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 Mundelein,
Illinois office of Grand National Bank, 3 Nelson C. White Pkwy.,
Mundelein, Illinois, 60060, at 10:00 AM (local time) on Wednesday, May
27, 1998 for the following purposes:
1. To elect five (5) Class II directors for a term of three years.
2. To consider and vote upon a proposal to ratify and approve the
Non-employee Directors Stock Option Plan, which was adopted by the
Board of Directors effective February 23, 1998.
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, 1998 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
***IMPORTANT***
Alan J. Emerick WHETHER OR NOT YOU EXPECT TO
Secretary ATTEND THE MEETING IN PERSON,
PLEASE SIGN THE ACCOMPANYING
PROXY AND MAIL IT NOW IN THE
April 13, 1998 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 1998 Annual
Meeting of Stockholders, (the "Annual Meeting"), and any adjournment or
adjournments thereof, to be held on Wednesday, May 27, 1998, at 10:00
A.M., local time, at the Mundelein office of Grand National Bank, 3
Nelson C. White Pkwy., Mundelein, Illinois, 60060.
Only holders of record of shares of common stock of the Company
(the "Common Stock") at the close of business on March 31, 1998 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 20,018,020 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 Non-
employee Directors 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 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, 1997, 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 13, 1998.
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 five (5) directors who are presently serving on the Board, Jean M.
Barry, James Esposito, R. Gerald Fox, David L. Murray and Stephen J.
Schostok expire at the Annual Meeting. The Board of Directors has re-
nominated Ms. Barry and Messrs. Esposito, Fox, Murray and Schostok for
election as Class II directors for a term ending at the Annual Meeting in
2001 or until their successors are elected and qualified.
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 five (5) positions are to be
filled on the Board of Directors, the five (5) 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.
Class II Nominees (If elected, term will expire in 2001)
Principal Occupation and Year First
Name Age Elected a Director (1)
Jean M. Barry 43 Senior Investment Officer of the
Company - 1996
James Esposito 65 Executive Vice President of Grand
National Bank, a subsidiary of the
Company - 1996
R. Gerald Fox 62 President and Chief Executive
Officer, F.I.A. Publishing Company.
(publisher of financial books and
periodicals) - 1996
David L. Murray 55 Senior Executive Vice President and
Chief Financial Officer of the
Company, and President, Grand
Premier Operating Systems, Inc., a
subsidiary of the Company. - 1996
Stephen J. Schostok 61 Attorney and partner, Dimonte
Schostok & Lizak, attorneys at
law. - 1996
Class III (Term expires 1999)
Principal Occupation and Year First
Name Age Elected a Director (1)
Frank J. Callero 70 Partner, Callero and Callero LLP.
(certified public accountants). - 1996
Alan J. Emerick 54 Executive Vice President and Chief
Administrative Officer of the Company.
- 1996
Howard A. McKee 82 Banker. - 1996
Richard L. Geach 57 Chairman of the Board and Chief
Executive Officer of the Company.
- 1996
H. Barry Musgrove 63 Chairman of the Board and President,
Frantz Manufacturing Company.
(manufacturer of anti-friction
products). - 1996
Class I (Term expires 2000)
Principal Occupation and Year First
Name Age Elected a Director (1)
Brenton J. Emerick 73 Executive Vice President of Grand
National Bank, a subsidiary of the
Company. - 1996
Thomas D. Flanagan 60 Founding Partner, Flanagan, Bilton &
Branagan. (law firm). - 1997
Robert W. Hinman 52 President and Chief Operating Officer
of the Company, and Chairman of the
Board and President of Grand National
Bank, a subsidiary of the Company.
- 1996
Edward G. Maris 62 Private Investor. - 1996
Joseph C. Piland 65 Educational Consultant and retired
President, Highland Community College.
- 1996
John Simcic 68 Chairman of the Board, Maki &
Associates, Inc. (d/b/a Century 21
United - real estate sales). - 1997
(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.
- - 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
The Board of Directors held 11 regular meetings in 1997. 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 Committee met once in
1997.
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, Brenton J. Emerick, James Esposito, Thomas D.
Flanagan, 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 1997.
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 four times in 1997.
The Audit Committee consists of four permanent members and other
outside directors on a rotating basis. Messrs. Frank J. Callero,
Chairman, H. Barry Musgrove, 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 five meetings in 1997.
DIRECTORS FEES AND COMPENSATION
For the year ended December 31, 1997, 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 were employees of the Company were paid $500 per board
meeting attended. Effective January 1, 1998, the fees paid to directors
were changed as follows: 1) Directors who are not employees of the
Company are paid a) an annual retainer of $ 12,000, b) $ 750 per meeting
attended for board and committee participation, and c) an annual stipend
of $1,000 for directors who serve as committee chairpersons; 2) Directors
who are employees of the Company are no longer paid for board or
committee participation. 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. See also "PROPOSAL 2:
ADOPTION of the NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN".
Howard A. McKee is retained by the Company pursuant to a consulting
agreement which expires December 31, 1999. Subsequent to December 31,
1999, the agreement may be renewed for additional successive one (1) year
periods upon such terms and conditions as the Company and Mr. McKee shall
mutually agree. Mr. McKee receives the following remuneration under the
terms of the agreement; 1) an annual consulting fee of $100,200, 2) an
annual salary of $200,000 in 1997, $150,000 in 1998 and $100,000 in 1999,
3) participation in the Company's benefit programs and 4) Company
contributions on his behalf under the Company's Savings and Stock Plan
and Deferred Compensation Plan. Such contributions totaled $14,164 for
the year ended December 31, 1997. Mr. McKee is furnished with a Company
leased automobile and a driver, and reported $1,830 in taxable
compensation for personal use in 1997. Mr. McKee also received board
attendance fees totaling $7,500 in 1997.
Brenton J. Emerick is retained as an officer of Grand National
Bank, a subsidiary of the Company, pursuant to a non-renewable agreement
which expires December 31, 1998. Mr. Emerick receives the following
remuneration under the terms of the agreement; 1) an annual salary of
$175,000 in 1997 and $150,000 in 1998, 2) participation in the Company's
benefit programs, and 3) contributions on his behalf under the Company's
Savings and Stock Plan and Deferred Compensation Plan. Such
contributions totaled $15,554 for the year ended December 31, 1997. Mr.
Emerick is furnished with a Company owned automobile, and reported $4,074
in taxable compensation for personal use in 1997. Mr. Emerick also
received board attendance fees totaling $6,000 in 1997.
Two other directors, James Esposito and Jean M. Barry, serve as
officers of the Company. For the year ended December 31, 1997, Mr.
