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 26, 1999 for the following
purposes:
1. To elect five (5) Class III directors for a term of three years.
2. To transact and act upon such other matters or business as may
properly come before said meeting, or any adjournment or adjournments
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, 1999 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 12, 1999 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 1999 Annual Meeting of Stockholders, (the
"Annual Meeting"), and any adjournment or adjournments thereof, to be held on
Wednesday, May 26, 1999, 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, 1999 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 22,028,192 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, and (2) 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,
1998, 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 12, 1999.
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, Frank J. Callero, Alan J. Emerick, Richard L. Geach, Howard A. McKee
and H. Barry Musgrove expire at the Annual Meeting. The Board of Directors
has re-nominated Messrs. Callero, Emerick, Geach, McKee and Musgrove for
election as Class III directors for a term ending at the Annual Meeting in
2002 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 III Nominees (If elected, term will expire in 2002)
Principal Occupation and Year First
Name Age Elected as a Director (1)
Frank J. Callero 71 Partner, Callero and Callero LLP.
(certified public accountants) - 1996
Alan J. Emerick 55 Executive Vice President and Chief
Administrative Officer of the Company. - 1996
Richard L. Geach 58 Chairman of the Board, President and
Chief Executive Officer of the Company. - 1996
Howard A. McKee 83 Chairman of the Executive Committee. - 1996
H. Barry Musgrove 64 Chairman of the Board and President,
Frantz Manufacturing Company.
(manufacturer of anti-friction products). - 1996
- - - - - - - - - - - - - - - - Continuing Directors - - - - - - - - - - - - - -
Class I (Term expires 2000)
Principal Occupation and Year First
Name Age Elected as a Director (1)
Brenton J. Emerick 74 Retired Chairman of the Board, Northern
Illinois Financial Corporation
(bank holding company) - 1996
Thomas D. Flanagan 61 Founding Partner, Flanagan, Bilton & Branagan.
(law firm) - 1997
Noa W. Horner (2) 52 President, The Municipal Insurance
Company of America of Elgin, Illinois
(insurance company) - 1998
Edward G. Maris 63 Private Investor. - 1996
Joseph C. Piland 66 Educational Consultant and retired President,
Highland Community College. - 1996
John Simcic 69 Chairman of the Board, Maki & Associates, Inc.
(d/b/a Century 21 United
- real estate sales) - 1997
Class II (Term expires 2001)
Principal Occupation and Year First
Name Age Elected as a Director (1)
Jean M. Barry 44 Senior Investment Officer of the Company. - 1996
James Esposito 66 Executive Vice President of Grand National Bank,
a subsidiary of the Company. - 1996
R. Gerald Fox 63 President and Chief Executive Officer,
F.I.A. Publishing Company (publisher of
financial books and periodicals). - 1996
David L. Murray 56 Senior Executive Vice President and
Chief Financial Officer of the Company. - 1996
Stephen J. Schostok 62 Attorney and partner, Dimonte Schostok & Lizak,
attorneys at law. - 1996
(1) Each director has engaged in the principal occupation indicated for at
least five years, except as follows:
- - Jean M. Barry was Vice President, Northern Illinois Financial Corporation,
from 1989-1996.
- - 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 of Northern Illinois Financial
Corporation, from 1988-1996.
- - James Esposito was Chief Executive Officer of Grand National Bank-Crete from
1974-1996.
- - 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.
(2) Under the terms of the agreement governing the merger of Premier
Financial Services, Inc. ("Premier") and Northern Illinois Financial
Corporation ("Northern Illinois") with and into the company on August 22, 1996
(the "merger"), Premier and Northern Illinois each had the right to designate
8 of the 16 members of the Company's original Board of Directors. The
Company's Amended and Restated Certificate of Incorporation provides that,
until the annual meeting of stockholders to be held in 1999, a majority of
those persons who were initially appointed as directors of the Company by
Premier or their nominees (the "Premier Directors") will have the right to
designate the person or persons to fill any vacancies on the board of
Directors created by death, resignation or removal of the Premier Directors,
and a majority of those persons who were initially appointed as directors of
the Company by Northern Illinois or their nominees (the "Northern Illinois
Directors") will have the right to designate the person or persons to fill any
vacancies created by the death, resignation or removal of the Northern
Illinois Directors. In accordance with that provision, the Northern Illinois
Directors designated Mr. Noa W.Horner to fill the remaining term of Robert W.
