated at date of
termination, 5) a lump sum payment equal to the amount which the
Company would have contributed to the Grand Premier Financial, Inc.
Deferred Compensation Plan had termination not occurred, and 6)
immediate and full vesting of all options so that such options become
Exercisable on the date of termination or for 200 days thereafter, or,
if such acceleration is not permissible under a Plan, a payment equal
to the excess, if any, of the aggregate fair market value of all stock
of the Company subject to options held by the executive less the
aggregate exercise price of such stock on the date of termination. If
the executive officer dies during the severance period, his or her
spouse or beneficiary will receive the remainder of all unpaid
benefits provided under the Agreements.
BOARD COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors is
responsible for establishing the policies and procedures which
determine the compensation of the Company's executive officers. The
Committee sets base cash compensation and potential bonus compensation
annually for the Chief Executive Officer (CEO) and other executive
officers. In addition, the Committee has exclusive authority to grant
stock options to executive officers.
23
In creating policies and making decisions concerning executive
compensation, the Compensation Committee seeks to:
1. ensure that the executive team has clear goals and
accountability
with respect to expected corporate performance;
2. establish pay opportunities that are competitive within the
Company's
industry and consistent with its position in the marketplace
and the
markets within which it operates;
3. assess results fairly and regularly in light of expected
Company
performance; and
4. align pay and incentives with the long-term interests of the
Company's
shareholders.
Base Salary
The objective of the Company's salary program is to help ensure
that the organization is able to attract and retain motivated
individuals necessary to achieve its goals in the most cost-effective
way possible. Salaries paid to executive officers (other than the
CEO) are based upon an assessment, in conjunction with the chief
executive officer, of the nature and responsibilities of each position
including its relative contribution to carrying out the Company s
strategic objectives. The committee considers both internal and
external information, including input from independent compensation
surveys and, where appropriate, from outside compensation consultants.
Comparisons focus primarily on banks and/or bank holding companies of
similar size and with similar geographic and/or market
characteristics. The salaries of the CEO and other executive officers
are established at levels that the committee believes approximate the
midpoint for comparable positions within the financial services
industry. Executive officers, including the CEO, may defer up to 50%
of their salary each year. The Company matches deferred amounts at
25%.
Performance Incentives
The Company utilizes both short-term and long-term incentive
programs, in tandem with base salaries, to closely tie overall
executive compensation to the interests of the Company's shareholders.
The Company's Incentive Programs are then designed to motivate the CEO
and other executive officers to manage towards improved shareholder
return.
24
The Short-Term Incentive Program (i.e. cash bonuses) rewards all
employees, including the CEO and other executive officers, for
surpassing the annual financial plan with regard to earnings and other
key performance indicators such as asset quality, growth, expense
control and efficiency. Each year, a financial plan is approved by
the Board of Directors. Based upon that plan, the key performance
indicators in the bonus program are weighted and the program is
approved by the Board. The bonus program provides for bonuses only if
earnings exceed the approved level. The size of any bonus, including
those paid to the CEO and other executive officers, may range from
approximately 3%-50% of base salary. Executive officers, including
the CEO, may defer up to 100% of any bonus. The Company matches
amounts deferred at 25%.
The Long-Term Incentive Program uses Stock Options to correlate
executive compensation with shareholder value. Executive officers,
including the CEO, may be granted options as determined by the
Compensation Committee. Options are valued at the discretion of the
committee at the date of grant, but in no case may they be valued at
less than fair market value as reported on The Nasdaq Stock Market s
National Market. Executives are allowed to exercise the options on a
vesting formula established at the date of grant by the committee, and
options must be exercised on or before their expiration date. The
potential value of options is dependent upon increasing total return
(i.e. stock price appreciation plus dividends) to shareholders over
time.
CEO Compensation
The base salary and bonus, if any, for the Chief Executive
Officer is determined under the policies and programs outlined above.
The maximum award under the Company's Short Term Incentive Program for
the CEO is approximately 50% of salary. The CEO may be awarded
options under the Long Term Incentive Program as determined by the
Compensation Committee. In 1996, the CEO was granted 120,000 options
which vest ratably over three years beginning September 23, 1997.
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended,
(the Code ) and related regulations provide that a public company may
not deduct, for federal income tax purposes, compensation in excess of
$1 million per year paid to the chief executive officer and the four
other most highly compensated executive officers employed by the
company at year end, other than compensation which qualifies as
performance-based compensation under the Code and related
regulations or is otherwise exempt from the provisions of Section
162(m). Compensation attributable to stock option awards is deemed to
be performance-based (and not subject to the $1 million cap) if, among
other things, the plan pursuant to which the stock options are granted
includes a limit on the number of shares for which stock options may
be granted to any employee during a specified period, and the plan is
25
approved by the stockholders of the company. The Company s 1996 Non-
qualified Stock Option Plan includes such a limit, and the Company is
submitting the Plan to the Stockholders for their approval at this
annual meeting.