Esposito received $120,000 in salary, contributions made by the Company
on his behalf totaling $9,927 to the Company's Savings and Stock Plan and
Deferred Compensation Plan, and participated in the Company's benefit
programs. Mr. Esposito was furnished with a Company leased automobile in
1997, and reported $1,621 in taxable compensation for personal use. Mr.
Esposito also received board attendance fees totaling $5,500 in 1997.
For the year ended December 31, 1997, Ms. Barry received $82,800 in
salary, contributions made by the Company on her behalf totaling $4,863
to the Company's Savings and Stock Plan and Deferred Compensation Plan,
and participated in the Company's benefit programs. Ms. Barry was
furnished with a Company leased automobile in 1997, and reported $2,928
in taxable compensation for personal use. Ms. Barry also received board
attendance fees totaling $5,500 in 1997.
For information concerning the compensation that members of the
Board of Directors who are also executive officers of the Company
received, 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 57 Chairman of the Board & Chief
Executive Officer of the Company and
a director of all of the Company's
subsidiaries.
Robert W. Hinman 52 President, Chief Operating Officer and
a director of the Company, President
and Chief Executive Officer of Grand
National Bank, and a director of all
of the Company's subsidiaries.
David L. Murray 55 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 54 Executive Vice President, Chief
Administrative Officer and a director
of the Company, and a director of all
of the Company's subsidiaries.
William R. Theobald 49 Executive Vice President and Chief
Credit Officer of the Company and a
director of Grand National Bank.
Larry W. O'Hara 38 Senior Vice President and Director of
Marketing of the Company
Kenneth A. Urban 60 President and Chief Executive Officer
and a director of Grand Premier Trust
and Investment, Inc. and of Grand
Premier Insurance, Inc., and Division
Head, Non-bank Products Division of
the Company.
Jack J. Emerick 40 Regional President, Region 1
Banking/Sales Offices.
Ralph M. Zicco 54 Regional President, Region 2
Banking/Sales Offices.
Reid L. French 44 Regional President, Region 3
Banking/Sales Offices.
Joseph E. Esposito 37 Regional President, Region 4
Banking/Sales Offices.
Scott Dixon 44 Regional President, Region 5
Banking/Sales Offices.
Jack R. Croffoot 47 Senior Vice President and Director of
Human Resources of the Company.
James K. Watts 34 Senior Vice President, Chief Operating
Officer and a director of Grand
Premier Operating Systems, Inc.
(1) The Company's subsidiaries are Grand National Bank, Grand Premier
Trust and Investment, Inc., Grand Premier Insurance, Inc., and Grand
Premier Operating Systems, Inc.
(2) Each executive officer has held the position or office indicated, or
other comparable responsible position(s) with the Company, or with
Premier Financial Services, Inc. or Northern Illinois Financial, Inc.
which were merged into the Company in August, 1996 for at least five
years except as follows:
- - Jack J. Emerick was Vice President, Grand National Bank/East Region
from 1992-1995 and Area Sales Manager, Grand National Bank/East Region in
1996. Jack J. Emerick is Brenton J. Emerick's son and Alan J. Emerick's
brother.
- - 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.
- - James K. Watts was Assistant Vice President/Data Center Manager for
Gary Wheaton Bank from 1984-1993, Assistant Vice President/Project
Manager for First National Bank of Chicago from 1993-1995, and Assistant
Vice President, TCF Bank, N.A., from 1995-1996.
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, 1998:
Amount & Nature
Title of Name and Address of Beneficial Owner of Beneficial Per Cent
Class Ownership of Class
Common Howard A. McKee 6,247,667 (1) 31.21%
26990 Countryside Lake Drive
Mundelein, Illinois 60060
Grand Premier Trust and Investment, 1,206,636 (2) 6.03%
Inc.
101 West Stephenson Street
Freeport, IL 61032
Northland Insurance Agency, Inc. 1,096,729 (3) 5.48%
20 South Clark Street, Suite 2310
Chicago, Illinois 60603
Keeco, Inc. 1,060,328 (3) 5.30%
20 South Clark Street, Suite 2310
Chicago, Illinois 60603
(1) 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 474,597
shares held in the Company's Savings and Stock Plan (the "Savings and
Stock Plan") for which Trust serves as trustee. Of the 1,206,636 shares
listed in the table, Trust has sole investment power with respect to
485,788 shares, shared investment power with respect to 510,047 shares
(including 474,597 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 210,801 shares. Trust has sole
voting power with respect to 375,593 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 (213,821 shares) or 401(k) (474,597 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. Trust,
as trustee, has the right to 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 executive
officers as a group, as of March 31, 1998:
Title of Name of Beneficial Amount & Nature of Per Cent of
Class Owner Beneficial Ownership (1)(2) Class
Common Jean M. Barry 591,330 (3)(4)(5)( 6) 2.95%
Frank J. Callero 99,500 (3) ( 7) *
Alan J. Emerick 64,257 (3)(4)(5)( 8) *
Brenton J. Emerick 682,214 (3) ( 9) 3.41%
James Esposito 1,517 (3) (10) *
Thomas D. Flanagan 824,315 (3) (11) 3.96%
R. Gerald Fox 47,118 (3) (12) *
Richard L. Geach 384,786 (3)(4)(5)(13) 1.91%
Robert W. Hinman 559,351 (3) (5)(14) 2.79%
Edward G. Maris 3,584 (3) *
Howard A. McKee 6,247,667 (3) (15) 31.21%
David L. Murray 70,942 (3)(4)(5)(16) *
H. Barry Musgrove 34,474 (3) *
Joseph C. Piland 7,812 (3) (17) *
Stephen J. Schostok 7,500 (3) *
John Simcic 278,222 (3) 1.39%
Ralph M. Zicco 47,222 (5) *
All 26 Directors, 10,175,938 (3)(4)(5)(18) 48.13%
Nominees & Executive
Officers as a group
(including those
individuals named
above)
* 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 20,018,020 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, 1998 pursuant to the
exercise of stock options or conversion of Series B Preferred Stock.
(3) The shares listed do not include 42,714 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 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: Ms. Barry, 1,287 shares; Mr. Alan J. Emerick, 5,004
shares; Mr.Geach, 99,884 shares; Mr. Murray 6,344 shares; all executive
officers and directors as a group, 198,029 shares. See also Note 2 to
the Beneficial Ownership Table on page 10.
(5) Includes shares that could be acquired within 60 days of March 31,
1998 pursuant to the exercise of stock options as follows; Ms. Barry,
1,450 shares; Mr. Alan J. Emerick, 1,804 shares; Mr. Geach, 141,290
shares; Mr. Hinman, 3,056 shares; Mr. Murray, 47,547 shares; Mr. Zicco,
1,450 shares; all executive officers and directors as a group, 300,854
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) Excludes 46,583 shares held by Mr. Esposito's spouse, as to all of
which Mr. Esposito disclaims beneficial ownership.