Hinman, who resigned from the board effective October 23, 1998.
Mr. Horner was born in 1947 in Honolulu, Hawaii. He graduated from
Northwestern University, Evanston, Illinois in 1969 with an undergraduate
degree in Liberal Arts and was awarded an M.B.A. in Finance in 1974 from the
Northwestern University Graduate School of Business. Mr. Horner was employed
by the Santa Fe Railway and its parent company, Santa Fe Industries from 1969
to 1978. He served Santa Fe in various capacities, including Senior Market
Analyst in the Market Research Department and Assistant to the Director of
Cost Analysis and Research. From 1978 to 1990, Mr. Horner was Executive Vice
President and Chief Financial Officer, MAF BANCORP, Clarendon Hills, Illinois,
with responsibility for all phases of financial and accounting operations as
well as management information systems. In 1990, through 1995, he was a
financial consultant, primarily in the areas of banking, finance and
insurance. Mr. Horner joined The Municipal Insurance Company of America of
Elgin, Illinois as President in 1995.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held 10 regular meetings in 1998. 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, Jean M. Barry,
Richard L. Geach, and David L. Murray. The Committee did not meet formally in
1998.
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, Joseph D. Piland, John
Simcic and Stephen J. Schostok. 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 four times in 1998.
The current members of the Compensation Committee are Messrs. Edward G.
Maris, Chairman, Frank J. Callero, Stephen J. Schostok and John Simcic. Among
other functions, the Committee makes recommendations to the Board of Directors
as to the compensation of the Executive Officers and outside Directors as well
as with respect to the Company's benefit programs. The Committee also
interprets and administers the Company's benefit plans. The Committee met
once in 1998.
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 four meetings in
1998.
DIRECTORS FEES AND COMPENSATION
For the year ended December 31, 1998, Directors who were not employees
of the Company were 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.
Directors who are employees of the Company are not 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.
The Company's Non-Employee Director's Stock Option Plan provides that
the Board of Directors may grant options to purchase shares of Common Stock to
non-employee directors. 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
February 22, 2008. Up to 200,000 shares of Common Stock have been authorized
for issuance under the Plan. 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.
A total of 19,000 options were granted to 10 Non-Employee directors,
namely Messrs. Callero, Brenton Emerick, Flanagan, Fox, Horner, Maris,
Musgrove, Piland, Schostok and Simcic in 1998. Each director was granted
1,900 options at an exercise price of $12.125 per share, the fair market value
of the Company's Common Stock as reported on the Nasdaq Stock Market on
December 21, 1998, the date of grant. The options expire on 12/21/2008.
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 $8,300 for the year ended December 31, 1998. Mr.
McKee is furnished with a Company leased automobile and a driver, and reported
$2,020 in taxable compensation for personal use in 1998.
Brenton J. Emerick was an officer of Grand National Bank, a subsidiary
of the Company, during 1998 pursuant to an agreement which expired December
31, 1998. Mr. Emerick retired from Grand National Bank effective January 1,
1999. Mr. Emerick received the following remuneration in 1998 under the terms
of the agreement; 1) a salary of $150,000, 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 $10,953 for the year ended December 31, 1998. Mr. Emerick was
furnished with a Company owned automobile, and reported $3,520 in taxable
compensation for personal use in 1998.
Two other directors, James Esposito and Jean M. Barry, serve as officers
of the Company. For the year ended December 31, 1998, Mr. Esposito received
$120,000 in salary, contributions made by the Company on his behalf totaling
$7,260 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 1998, and reported $1,764 in
taxable compensation for personal use. For the year ended December 31, 1998,
Ms. Barry received $82,800 in salary, contributions made by the Company on her
behalf totaling $4,901 to the Company's Savings and Stock Plan and Deferred
Compensation Plan, and participated in the Company's benefit programs.
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 58 Chairman of the Board, President & Chief Executive
Officer of the Company, President & Chief Executive
Officer of Grand National Bank, and a director of
all of the Company's subsidiaries.
David L. Murray 56 Senior Executive Vice President, Chief Financial
Officer and a director of the Company, Grand
National Bank and Grand Premier Trust and
Investment, Inc., and President & Chief Executive
Officer and a director of Grand Premier Operating
Systems, Inc.
Alan J. Emerick 55 Executive Vice President, Chief Administrative
Officer and a director of the Company and all of
the Company's subsidiaries.