All compensation paid to the Company s Chief Executive Officer
and the four other most highly compensated executive officers was
deductible in 1996 and is expected to be deductible in 1997. In
designing future compensation programs for the chief executive officer
and other highly compensated executive officers, the Committee will
take into account the deductibility of such compensation under Section
162(m). The Committee may recommend, in the future, steps to assure
the deductibility of other forms of compensation paid by the Company,
in the event the Committee determines that the benefits of such
deductibility to the Company outweigh any loss of flexibility or other
disadvantages involved in qualifying such compensation as performance-
based under Section 162(m).
COMPENSATION COMMITTEE
Edward G. Maris
Frank J. Callero
Stephen J. Schostok
John Simcic
The following graph shows the cumulative total return to shareholders
(stock price appreciation plus dividends) of the Company's stock as
compared to the cumulative total return of all domestic (US) stocks
traded on The Nasdaq Stock Market s National Market and the cumulative
total return of all Bank stocks traded on The Nasdaq Stock Market s
National Market for the years 1992 through 1996. The Company s stock
26
began trading on The Nasdaq Stock Market s National Market on August
22, 1996, the effective date of the Merger. Prior to the Merger,
Premier Financial Services, Inc. s common stock was traded on The
Nasdaq Stock Market s National Market. Northern Illinois Financial
Corporation s common stock was not traded on any regional or national
exchange or any established over-the-counter market. For periods
prior to August 22, 1996, the Company s stock performance as set forth
in the following graph reflects the stock price appreciation for
Premier Financial Services, Inc. Common stock plus dividends paid by
Premier Financial Services, Inc. and Northern Illinois Financial
Corporation.
Pursuant to Rule 304 (d) of Regulation S-T Grand Premier Financial,
Inc. is submitting on paper under cover of Form SE the performance graph
that is to appear in registrant's proxy and information statements
relating to annual meetings of security holders at which directors will
be elected. The following table presents year-end cumulative total
returns for the Company, U.S. stocks traded on the NASDAQ over the
counter market and all Bank stocks traded on the NASDAQ over the counter
market assuming $100.00 was invested on Janaury 1, 1992 and all
dividends
were reinvested for the five year period ended December 31, 1996.
1991 1992 1993 1994 1995 1996
Company $100 $151 $161 $203 $235 $235
Nasdaq Bank Stocks $100 $146 $165 $246 $246 $326
U.S. Nasdaq Stocks $100 $116 $130 $185 $185 $227
The Company's cumulative total return to shareholders has exceeded
the cumulative total return of all U.S. Nasdaq stocks traded on the
NASDAQ
over-the-counter market for the years 1991 through 1996. In 1992, the
Company's cumulative total return exceed that of the Bank stocks traded
on the NASDAQ over-the-counter market.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee is an officer,
employee or former employee of the Company. Members of the
Compensation Committee or their associates may have loans or loan
commitments from the Company s subsidiary banks, but all such loans or
loan commitments were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and did not involve more
than the normal risk of collectability or present other unfavorable
features.
Compliance with Section 16(a) of the Exchange Act
Pursuant to Securities and Exchange Commission regulations, the
Company must disclose the names of persons who failed to file or filed
late a report required under Section 16(a) of the Securities Exchange
Act of 1934. Generally, the reporting regulations under Section 16(a)
require directors and executive officers to report changes in
ownership in the Company s equity securities. Based solely on a
review of Forms 3, 4, and 5, including amendments thereto, all such
forms were filed on a timely basis by reporting persons.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Directors and executive officers of the Company and their
associates were customers of, and have had transactions with, the
Company and in particular its subsidiary banks from time to time in
the ordinary course of business. Additional transactions may be
expected to take place in the ordinary course of business in the
future. All loans and loan commitments included in such transactions
were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable
transactions with other persons and did not involve more than normal
risk of collectability or present other unfavorable features.
PROPOSAL 2
ADOPTION OF THE 1996 NON-QUALIFIED STOCK OPTION PLAN
The Board of Directors has approved, subject to stockholder
ratification and approval, the Company's 1996 Non-qualified Stock
28
Option Plan (the "Plan"), which is included as Appendix A to this
Proxy Statement.
For information concerning stock options granted in 1996 under
the Plan to the chief executive officer, the other four most highly
compensated executive officers of the Company, all executive officers
of the Company as a group and all directors who are not executive
officers as a group see STOCK OPTIONS AWARDED IN LAST FISCAL YEAR.