(11) Represents 822,315 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.
Includes 2,000 shares held by Mr. Flanagan for the benefit of minor
children.
(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.
(15) 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 15,518 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 559,162 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
300,854 shares which executive officers could acquire within 60 days of
March 31, 1998 pursuant to the exercise of stock options (see note 5
above), and 822,315 shares issuable within 60 days of March 31, 1998
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 $100,000 in the year ended December 31, 1997. Compensation
includes amounts paid by Premier Financial Services, Inc. and Northern Illinois Financial Corporation,
which were merged into the Company in August, 1996.
<CAPTION>
Annual Compensation Long Term Compensation
_______________________________ ________________________
Awards Payouts
____________ ___________
Other Annual Securities Long Term All
Name and Compensation Underlying Incentive Other
Principal Position Year Salary Bonus Options Payouts
($) ($) $) (1) (#) ($) (2)
__________________ ____ ________ ______ _____________ __________ _________ _______
<S> <C> <C> <C> <C> <C> <C> <C>
Richard L. Geach, 1997 272,400 0 11,975 0 0 20,526
Chief Executive 1996 221,667 0 7,300 120,000 0 13,922
Officer of the 1995 176,292 0 4,800 15,000 0 8,296
Company
Robert W. Hinman, 1997 240,000 0 10,169 6,500 0 27,930
President & Chief 1996 232,000 14,014 8,648 15,280 0 25,510
Operating Officer 1995 219,000 1,095 9,976 0 0 23,744
of the Company
David L. Murray, 1997 173,370 0 10,600 5,000 0 17,265
Sr. Executive Vice 1996 150,333 0 7,300 10,180 0 14,020
President & Chief 1995 130,008 0 4,800 11,100 0 8,296
Financial Officer
of the Company
Alan J. Emerick, 1997 155,000 0 9,709 4,500 0 11,090
Executive Vice 1996 145,217 10,203 10,022 9,020 0 24,550
President & Chief 1995 136,000 35,782 7,304 0 0 23,977
Administrative
Officer of the
Company
Ralph M. Zicco, 1997 139,000 0 5,100 3,500 0 9,429
Regional President, 1996 128,830 10,693 6,681 7,250 0 15,902
Region 2 Sales 1995 128,000 9,039 5,118 0 0 16,541
Offices
(1) Other annual compensation consists of board attendance fees, and a taxable allowance for use of
automobiles owned by the executive officer for business purposes or taxable compensation for personal
use of automobiles owned by the Company.
(2) Amounts accrued for the benefit of the individuals under the Company's Savings and Stock Plan and
Deferred Compensation Plan.
</TABLE>
<TABLE>
The following table sets forth information regarding stock options exercised by each of the named
executive officers during the year ended December 31, 1997, as well as the value of unexercised stock
options outstanding at fiscal year end.
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 - - 141,290 90,143 2,013,388 1,284,532
Robert W. Hinman - - 3,056 18,724 43,548 266,867
David L. Murray - - 47,547 19,696 677,550 280,662
Alan J. Emerick - - 1,804 11,716 25,707 166,953
Ralph M. Zicco - - 1,450 9,300 20,603 132,525
(1) Based on the fair market value (closing bid price) of the Common Stock of the Company on
December 31, 1997, as reported on The Nasdaq Stock Market.
</TABLE>
<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, 1997.
STOCK OPTIONS AWARDED IN LAST FISCAL YEAR (1)
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
for Option Term
Individual Grants (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>
Robert W. Hinman 6,500 7.0 14.38 12/22/07 58,783 148,967
David L. Murray 5,000 5.4 14.38 12/22/07 45,218 114,590
Alan J. Emerick 4,500 4.9 14.38 12/22/07 40,696 103,131
Ralph M. Zicco 3,500 3.8 14.38 12/22/07 31,652 80,213
- ------------------------------------------------------------------------------------
All executive 55,250 59.6 14.38 12/22/07 499,654 1,266,220
officers as a
group
All directors who 7,500 8.1 14.38 12/22/07 67,826 171,885
are not executive
officers as a
group
(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 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 on December 22, 1997,
the date of grant.
</TABLE>
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 Zicco.
Each Agreement has a term of 36 months, subject to automatic extension,
unless either party gives the other party notice of 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 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.
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.
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 short-term and/or 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 designed to motivate the CEO and other
executive officers to manage towards improved shareholder return.
The Company employed a Short-Term Incentive Program (i.e., a cash
bonus program) in 1997 which was designed to reward all employees,
including the CEO and other executive officers, subject to surpassing the
Company's 1997 annual financial plan with regard to earnings and other
key performance indicators (such as asset quality, growth, expense
control and efficiency) as approved by the Board of Directors. The
Company did not exceed the established earnings threshold in 1997, and no
bonuses were accrued or paid under the program.
The Company's 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 CEO
did not receive a bonus under the short-term incentive program utilized
in 1997. The CEO may be awarded options under the Long Term Incentive
Program as determined by the Compensation Committee. The CEO was not
granted any options in the year ended December 31, 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 approved by the stockholders of the company. The
Company's 1996 Non-qualified Stock Option Plan includes such a limit.
All compensation paid to the Company's Chief Executive Officer and
the four other most highly compensated executive officers was deductible
in 1997 and is expected to be deductible in 1998. 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 and the cumulative total return of all
Bank stocks traded on The Nasdaq Stock Market for the years 1993 through
1997. The Company's stock began trading on The Nasdaq Stock 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. 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.
[Performance Graph Appears Here]
[Charting the Following Table]
1992 1993 1994 1995 1996 1997
GPFI Stock $100.00 $107.38 $107.49 $137.61 $161.80 $236.84
NASDAQ Bank Stocks $100.00 $114.04 $113.63 $169.22 $223.41 $377.44
U.S. NASDAQ Stocks $100.00 $114.80 $112.21 $158.70 $195.19 $239.53
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
collection 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 except as follows: 1) Thomas D.
Flanagan inadvertently failed to report beneficial ownership on Form 4 of
2,000 shares of the Company's Common Stock purchased in 1997 and held for
the benefit of minors - Mr. Flanagan reported such beneficial ownership
on Form 5 filed in February, 1998, and 2) James Esposito transferred
ownership of 28,313 shares of the Company's Common Stock (previously held
jointly with his spouse) to his spouse in August, 1997 and inadvertently
failed to file Form 4 reporting the ownership transfer in September, 1997
- - Mr. Esposito reported such beneficial ownership change on Form 5 in
February, 1998.
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 collection or present other
unfavorable features.