Scott Dixon 45 Executive Vice President and Senior Sales Leader of
the Company and of Grand National Bank.
Larry W. O'Hara 39 Executive Vice President and Senior Service Leader
of the Company and of Grand National Bank, 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.
Kenneth A. Urban 61 President and Chief Executive Officer and
a director of Grand Premier Trust and
Investment, Inc. and Grand Premier Insurance, Inc.
Jack R. Croffoot 48 Senior Vice President and Director of Human
Resources of the Company.
Nanette K. Donton 28 Senior Vice President and Chief Accounting Officer
of the Company.
Al Lutton 57 Senior Vice President and Chief Information Officer
of the Company.
James K. Watts 35 Senior Vice President and Chief Operations Officer
of the Company, 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:
- - Nanette K. Donton was Supervising Senior Auditor with KPMG LLP
from 1993-1997.
- - James K. Watts was 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, 1999:
Amount & Nature
Title of Name and Address of of Beneficial Per Cent
Class Beneficial Owner Ownership of Class
Common Howard A. McKee 6,872,432 (1) 31.20%
26990 Countryside Lake Drive
Mundelein, Illinois 60060
Grand Premier Trust and Investment, Inc. 1,425,973 (2) 6.47%
101 West Stephenson Street
Freeport, IL 61032
Northland Insurance Agency, Inc. 1,206,401 (3) 5.48%
20 South Clark Street, Suite 2310
Chicago, Illinois 60603
Keeco, Inc. 1,166,360 (3) 5.29%
20 South Clark Street, Suite 2310
Chicago, Illinois 60603
(1) Includes 1,206,401 shares held by Northland Insurance Agency, Inc. and
1,166,360 shares held by Keeco, Inc., as to which Mr. McKee shares investment
power (see Note 3 below). Excludes 551,131 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 531,134 shares held
in the Company's Savings and Stock Plan (the "Savings and Stock Plan") for
which Trust serves as trustee. Of the 1,425,973 shares listed in the table,
Trust has sole investment power with respect to 161,458 shares, shared
investment power with respect to 549,272 shares (including 531,134 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
715,243 shares. Trust has sole voting power with respect to 480,626 shares,
and no voting power with respect to 216,147 shares. Participants are entitled
to direct the trustee as to the voting of shares held in their accounts in
either the ESOP (198,066 shares) or 401(k) (531,134 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, 1999:
Title of Name of Beneficial Amount & Nature of Beneficial Per Cent of
Class Owner Ownership (1) (2) Class
Common Jean M. Barry 645,656 (3)(4)(5)( 6) 2.93%
Frank J. Callero 102,000 (3) (5)( 7) *
Alan J. Emerick 79,109 (3)(4)(5)( 8) *
Brenton J. Emerick 735,860 (3) (5)( 9) 3.34%
James Esposito 2,241 (3) (5)(10) *
Thomas D. Flanagan 907,296 (3) (5)(11) 3.96%
R. Gerald Fox 56,228 (3) (5)(12) *
Richard L. Geach 441,791 (3)(4)(5)(13) 1.99%
Noa W. Horner 555,131 (3) (14) 2.92%
Edward G. Maris 4,492 (3) (5) *
Howard A. McKee 6,872,432 (3) (15) 31.20%
David L. Murray 85,860 (3)(4)(5)(16) *
H. Barry Musgrove 37,206 (3) (5) *
Joseph C. Piland 9,143 (3) (5)(17) *
Stephen J. Schostok 17,025 (3) (5) *
John Simcic 306,593 (3) (5) 1.39%
William R. Theobald 10,648 (4)(5) *
Kenneth A. Urban 92,028 (4)(5) *
All 24 Directors,
Nominees & Executive
Officers as a group
(including those
individuals named
above) 10,547,623 (3)(4)(5)(18) 46.46%
* 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 22,028,192 shares outstanding plus, with respect to each
beneficial owner and the group, the shares each beneficial owner and the group
has the right to acquire within 60 days of March 31, 1999 pursuant to the
exercise of stock options or conversion of Series B Preferred Stock. Shares
shown as beneficially owned by more than one beneficial owner in the table are
included only once in the group to avoid duplication.
(3) The shares listed do not include 71,533 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, 1,231 shares; Mr. Alan J. Emerick, 9,583 shares; Mr.
Esposito, 23 shares; Mr.Geach, 91,386 shares; Mr. Murray, 6,982 shares; Mr.