All such options were granted subject to stockholder approval of the
Plan.
The Plan is intended to recognize employee contributions in
achieving the Company's strategic goals, and to enhance the ability of
the Company to attract, retain and motivate individuals of the caliber
essential to the Company's future growth and success. The Plan also
provides an additional incentive to perform by giving key employees an
opportunity to acquire, or increase their proprietary investment in,
the Company's Common Stock. All options granted under the Plan will
be non-qualified stock options.
The Board of Directors believes the use of options will enable
the Company to attract, retain and motivate talented, experienced
individuals at salary levels below that which would otherwise have
been required if options were not part of the Company's compensation
package. Because options provide a potential economic benefit to
holders, their use effectively provides an incentive to Plan
participants to endeavor to improve the Company's financial
performance, and therefore the performance of the Company's Common
Stock in the public market.
SUMMARY OF THE PLAN
The following Plan summary should be read in conjunction with the
Plan, a copy of which is included in this proxy statement as Exhibit
A, and is incorporated herein by reference.
1. SHARES COVERED BY THE PLAN - The number of shares of Common Stock
for which options may be granted shall initially be 400,000 shares
(approximately 2%) of the Common Stock outstanding on March 31, 1997.
The total number of shares available for option will be adjusted on
January 1 of each calendar year to 4% of the Company's outstanding
shares as of that date, provided that no such adjustment shall reduce
the number of shares which may be issued and sold under the Plan below
400,000. The number of shares available for option under the Plan is
subject to adjustment for any stock split, dividend, recapitalization
or certain other capital adjustments.
2. ADMINISTRATION - The Compensation Committee (the "Committee") of
the Board of Directors of the Company will administer and interpret
the Plan and may prescribe, in its sole discretion, rules and
regulations it deems necessary for administration of the Plan. The
29
Committee will consist of at least two directors. Membership on the
Committee is limited to those directors who meet the definitions of
(I) non-employee directors within the meaning of Rule 16b-3(b)(3)
under the Securities Exchange Act of 1934, as amended (the Exchange
Act ), and (ii) outside directors under Section 162(m) of the Code
and related rules and regulations.
3. ELIGIBILITY - All persons who have been designated by the
Committee as key employees of the Company or any of its subsidiaries
are eligible to receive options under the Plan. Currently, the
Committee has identified 13 key employees as being eligible to
participate in the Plan.
4. NUMBER OF AWARDS SUBJECT TO GRANTS - Subject to the provisions of
the Plan, the Committee may grant options to eligible employees for
such number of shares of Common Stock and upon such terms and
conditions as the Committee deems desirable. The maximum number of
shares of Common Stock with respect to which options may be granted to
any employee within any calendar year may not, however, exceed 250,000
shares, subject to adjustment under the anti-dilution provisions of
the Plan.
5. TERM OF PLAN - No option may be granted under the Plan after
August 22, 2006.
6. TERMS AND CONDITIONS OF OPTIONS - Each option granted under the
Plan will be evidenced by an Agreement between the Company and the
employee to whom the option is granted. The Agreement will be subject
to the following terms and conditions:
(a) The exercise price for each share granted will be determined in
each case on the date of grant by the Committee, but shall not be
less than the fair market value of shares of Common Stock at the
time
the option is granted. Fair market value is defined as 1) the
average of the high and low sales prices per share of Common Stock
as reported on The Nasdaq National Stock Market s National Market
on
the date of grant, or 2) if no sales are reported for such date the
average of the bid and asked prices per share as quoted on The
Nasdaq
Stock Market s National Market on the date of grant, or 3) a price
as
otherwise determined by the Committee in its discretion.
(b) Vesting - each option is vested in accordance with the terms of
the Agreement evidencing such Option.
(c) expiration of options - options granted under the Plan expire
not later than the first to occur of the following:
(1) Ten years from the date the option is granted ("option
30
period")
(2) Three months after a) the retirement of the Optionee under
any retirement plan of the Company, b) termination due to total
and permanent disability, provided that the Board of Directors
may, by resolution, determine that this subparagraph (2) of
paragraph (c) shall not apply to any option or portion thereof.
(3) Six months after an Optionee's date of death, or, at the
expiration of the option period without exercise by the person
or
persons entitled to do so under the Optionee's Will, or, if the
Optionee fails to make testamentary disposition or dies
intestate,
by the Optionee's legal representative(s).
(4) Termination of employment for any reason other than those
expressed in subparagraphs (2) and (3) of paragraph (c).
(d)Transferability - unless otherwise permitted in the option
agreement and subject to the terms of the Plan, options granted
under the Plan shall be non-transferable except to theOptinoee s
trust, or by will or the laws of descent and distribution, and are
exercisable during the Optionee's lifetime only by the Optionee.