PROPOSAL 2
ADOPTION OF THE NON-EMPLOYEE DIRECTOR'S STOCK OPTION PLAN
The Board of Directors has approved, subject to stockholder
ratification and approval, the Company's Non-Employee Directors Stock
Option Plan (the "Plan"), which is included as Appendix A to this Proxy
Statement. No options were granted under the Plan during the year ended
December 31, 1997.
The Plan is intended to correlate the strategic focus of the Board
with that of shareholder's by directly tying a portion of their
compensation to increased market value (if any) of the Company's Common
Stock. Because options provide a potential economic benefit to holders,
their use effectively incents participants to improve the Company's
financial performance, and therefore the performance of the Company's
Common Stock in the public market. The Board of Directors believes the
Plan also enhances the Company's ability to attract and retain qualified,
experienced non-employee directors by providing an opportunity to
acquire, or increase their proprietary interest in, the Company's Common
Stock. All options granted under the Plan will be non-qualified stock
options.
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 be 200,000 shares (1%) of the number
of shares of Common Stock outstanding on March 31, 1997. 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 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 Board of Directors, in its sole discretion and subject
to the express provisions of the plan, determine the non-employee
directors to whom options will be granted, including the terms and
conditions applicable to each grant.
3. ELIGIBILITY - All non-employee directors of the Company are eligible
to receive options under the Plan. Currently, there are 8 non-employee
directors on the Board of Directors.
4. GRANTING OF OPTIONS - Subject to the provisions of the Plan, the
Board of Directors may grant options from time-to-time to any non-
employee director for such number of shares of Common Stock and upon such
terms and conditions as the Board deems desirable. Nothing contained in
the Plan is deemed to give any non-employee director any right to be
granted an option except to the extent, and upon such terms and
conditions, as are determined by the Board of Directors.
5. TERM OF PLAN - No option may be granted under the Plan after
February 22, 2008, provided however that the Board of Directors may
terminate the Plan at any time prior to that date.
6. TERMS AND CONDITIONS OF OPTIONS - Each option granted under the Plan
will be evidenced by an Agreement between the Company and the non-
employee director 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 Board, 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 Stock 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 on the
date of grant, or 3) a price as otherwise determined by the Board of
Directors in its discretion.
b) 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
period")
(2) Three months after a) the retirement of the Optionee from
membership on the Board of Directors after attaining age 60, or
b) termination of membership on the Board of Directors due to total
and permanent disability, provided that the Board of Directors
may, by resolution, determine that this subparagraph (2) of
paragraph (b) shall not apply to any option or portion thereof.
(3) Six months after an Optionee's date of death, or,
(4) Termination of membership on the Board of Directors for any
reason other than those expressed in subparagraphs (1), (2) and
(3) of paragraph (b).
(c)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 the Optionee's
trust, or by will or the laws of descent and distribution, and are
exercisable during the Optionee's lifetime only by the Optionee.
(d) 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 Board of Directors,
in its discretion, authorizes at the time of the grant, or
(5) by any combination of (1), (2), (3) and (4) above.
7. DEFERRAL OF STOCK OPTION GAINS - Any Optionee eligible to participate
in the Company's Deferred Compensation Plan may elect to defer the gain
on exercise of any option granted to him under the Plan. Such election
allows for the Optionee to defer receipt of a number of shares of Common
Stock representing the excess of (1) the number of shares of Common Stock
purchased pursuant to an exercise, over (2) a number of shares of Common
Stock with a fair market value equal to the purchase price of such option
shares.
(a) Any election to defer stock option gains must;
(1) be evidenced by a written instrument delivered by the Optionee
to the Board of Directors at least 180 days prior to exercise of
the option,
(2) be implemented by the Optionee at the exercise date through
delivering Common Stock acquired at least 180 days prior to the
exercise date, accompanied by a notarized from the Optionee to the
Board of Directors affirming that the shares delivered were
acquired by the Optionee at least 180 days prior to the exercise
date,
(3) be irrevocable.
(b) Upon exercise of any option subject to a deferral election, the
Company will credit the Optionee's Deferral Account established under
the Company's Deferred Compensation Plan with fully vested Stock Units
equal to the number of shares of Common Stock whose receipt was
deferred. Such Stock Units will be held, administered and distributed
pursuant to the terms of the Deferred Compensation Plan.
8. 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 Board of Directors, as
constituted before the change of control, may also take any one or 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 Board of
Directors 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 February 23, 1998
(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 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.
9. 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.
10.EXEMPTION FROM LIABILITY - The members 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 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.
11.GOVERNING LAWS - The Plan shall be construed, administered and
governed under and by the Laws of the State of Illinois.
The Board of Directors approved the Non-Employee Director Stock Option
Plan on February 23, 1998, to become effective on that date subject to
the approval of the Plan by the stockholders. <PAGE>
Under the Company's by-laws and Delaware Law, the Plan must be approved
by a majority of the shares of Common Stock present and entitled to vote
at the 1998 Annual Meeting. Abstentions will be counted as votes present
and entitled to vote, and an abstention will have the same effect as a
vote against approval of the Plan. Broker non-votes will be counted as
votes present, but not entitled to vote at the meeting. As a result,
provided that a quorum is present at the 1998 Annual Meeting, a broker
non-vote should have no effect on the outcome of the vote to approve the
Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ADOPTION of
the Non-Employee Directors stock Option Plan.
AUDITORS
KPMG PEAT MARWICK LLP, independent certified public accountants,
have served as the Company's public accountants for the fiscal year ended
December 31, 1997. Representatives of KPMG PEAT MARWICK LLP, are
expected to be present at the meeting with the opportunity to make a
statement if they desire to do so and are expected to be available to
respond to appropriate questions.
NOTICE PROVISIONS FOR STOCKHOLDER PROPOSALS AND NOMINATIONS OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation
establishes an advance notice procedure with respect to the nomination,
other than by or on behalf of the Board of Directors, of candidates for
election as directors and with respect to any proposed business to be
considered before an annual meeting of stockholders. Under the advance
notice procedures, any stockholder who wishes to nominate a candidate for
election as a director or to bring any proposal of business before an
annual meeting must give advance written notice to the Secretary of the
Company of such nomination or proposed business. Such notice must be
received, by the Secretary of the Company at the Company's principal
executive offices, not later than the close of business on the 40th day
nor earlier than the close of business on the 70th day before the first
anniversary of the preceding year's annual meeting. Special provisions
apply in the event that the number of directors to be elected to the
Board of Directors is increased and there is no public disclosure by the
Company naming all of the nominees for director or specifying the size of
the increased board at least 50 days before the first anniversary of the
previous year's annual meeting. Under such circumstances, a
stockholder's notice will be considered timely, but only with respect to
nominees for any new board positions created by such increase, if it is
received by the Secretary of the Company not later than the close of
business on the 14th day following the day on which such public
disclosure is made. Any business to be brought before an annual meeting
must be a proper matter for stockholder action.