Theobald, 6,653 shares; Mr. Urban, 6,980 shares; all executive officers and
directors as a group, 190,786 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, 1999
pursuant to the exercise of stock options as follows; Ms. Barry, 3,740 shares;
Mr. Callero, 550 shares; Mr. Alan J. Emerick, 4,958 shares; Mr. Brenton J.
Emerick, 550 shares; Mr. Esposito, 550 shares; Mr. Flanagan, 550 shares; Mr.
Fox, 550 shares; Mr. Geach, 161,341 shares; Mr. Maris, 550 shares; Mr.
Murray, 60,122 shares; Mr. Musgrove, 550 shares; Mr. Piland, 550 shares; Mr.
Schostok, 550 shares; Mr. Simcic, 550 shares; Mr. Theobald, 3,762 shares; Mr.
Urban, 54,501 shares; all executive officers and directors as a group,
327,394 shares.
(6) Includes 6,735 shares held by Ms. Barry as custodian for minor children.
Includes 530,317 shares held by Municipal Insurance Company and 24,814 shares
held by Public Service Investment & Management Corporation in which Ms. Barry
shares investment power. Ms. Barry is Mr. McKee's daughter.
(7) Excludes 11,968 shares held by Mr. Callero's spouse, as to all of which
Mr. Callero disclaims beneficial ownership.
(8) Excludes 22,522 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 159,837 shares held by Mr. Emerick's spouse, as to all of which
Mr. Emerick disclaims beneficial ownership.
(10) Excludes 45,741 shares held by Mr. Esposito's spouse, as to all of which
Mr. Esposito disclaims beneficial ownership.
(11) Includes 904,546 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 $7.7387 per share. Mr. Flanagan has full investment
power over the Series B Preferred Stock. Includes 2,200 shares held by Mr.
Flanagan for the benefit of minor children.
(12) Excludes 5,524 shares held by Mr. Fox's spouse, as to all of which Mr.
Fox disclaims beneficial ownership.
(13) Excludes 221,496 shares held by Mr. Geach's spouse, as to all of which
Mr. Geach disclaims beneficial ownership.
(14) Includes 530,317 shares held by Municipal Insurance Company and 24,814
shares held by Public Service Investment & Management Company in which Mr.
Horner shares investment power.
(15) Includes 1,206,401 shares held by Northland Insurance Agency, Inc. and
1,166,360 shares held by Keeco, Inc., as to which Mr. McKee shares investment
power. Excludes 555,131 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 17,069 shares held by Mr. Murray's spouse, as to all of which
Mr. Murray disclaims beneficial ownership.
(17) Excludes 935 shares held by Mr. Piland's spouse, as to all of which Mr.
Piland disclaims beneficial ownership.
(18) Excludes 488,033 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
327,394 shares which directors or executive officers could acquire within 60
days of March 31, 1999 pursuant to the exercise of stock options (see note 5
above), and 904,546 shares issuable within 60 days of March 31, 1999 pursuant
to conversion of Grand Premier Financial, Inc. Series B Preferred Stock (see
note 11 above).
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 $100,000 in the year ended December 31, 1998, as well as one
individual who was an executive officer through October 22, 1998.
Compensation includes amounts paid by Premier Financial Services, Inc. and
Northern Illinois Financial Corporation, which were merged into the Company in
August, 1996.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------- -----------------------
Awards Payouts
----------- ---------
Other Securities Long Term All
Name and Annual Underlying Incentive Other
Principal Position Year Salary Bonus Compensation Options Payouts
($) ($) ($) (1) (#) ($) (2)
- ------------------- ---- ------- ------ ------------ ----------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard L. Geach, 1998 292,000 0 6,000 0 0 23,736
President & Chief 1997 272,400 0 11,975 0 0 20,526
Executive Officer 1996 221,667 0 7,300 132,000 0 13,922
David L. Murray, 1998 186,000 0 6,000 3,600 0 17,755
Sr. Executive Vice 1997 173,370 0 10,600 5,500 0 17,265
President & Chief 1996 150,333 0 7,300 11,198 0 14,020
Financial Officer
Alan J. Emerick, 1998 168,000 0 6,000 3,250 0 11,927
Executive Vice 1997 155,000 0 9,709 4,950 0 11,090
President & Chief 1996 145,217 10,203 10,022 9,922 0 24,550
Administrative
Officer
William R. Theobald, 1998 128,750 0 6,000 2,000 0 9,429
Executive Vice 1997 125,000 0 3,275 3,850 0 13,209
President & Chief 1996 114,667 9,368 1,294 7,480 0 22,872
Credit Officer
Kenneth A. Urban, 1998 120,700 0 6,000 2,250 0 17,324
President & Chief 1997 116,000 0 5,100 3,850 0 14,708
Executive Officer 1996 113,500 0 4,800 7,975 0 14,050
of Grand Premier
Trust & Investment,
Inc.