(e) Payment - Optionees must pay the purchase price of the shares
of
Common Stock upon exercise. Payment may be as follows:
(1) in cash,
(2) by delivering shares of Common Stock having an aggregate
fair
market value on the date of exercise equal to the option
exercise
price,
(3) by directing the Company to withhold such number of shares
of
Common Stock otherwise issuable upon exercise of such option
having a fair market value on the date of exercise equal to the
option exercise price,
(4) by such other medium of payment that the Committee, in its
discretion, authorizes at the time of the grant, or
(5) by any combination of (1), (2), (3) and (4) above.
7. CHANGE OF CONTROL PROVISIONS - All outstanding options will become
fully Exercisable and all restrictions will terminate on such options
under a change of control of the Company. The Committee, as
constituted before the change of control, may also take any one or
31
more of the following actions;
(a) provide for the purchase of any option for an amount of cash
equal to the difference between the exercise price and the then
Fair
Market Value of the Common Stock covered by the option had the
option
been currently Exercisable,
(b) make such adjustment to any option outstanding as the Committee
deems appropriate to reflect the change of control, or
(c) cause any outstanding option to be assumed by the acquiring or
surviving corporation after such change of control. Change of
control is defined as:
(1) subject to certain specified exemptions (including an
exemption for shares
of Common Stock as a result of the conversion of shares of
Northern Illinois
Common Stock in the Merger), any individual, entity, or group,
including any
Person (as defined in Section 13(d)(3) or 14(d)(2) of the
Exchange Act)
acquires beneficial ownership of 20% or more of the Common Stock
or of the
combined voting power of the then outstanding securities of the
Company
entitled to vote generally in the election of directors (the
Voting
Securities );
(2) persons who were directors of the Company as of August 22,
1996 (the
effective date of the Plan) or persons nominated by those
directors to succeed
to their positions or their successors (the Incumbent Board )
shall cease to
constitute a majority of the board of directors of the Company;
(3) the shareholders shall approve a reorganization, merger or
consolidation
of the Company, unless, following such reorganization, merger or
consolidation, (I) more than 60% of the Common Stock and 60% of
the Voting
Securities are owned by all or substantially all of the same
persons who were
beneficial owners of such securities immediately prior to the
reorganization,
consolidation or merger, in substantially the same proportions
relative to one
another, (ii) no person beneficially owns 20% or more of the
32
common stock or
voting securities of the surviving corporation, other than
specified entities
controlled by the Company or a person who beneficially owned 20%
or more of
the Common Stock or the Voting Securities immediately prior to
the
reorganization, consolidation or merger, and (iii) at least a
majority of the
members of the board of directors of the surviving corporation
were members
of the Incumbent Board; or
(4) the shareholders approve a plan of liquidation or
dissolution of the Company
or the sale or disposition of all or substantially all of the
assets of the
Company to another corporation other than a corporation which
meets the
following requirements: (I) more than 60% of the common stock
and 60% of the
voting securities of the corporation are owned by all or
substantially all of
the same persons who were beneficial owners of the Common Stock
and the Voting
Securities immediately prior to such sale or disposition, in
substantially the
same proportions relative to one another, (ii) no person
beneficially owns 20%
or more of the common stock or voting securities of the
corporation, other than
specified entities controlled by the Company or a person who
beneficially owned
20% or more of the Common Stock or Voting Securities immediately
prior to such
sale or disposition, and (iii) at least a majority of the
members of the board
of directors of the corporation were members of the Incumbent
Board.
8. AMENDMENTS - The Plan may be terminated or amended from time-to-
time by vote of the Board of Directors without stockholder approval to
the extent permitted by law. No amendment may adversely affect options
previously granted under the Plan without the written consent of the
holders of such options.
9. EXEMPTION FROM LIABILITY - The members of the Committee and of the
Board of Directors, and each of them, shall be free from all
liability, joint or several, for their acts, omissions and conduct and
for all the acts, omissions and conduct of their duly constituted
agents in carrying out their responsibilities under the Plan, and the
Company shall save them and each of them harmless from the effects and
33
consequences of their acts, omissions and conduct in their official
capacity except to the extent that such effects and consequences shall
result from their own willful misconduct.
10. GOVERNING LAWS - The Plan shall be construed, administered and
governed under and by the Laws of the State of Illinois.
11. TAXES - At the time of exercise of any option, the Company may
require an Optionee to pay the Company an amount equal to the tax the
Company or any subsidiary may be required to withhold to obtain a
deduction for Federal and State income tax purposes as a result of the
exercise or to comply with applicable law.
The Board of Directors approved the 1996 Non-Qualified Stock Option
Plan on August 20, 1996, to become effective August 22, 1996 subject