Under the advance notice procedures, notice from a stockholder who
proposes to nominate a person for election as a director must contain
certain information about that person, including age, business address,
principal occupation, the class and number of shares of Company stock
beneficially owned by such person, and such other information as would be
required to be included in a proxy statement soliciting proxies for the
election of the proposed nominee (including such person's written consent
to be named as a nominee and to serving as a director, if elected).
Notice from a stockholder who proposes to bring business before an annual
meeting must include a brief description of the business to be brought,
the reasons for conducting such business at the annual meeting, and any
material interest that the stockholder may have in such business. Any
notice must also include certain information concerning the stockholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal has been made, including the name and address of
the stockholder as they appear on the Company's books, the name and
address of such beneficial owner, if any, and the class and number of
shares of the Company's stock beneficially owned by such stockholder and
beneficial owner, if any. If the Chairman or other officer presiding at
an annual meeting determines that a person was not properly nominated or
that other business was not properly brought before the meeting in
accordance with the foregoing procedures, he shall so declare at the
meeting and such defective nomination shall be disregarded or such
business shall not be conducted at the annual meeting.
OTHER BUSINESS
Management does not intend to present, and does not have reason to
believe others will present, any items of business at the Annual Meeting
other than those mentioned in the Notice of the Meeting. However, if any
other matters are properly presented for a vote, the proxies will be
voted on such matters according to the judgment of the persons named as
proxies therein.
STOCKHOLDER PROPOSALS
Proposals from stockholders to be presented at the 1999 Annual
Meeting of stockholders of the Company must be received by the Company on
or before December 15, 1998 in order to be eligible for inclusion in the
Company's proxy statement and form of proxy for that meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
Alan J. Emerick
Secretary
Dated: April 13, 1998
APPENDIX A
GRAND PREMIER FINANCIAL, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
SECTION 1. Establishment. GRAND PREMIER FINANCIAL, INC. (the
"Company"), a Delaware corporation, hereby establishes the Grand Premier
Financial, Inc. Non-employee Directors Stock Option Plan (the "Plan")
pursuant to which members of the Board of Directors of the Company who
are not employed by the Company or any of its Subsidiaries ("Non-employee
Directors") may be granted options to purchase shares of common stock of
the Company, par value $0.01 per share ("Common Stock"). A "Subsidiary"
is any entity of which the Company is the direct or indirect owner of not
less than eighty percent (80%) of all issued and outstanding equity
interests.
SECTION 2. Purpose. The purpose of the Plan is to provide a means
whereby Non-employee Directors may be given the opportunity to purchase
stock of the Company through options to acquire Common Stock. The Plan
is intended to advance the interests of the Company by encouraging stock
ownership or additional stock ownership by Non-employee Directors and by
giving Non-employee Directors added incentive to devote themselves to the
future success of the Company. Options granted under this Plan
("Options") are not intended to qualify as incentive stock options within
the meaning of Section 422 of the Internal Revenue Code.
SECTION 3. Eligibility. All Non-employee Directors shall be
eligible to be granted Options to purchase shares of Common Stock under
the Plan. Whether a Non-employee Director becomes an Optionee under the
Plan shall be determined in accordance with Section 6.
SECTION 4. Number of Shares Covered by Options. The total number
of shares of Common Stock that may be issued and sold pursuant to Options
granted under the Plan shall be 200,000. The Common Stock to be optioned
under the Plan may be either authorized and unissued shares or issued
shares that shall have been reacquired by the Company. Such shares are
subject to adjustment in accordance with the provisions of Section 9
hereof. The shares involved in the unexercised portion of any terminated
or expired Option under the Plan may again be optioned under the Plan.
SECTION 5. Administration. The Plan shall be administered by the
Board of Directors of the Company. No person, other than members of the
Board of Directors, shall have any authority concerning decisions
regarding the Plan. Subject to the express provisions of the Plan, the
Board of Directors shall have sole discretion concerning all matters
relating to the Plan and Options granted hereunder. The Board of
Directors, in its sole discretion, shall determine the Non-employee
Directors of the Company to whom, and the time or times at which, Options
will be granted, the number of shares of Common Stock to be subject to
each Option, the expiration date of each Option, the time or times within
which the Option may be exercised, the terms governing the cancellation
of the Option (with the consent of the holder thereof) and the other
terms and conditions of the grant of the Option. The terms and
conditions of the Options need not be the same with respect to each
Optionee or with respect to each Option.
The Board of Directors may, subject to the provisions of the Plan,
establish such rules and regulations as it deems necessary or advisable
for the proper administration of the Plan and may make determinations and
may take such other action in connection with or in relation to the Plan
as it deems necessary or advisable. Each determination or other action
made or taken pursuant to the Plan, including, interpretation of the Plan
and the specific terms and conditions of the Options granted hereunder by
the Board of Directors, shall be final and conclusive for all purposes
and upon all persons including, but without limitation, the Company, its
Subsidiaries, the Board of Directors, and the affected Non-employee
Directors and their respective successors in interest.
SECTION 6. Granting of Options. Subject to the provisions of the
Plan, the Board of Directors, within ten years from the date the Plan is
adopted, from time to time grant Options to any Non-employee Director
("Optionee") for such number of shares of Common Stock and upon such
terms and conditions as in the judgement of the Board of Directors shall
be desirable. Nothing contained in the Plan shall be deemed to give any
Non-employee Director any right to be granted an Option to purchase
shares of Common Stock except to the extent, and upon such terms and
conditions, as may be determined by the Board of Directors.
SECTION 7. Terms of Options. Each Option granted under the Plan
shall be evidenced by an agreement ("Stock Option Agreement") that shall
be executed by the Chief Executive Officer, President or any Executive
Vice President of the Company, and by the Non-employee Director to whom
such Option is granted, and shall be subject to the following terms and
conditions:
(a) The price at which each share of Common Stock covered by each
Option may be purchased shall be determined in each case on the date of
grant by the Board of Directors, but shall not be less than the Fair
Market Value of shares of Common Stock at the time the Option is granted.
For purposes of this Section, the "Fair Market Value" of shares of Common
Stock on the date of the grant shall be: (i) the average of the high and
low sales prices per share of Common Stock as reported on The Nasdaq
Stock Market's National Market ("Nasdaq") on the date of grant; or (ii)
if no sales are reported for such date, the average of the bid and asked
prices per share of Common Stock as quoted on Nasdaq on the date of
grant, or as otherwise determined by the Board of Directors in its
discretion.