- ------------------------------------------------------------------------------------------
Robert W. Hinman 1998 209,167 0 4,750 0 0 385,958
(3) 1997 240,000 0 10,169 7,150 0 27,930
1996 232,000 14,014 8,648 16,808 0 25,510
</TABLE>
(1) Other annual compensation consists of a) board attendance fees (1997 and
1996, Messrs. Geach, Murray, Emerick and Hinman), and b) 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.
(3) Mr. Hinman resigned his position as President and Chief Operating Officer
of the Company effective October 23, 1998. "All Other" compensation shown in
the table includes a lump sum separation payment of $ 370,000 paid to Mr.
Hinman.
The following table sets forth information regarding stock options
exercised by each of the named executive officers during the year ended
December 31, 1998, as well as the value of unexercised stock options
outstanding at fiscal year end.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND
FISCAL YEAR-END OPTION VALUES
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 16,144 234,821 139,737 96,083 1,711,781 1,177,014
David L. Murray 12,164 162,198 60,123 17,444 736,507 213,689
Alan J. Emerick - - 4,959 13,163 60,745 161,249
William R.Theobald - - 3,762 9,568 46,085 117,208
Kenneth A. Urban - - 54,501 12,374 667,640 151,579
(1) Based on the fair market value (closing bid price) of the Common Stock of the Company on
December 31, 1998, as reported on The Nasdaq Stock Market.
</TABLE>
The following table sets forth awards made under the Company's 1996
Non-qualified Stock Option Plan during the fiscal year ended December 31,
1998.
<TABLE>
<CAPTION>
STOCK OPTIONS AWARDED IN LAST FISCAL YEAR (1)
Individual Grants
----------------------------------------------------
Number % of Total Potential Realizable
of Options Value at Assumed
Securities Granted to Exercise Annual Rates of Stock
Underlying Employees Or Base Price Appreciation
Options In Price for Option Term
Granted Fiscal ($/Share) Expiration (2)
Name (#) Year (2) Date 5% ($) 10% ($)
________________ ___________ ___________ __________ __________ __________ _________
<S> <C> <C> <C> <C> <C> <C>
David L. Murray 3,600 5.1 12.125 12/21/08 27,451 69,565
Alan J. Emerick 3,250 4.6 12.125 12/21/08 24,783 62,802
William R. Theobald 2,000 2.8 12.125 12/21/08 15,251 38,647
Kenneth A. Urban 2,250 3.2 12.125 12/21/08 17,157 43,478
- ----------------------------------------------------------------------------------------------
11 executive 23,500 33.0 12.125 12/21/08 179,197 454,105
officers - group
2 directors who 3,800 5.3 12.125 12/21/08 28,977 73,430
are not executive
officers - group
</TABLE>
(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 21, 1998, the date of grant.
The Company has entered into Change in Control and Termination Agreements
("Agreements") dated October, 1996 with certain executive officers, including
Messrs. Geach, Murray, Emerick, Theobald and Urban. 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 did not establish a Short-Term Incentive Program (i.e., a
cash bonus program) in 1998. Consequently, no bonuses were accrued or paid
during the year.
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 cash bonus in 1998. 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, 1998.
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 1998
and is expected to be deductible in 1999. 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 1994 through 1998. 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]
1993 1994 1995 1996 1997 1998
GPFI Stock $100.00 $100.11 $128.16 $150.68 $220.56 $214.12
Nasdaq Bank Stocks $100.00 $ 99.64 $148.38 $195.91 $328.02 $324.90
U.S. Nasdaq Stocks $100.00 $ 97.75 $138.26 $170.01 $208.58 $293.21
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 by reporting persons on a timely
basis.
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.
AUDITORS
KPMG LLP, independent certified public accountants, served as the
Company's public accountants for the fiscal year ended December 31, 1998.
Representatives of KPMG 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 2000 Annual Meeting
of stockholders of the Company must be received by the Company on or before
December 15, 1999 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 12, 1999