(b) Except as otherwise provided in the Plan or in any Stock Option
Agreement, the Optionee shall pay the purchase price of the shares of
Common Stock upon exercise of any Option: (i) in cash; (ii) in cash
received from a broker-dealer to whom the Optionee has submitted an
exercise notice consisting of a fully endorsed Option (however, this
payment option shall only be available to the extent the payment
procedure complies with Regulation T issued by the Federal Reserve
Board); (iii) by delivering shares of Common Stock having an aggregate
Fair Market Value on the date of exercise equal to the Option exercise
price; (iv) by directing the Company to withhold such number of shares
of Common Stock otherwise issuable upon exercise of such Option having an
aggregate Fair Market Value of the date of exercise equal to the Option
exercise price; (v) by such other medium of payment as the Board of
Directors, in its discretion, shall authorize at the time of grant; or
(vi) by any combination of (i), (ii), (iii), (iv) and (v). In the case
of an election pursuant to (i) or (ii) above, cash shall mean cash or a
check issued by a federally insured bank or savings and loan association,
and made payable to the Company. In the case of payment pursuant to
(ii), (iii) or (iv) above, the Optionee's election must be made on or
prior to the date of exercise and shall be irrevocable. The Company
shall issue, in the name of the Optionee, stock certificates representing
the total number of shares of Common Stock issuable pursuant to the
exercise of any Option as soon as reasonably practicable after such
exercise, provided that any shares of Common Stock purchased by an
Optionee through a broker-dealer pursuant to clause (ii) above shall be
delivered to such broker-dealer in accordance with 12 C.F.R. 220.3(e)(4)
or other applicable provision of law.
(c) Each Stock Option Agreement shall provide that such Option may be
exercised by the Optionee or by the person or persons entitled to do so
under the Optionee's will, or, if the Optionee shall fail to make
testamentary disposition of said Option, or shall die intestate, by the
Optionee's legal representative or representatives, in such parts and at
such times as may be specified in such Agreement. Any Option granted
hereunder shall expire not later than the first to occur of the
following:
(i) The expiration of ten years from the date such Option is
granted (hereinafter called the "Option Period").
(ii) The expiration of three months after the date of either: (A)
the retirement of the Optionee from membership on the Board of
Directors after attaining the age of 60 years; or (B) the
termination of the membership of the Optionee on the Board of
Directors due to total and permanent disability. The Board of
Directors of the Company may provide by resolution, however, that
any terms of this subparagraph (ii) of paragraph (c) shall not
apply to any Option or portion of an Option;
(iii) The expiration of the period of six months after the date of
the Optionee's death; and
(iv) The termination of membership of the Optionee on the Board of
Directors for a reason other than those expressed in subparagraphs
(ii) and (iii) of this paragraph (c).
(d) Notwithstanding anything herein to the contrary, no Option granted
under the Plan prior to approval of the Plan by the stockholders may be
exercised before such approval, and in the event this Plan is disapproved
by the stockholders, then any Option granted hereunder shall become null
and void.
(e) Each Option and right granted under the Plan shall by its terms be
non-transferable by the Optionee except by will or by the laws of descent
and distribution, or pursuant to a qualified domestic relations order (as
defined in the Employee Retirement Income Security Act of 1974, as
amended), and each Option shall be exercisable during the Optionee's
lifetime only by him. Notwithstanding the preceding sentence, a Stock
Option Agreement may permit an Optionee, at any time prior to his death,
to assign all or any portion of an Option granted to him to: (i) his
spouse or lineal descendant; (ii) the trustee of a trust for the primary
benefit of his spouse or lineal descendant; or (iii) a partnership of
which his spouse and lineal descendants are the only partners. In such
event, the spouse, lineal descendant, trustee or partnership will be
entitled to all of the rights of the Optionee with respect to the
assigned portion of such Option, and such portion of the Option will
continue to be subject to all of the terms, conditions and restrictions
applicable to the Option, as set forth herein and in the related Stock
Option Agreement immediately prior to the effective date of the
assignment. Any such assignment will be permitted only if: (i) the
Optionee does not receive any consideration therefor; and (ii) the
assignment is expressly permitted by applicable Agreement as approved by
the Board of Directors. Any such assignment shall be evidenced by an
appropriate written document executed by the Optionee, and a copy thereof
shall be delivered to the Company on or prior to the effective date of
the assignment.
(f) The Stock Option Agreement entered into pursuant hereto may contain
such other terms, provisions and conditions not inconsistent herewith as
shall be determined by the Board of Directors including, without
limitation, provisions: (i) requiring the giving of satisfactory
assurances by the Optionee that the shares are purchased for investment
and not with a view to resale in connection with the distribution of such
shares, and will not be transferred in violation of applicable securities
laws; (ii) restricting the transferability of such shares during a
specific period; and (iii) requiring the resale of such shares to the
Company at the Option price if the membership of the Optionee on the
Board of Directors terminates prior to a specified time.
SECTION 8. Deferral of Stock Option Gains. Any Optionee who is
eligible to participate in the Grand Premier Financial, Inc. Deferred
Compensation Plan, as amended and restated effective January 1, 1997 and
further amended on March 24, 1997 and January 9, 1998 ("Deferred
Compensation Plan"), may make an election with respect to any Option
granted to him under the Plan as follows:
(a) An Optionee may elect, with respect to an Option granted to him
under the Plan, to defer receipt of a number of shares of Common Stock
(and the related Stock Units described below) representing the excess of
(a) the number of shares of Common Stock purchased pursuant to the
exercise of such Option, over (b) a number of shares of Common Stock with
a Fair Market Value (as defined in Section 7(a)) equal to the purchase
price of such Option.
(b) A deferral election with respect to an Option pursuant to this
section must be made pursuant to a written instrument delivered by the
Optionee to the Board of Directors at least 180 days prior to the
exercise date of such Option.
(c) An election may be made pursuant to this section only if the
purchase price of the applicable Option is paid by the Optionee pursuant
to subsection 7(b) by delivering Common Stock acquired by the Optionee at
least 180 days prior to the exercise date of such Option.
(d) To implement the exercise of an Option as described in clause (c)
above, the Optionee shall provide a notarized statement to the Board of
Directors that he is the sole owner of the shares of Common Stock being
delivered to pay the purchase price of such Option, and that such shares
of Common Stock were acquired at least 180 days prior to the exercise
date.
(e) Upon exercise of an Option that is subject to a deferral election
pursuant to this section, the Company shall credit the Optionee's Stock
Option Deferral Account established under the Deferred Compensation Plan
with a number of Stock Units equal to the number of shares of Common
Stock whose receipt is deferred pursuant to clause 1 above.
(f) Upon exercise of an Option that is subject to a deferral election
pursuant to this section, the Company shall transfer to the Trustee of
the Trust Agreement under the Grand Premier Financial, Inc. Deferred
Compensation Plan, dated January 31, 1997 and amended on January 9, 1998
("Trust Agreement"), a number of newly-issued shares of Common Stock
equal to the number of shares of Common Stock whose receipt is deferred
pursuant to clause (a) above. Said shares of Common Stock shall be
credited to a fully vested account maintained for the Optionee under the
Trust Agreement and shall be distributed to the Optionee, or to his
beneficiary in the event of his death, pursuant to the terms of the
Deferred Compensation Plan and the Trust Agreement.
(g) An Optionee may make a deferral election with respect to one or
more specific Options granted to him under the Plan on or prior to the
date of the deferral election, or pursuant to a blanket election
applicable to all Options granted to him on or prior to the date of the
deferral election and all Options to be granted to him under the Plan
after the date of the deferral election.
(h) A deferral election by an Optionee shall be irrevocable with
respect to each Option granted to him hereunder on or before the date of
his deferral election and that is subject to such deferral election. A
deferral election by an Optionee with respect to an Option granted to him
on or after the date of his deferral election may be revoked by the
Optionee, by written instrument delivered to the Board of Directors at
least 180 days prior to the date of exercise of such Option.
(i) All deferred Stock Units and shares of Common Stock shall be held,
administered and distributed pursuant to the terms of the Deferred
Compensation Plan and the Trust Agreement.
(j) The provisions of this section shall apply with respect to an
Option subject to a deferral election, notwithstanding any other
provision of the Plan. However, the other provisions of the Plan shall
apply with respect to such Option to the extent not inconsistent with the
provisions of this section.
SECTION 9. Adjustment of Number of Shares. In the event that a
dividend shall be declared upon the shares of Common Stock payable in
shares of Common Stock, the number of shares of Common Stock then subject
to any Option granted hereunder and the number of shares available for
issuance pursuant to the Plan but not yet covered by an Option, shall be
adjusted by adding to each of such shares the number of shares which
would be distributable thereon if such share had been outstanding on the
date fixed for determining the stockholders entitled to receive such
stock dividend. In the event that the outstanding shares of Common Stock
shall be changed into or exchanged for a different number of kind of
shares of stock or other securities of the Company or of another
corporation, whether through reorganization, recapitalization, stock
split-up, combination of shares, merger or consolidation, then there
shall be substituted for each share of Common Stock subject to any such
Option and for each share of Common Stock reserved for issuance pursuant
to the Plan but not yet covered by an Option, the number of kind of
shares of stock or other securities into which each outstanding share of
Common Stock shall be so changed or for which each such share shall be
exchanged; provided, however, that in the event that such change or
exchange results from a merger or consolidation, and in the judgment of
the Board of Directors such substitution cannot be effected or would be
inappropriate, or if the Company shall sell all or substantially all of
its assets, the Company shall use reasonable efforts to effect some other
adjustment of each then outstanding Option which the Board of Directors,
in its sole discretion, shall deem equitable. In the event that there
shall be any change, other than as specified above in this Section 9, in
the number or kind of outstanding shares of Common Stock, then if the
Board of Directors shall determine that such change equitably requires an
adjustment in the number or kind of shares theretofore available for
issuance pursuant to the Plan but not yet covered by an Option, and the
number of shares of Common Stock then subject to an Option or Options,
such adjustment shall be made by the Board of Directors and shall be
effective and binding for all purposes of the Plan and of each Stock
Option Agreement. In the case of any such substitution or adjustment as
provided for in this Section, the Option price in each Stock Option
Agreement for each share covered thereby prior to such substitution or
adjustment will be the Option price for all shares of stock or other
securities which shall have been substituted for such shares or to which
such share shall have been substituted for such shares or to which such
share shall have been adjusted pursuant to this Section. No adjustment
or substitution provided for in the Section 9 shall require the Company,
in any Stock Option Agreement, to sell a fractional share, and the total
substitution or adjustment with respect to each Stock Option Agreement
shall be limited accordingly.
SECTION 10. Amendments. This Plan may be terminated or amended
from time to time by vote of the Board of Directors, without the approval
of the stockholders of the Company to the extent allowed by law. No
amendment or termination of the Plan shall in any manner affect any
Option theretofore granted without the consent of the Optionee, except
that the Board of Directors may amend the Plan in a manner that does
affect Options theretofore granted upon a finding by the Board of
Directors that such amendment is in the best interest of holders of
outstanding Options affected thereby.
SECTION 11. Change in Control. Notwithstanding the provisions of
the Plan or any Option Agreement evidencing Options granted hereunder,
upon a Change in Control of the Company (as defined below) all
outstanding Options shall become fully exercisable and all restrictions
thereon shall terminate in order that Optionee may fully realize the
benefits thereunder. Further, in addition to the Board of Directors'
authority set forth in Section 5, the Board of Directors, as constituted
before such Change in Control, is authorized, and has sole discretion, as
to any Option, either at the time such Option is granted hereunder or any
time thereafter, to take any one or more of the following actions: (a)
provide for the purchase of any such Option, upon the Optionee's request,
for an amount of cash equal to the difference between the exercise price
and the then Fair Market Value of the Common Stock covered thereby had
such Option been currently exercisable; (b) make such adjustment to any
such Option then outstanding as the Board of Directors deems appropriate
to reflect such Change in Control; and (c) cause any such Option then
outstanding to be assumed, by the acquiring or surviving corporation,
after such Change in Control.
For the purposes of this Plan, a "Change in Control" of the Company
shall be deemed to have occurred if or upon:
(a) The acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Sections 13(d)(3) or 14
(d)(2) of the Securities Exchange Act of 1934 (the "1934 Act"), of
beneficial ownership within the meaning of Rule 13d-3 promulgated under
the 1934 Act of 20% or more or either (i) the then outstanding shares of
Common Stock of the Company (the "Outstanding Company Common Stock") or
(ii) the combined voting power of the then outstanding securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that the
following acquisitions shall not constitute a Change in Control: (A) any
acquisition resulting directly from the conversion of shares of Northern
Illinois Financial Corporation Common Stock into share of Common Stock
pursuant to the Agreement and Plan of Merger, dated January 22, 1996,
among the Company, Premier Financial Services, Inc. and Northern Illinois
Financial Corporation, as amended by the First Amendment thereto, dated
March 18, 1996, and the Second Amendment thereto, dated as of August 15,
1996 (the "Merger Agreement"), (B) any subsequent acquisition of shares
of Common Stock that is permitted under Section 1(b) of the Rights
Agreement, dated as of July 9, 1996, between the Company and Grand
Premier Trust and Investment, Inc. (the "Rights Agreement"), without
rendering the Person effecting such acquisition an "Acquiring Person" for
purposes of the Rights Agreement (C) any acquisition directly from the
Company (excluding any acquisition resulting from the exercise of a
conversion or exchange privilege in respect of outstanding convertible or
exchangeable securities), (D) any acquisition by the Company, (E) any
acquisition by an employee benefit plan [or related trust] sponsored or
maintained by the Company or any corporation controlled by the Company or
(F) any acquisition by any corporation pursuant to a reorganization,
merger or consolidation involving the Company, if immediately after such
reorganization, merger or consolidation, each of the conditions described
in clauses (i), (ii) and (iii) of subsection (c) of this Section 11 shall
be satisfied; and provided further that, for the purposes of clause (D),
in any Person (other than the Company or any employee benefit plan [or
related trust] sponsored or maintained by the Company or any corporation
controlled by the Company) shall become the beneficial owner of 20% or
more of the Outstanding Company Common Stock or 20% or more of the
Outstanding Company Voting Securities by reason of an acquisition by the
Company and such Person shall after such acquisition by the Company,
become the beneficial owner of any additional shares of the Outstanding
Company Common Stock or any additional Outstanding Company Voting
Securities and such beneficial ownership is publicly announced, such
additional beneficial ownership shall constitute a Change in Control;
(b) individuals who, as of the effective date hereof, constitute the
Board of Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of such Board of Directors; provided,
however, that any individual who becomes a director of the Company
subsequent to the date hereof whose election, or nomination for election
by the Company's stockholders, was approved by the vote of at least a
majority of the directors then comprising the Incumbent Board shall be
deemed to have been a member of the Incumbent Board; and provided
further, that no individual who was initially elected as a director of
the Company as a result of an actual or threatened election contest, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under
the 1934 Act, or any other actual or threatened solicitation or proxies
or consents by or on behalf of an Person other than the Board of
Directors shall be deemed to have been a member of the Incumbent Board;
(c) approval by the stockholders of the Company of a reorganization,
merger or consolidation unless, in any such case, immediately after such
reorganization, merger or consolidation, (i) more than 60% of the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and more than 60% of the combined
voting power of the then outstanding securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all
of the individuals or entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such reorganization,
merger or consolidation and in substantially the same proportions
relative to each other as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as the case
may be, (ii) no Person (other than the Company, any employee benefit plan
[or related trust] sponsored or maintained by the Company or the
corporation resulting from such reorganization, merger or consolidation
(or any corporation controlled by the Company) and any Person which
beneficially owned, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 20% or more of the Outstanding
Company Common Stock or the Outstanding Company Voting Securities, as the
case may be, beneficially owned, directly or indirectly, 20% more of the
then outstanding shares of common stock of such corporation or 20% or
more of the combined voting power of the then outstanding securities of
such corporation entitled to vote generally in the election of directors
and (iii) at least a majority of the member of the board of directors of
the corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board of Directors
providing for such reorganization, merger or consolidation; or
(d) approval by the stockholders of the Company of (i) a plan of
complete liquidation or dissolution of the Company or (ii) the sale or
other disposition of all or substantially all of the assets of the
Company other than to a corporation with respect to which, immediately
after such sale or other disposition, (A) more than 60% of the then
outstanding shares of common stock thereof and more than 60% of the
combined voting power of the then outstanding securities thereof entitled
to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and the Outstanding Company Voting
Securities immediately prior to such sale or other disposition and in
substantially the same proportions relative to each other as their
ownership, immediately prior to such sale or other disposition, of the
Outstanding Company Common Stock and the Outstanding Company Voting
Securities, as the case may be, (B) no Person (other than the Company,
any employee benefit plan [or related trust] sponsored or maintained by
the Company or such corporation (or any corporation controlled by the
Company) and any Person which beneficially owned immediately prior to
such sale or other disposition, directly or indirectly, 20% or more of
the Outstanding Company Common Stock or the Outstanding Company Voting
Securities, as the case may be) beneficially owned, directly or
indirectly, 20% more of the then outstanding shares of common stock
thereof or 20% or more of the combined voting power of the then
outstanding securities thereof entitled to vote generally in the election
of directors and (C) at least a majority of the members of the Board of
Directors thereof were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board of Directors
providing for such sale or other disposition.
The Board of Directors may otherwise accelerate the Commencement Date for
the Exercise Period (as such terms are defined in the applicable Stock
Option Agreement) of an Option or any part thereof at such other times or
upon such other occasions, including, but not limited to, anticipation of
an event described in Section 11 of the Plan, as the Board of Directors
in its sole discretion determines is appropriate.
SECTION 12. Effective Date. The Plan was adopted by the Board of
Directors of the Company on February 23, 1998, and authorized for
submission to the stockholders of the Company. If the Plan is approved
by the affirmative vote of a majority of the shares of the voting stock
of the Company entitled to be voted by the holders of stock represented
at a duly held stockholders' meeting, it shall become effective, or
deemed to have become effective, as of February 23, 1998. Options may be
granted under the Plan prior, but subject, to approval of the Plan by
stockholders of the Company and, in each such case, the date of grant
shall be determined without reference to the date of approval of the Plan
by the stockholders of the Company.
SECTION 13. Termination. The Plan shall terminate as of February
22, 2008; provided however, that the Board of Directors may terminate the
Plan at any time prior thereto. Termination of the Plan shall not impair
any of the rights or obligations under any Option granted under the Plan
without the consent of the Optionee.
SECTION 14. Proceeds from Sale of Stock. Proceeds from the sale
of Common Stock issued upon the exercise of Options granted pursuant to
the Plan shall be added to the general funds of the Company.
SECTION 15. Exemption from Liability. The members of the Board of
Directors of the Company and each of them, shall be free from all
liability, joint or several, for their acts, omissions and conduct, and
for the act, omissions and conduct of their duly constituted agents, in
carrying out the responsibilities of said Board of Directors under the
Plan, and the Company shall indemnify and save them and hold each of them
harmless from the effects and 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.
SECTION 16. Right to Repurchase. In the event a person who has
acquired Common Stock pursuant to an Option granted under the Plan offers
to sell shares of such Common Stock, the Company shall have the first
right of purchase. Such person shall make a written offer to the Company
and the Company shall have first right of purchase, and if it exercises
this right, and so long as its stock is traded over-the-counter, the
amount payable for each share of Common Stock shall be the mean of the
bid and ask prices as of the most recently published quotation of the bid
and ask prices prior to the date of offer to sell as such published
quotation is evidenced in the Midwest Edition of The Wall Street Journal
for such Common Stock. If the Company wishes to exercise its right to
purchase, the Company must express its decision in a written statement
signed by an official representative of the Company and the statement
must be delivered to the person offering the Common Stock within two
regular business days from the date the person offers to sell the Common
Stock.
SECTION 17. Governing Laws. The Plan shall be construed,
administered and governed in all respects under and by the Laws of the
State of Illinois. Each Stock Option Agreement granted under the Plan
shall be construed, administered and governed in all respects under and
by the laws of the State of Illinois.
