<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
FIRST SECURITYFED FINANCIAL, INC.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
[LOGO]
March 24, 1998
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of First
SecurityFed Financial, Inc., I cordially invite you to attend the First Annual
Meeting of Stockholders of the Company (the "Meeting"). The Meeting will be
held at 7:00 p.m. (Central Time), on May 6, 1998, at the Suma Hall located at
2457 W. Chicago Avenue, Chicago, Illinois 60622.
The attached Notice of Annual Meeting of Stockholders and Proxy
Statement discusses the business to be conducted at the Meeting. We have also
enclosed a copy of the Company's Annual Report to Stockholders. At the meeting
we will report on the Company's operations and outlook for the year ahead.
I encourage you to attend the Meeting in person. Whether or not you
plan to attend, however, please read the enclosed Proxy Statement and then
complete, sign and date the enclosed proxy and return it in the accompanying
postpaid return envelope as promptly as possible. This will save the Company
additional expense in soliciting proxies and will ensure that your shares are
represented at the Meeting.
Thank you for your attention to this important matter.
Very truly yours,
/s/ JULIAN E. KULAS
-------------------------------------
JULIAN E. KULAS
President and Chief Executive Officer
<PAGE>
FIRST SECURITYFED FINANCIAL, INC.
936 North Western Avenue
Chicago, Illinois 60622-4695
----------
NOTICE OF FIRST ANNUAL MEETING OF STOCKHOLDERS
To be Held on May 6, 1998
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Notice is hereby given that the First Annual Meeting of Stockholders
(the "Meeting") of First SecurityFed Financial, Inc. ("First SecurityFed" or
the "Company") will be held at the Suma Hall located at 2457 W. Chicago
Avenue, Chicago, Illinois 60622, on May 6, 1998 at 7:00 p.m. (Central Time). A
Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of:
1. Electing three directors of the Company;
2. The ratification of the adoption of the 1998 Recognition and
Retention Plan ("RRP");
3. The ratification of the adoption of the 1998 Stock Option and
Incentive Plan ("Stock Option Plan");
4. The ratification of the appointment of Crowe, Chizek and Company
LLP as auditors for the Company for the fiscal year ending
December 31, 1998; and
such other matters as may properly come before the Meeting, or any
adjournments or postponements thereof. The Board of Directors is not aware of
any other business to come before the Meeting.
Any action may be taken on any one of the foregoing proposals at the
Meeting on the date specified above, or on any date or dates to which the
Meeting may be adjourned or postponed. Stockholders of record at the close of
business on March 16, 1998 will be entitled to vote the number of shares held
of record in their names on that date.
You are requested to fill in and sign the enclosed form of proxy
which is solicited on behalf of the Board of Directors, and to mail it
promptly in the enclosed envelope. The proxy will not be used if you attend
and vote at the Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ PAUL NADZIKEWYCZ
----------------------------------
PAUL NADZIKEWYCZ
Chairman of the Board
Chicago, Illinois
March 24, 1998
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A PRE-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED
WITHIN THE UNITED STATES.
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<PAGE>
PROXY STATEMENT
FIRST SECURITYFED FINANCIAL, INC.
936 North Western Avenue
Chicago, Illinois 60622-4695
ANNUAL MEETING OF STOCKHOLDERS
May 6, 1998
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of First SecurityFed Financial,
Inc. ("First SecurityFed" or the "Company") to be used at the First Annual
Meeting of Stockholders of the Company (the "Meeting"), to be held at the Suma
Hall located at 2457 W. Chicago Avenue, Chicago, Illinois 60622, on May 6,
1998, at 7:00 p.m. (Central Time), and at all adjournments or postponements of
the Meeting. The accompanying Notice of Meeting and this Proxy Statement are
first being mailed to stockholders on or about March 24, 1998. Certain of the
information provided herein relates to First Security Federal Savings Bank
(the "Bank"), a wholly owned subsidiary and the predecessor of the Company.
At the Meeting, the stockholders of the Company are being asked to
consider and vote upon the election of three directors of the Company.
Voting Rights and Proxy Information
All shares of common stock, par value $.01 per share, of the Company
(the "Common Stock") represented at the Meeting by properly executed proxies
received prior to or at the Meeting, and not revoked, will be voted at the
Meeting in accordance with the instructions thereon. Proxies solicited on
behalf of the Board of Directors of the Company will be voted in accordance
with the directions given therein. Where no instructions are indicated,
proxies will be voted "FOR" the proposals set forth in this Proxy Statement
for consideration at the Meeting. The Company does not know of any matters,
other than as described in the Notice of Meeting, that are to come before the
Meeting. If any other matters are properly presented at the Meeting for
action, the persons named in the enclosed form of proxy will have the
discretion to vote on such matters in accordance with their best judgment.
A proxy given pursuant to this solicitation may be revoked at any
time before it is voted. Proxies may be revoked by: (i) filing with the
Secretary of the Company at or before the Meeting a written notice of
revocation bearing a later date than the proxy; (ii) duly executing a
subsequent proxy relating to the same shares and delivering it to the
Secretary of the Company at or before the Meeting; or (iii) attending the
Meeting and voting in person (although attendance at the Meeting will not in
and of itself constitute revocation of a proxy). Any written notice revoking a
proxy should be delivered to Terry Gawryk, Secretary, First SecurityFed
Financial, Inc., 936 North Western Avenue, Chicago, Illinois.
One-third of the shares of the Common Stock eligible to vote at the
meeting shall constitute a quorum for purposes of the Meeting. Abstentions and
broker non-votes are counted for purposes of determining a quorum.
Voting Required for Approval of Proposals
Directors shall be elected by a plurality of the shares present in
person or represented by proxy at the Meeting and entitled to be voted on the
election of directors. Proposals to ratify the adoption of the RRP and the
Stock Option Plan require the affirmative vote of a majority of shares
entitled to vote at the Meeting. Proxies marked to abstain with respect to any
proposal have the same effect as votes against the proposal. Broker non-votes
have no effect on the vote. In all other matters, the affirmative vote of the
majority of shares present in person or represented by proxy at the Meeting
and entitled to vote on the matter shall be the act of the stockholders.
<PAGE>
Voting Securities and Principal Holders Thereof
Stockholders of record as of the close of business on March 16, 1998
will be entitled to one vote for each share then held on all matters brought
before the Meeting. As of that date, the Company had 6,408,000 shares of
Common Stock issued and outstanding.
The following table sets forth information as of December 31, 1997
regarding the share ownership of (i) those persons or entities known by
management to beneficially own more than five percent of the Common Stock, and
(ii) the executive officers named below and (iii) all directors and executive
officers as a group. For information regarding the beneficial ownership of
Common Stock by directors and nominees of the Company, see "Proposal I -
Election of Directors."
<TABLE>
<CAPTION>
Shares Percent
Beneficially of
Name and Address of Beneficial Owner Owned Class
- ------------------------------------ ------- ------
<S> <C> <C>
First SecurityFed Financial, Inc. Employee Stock Ownership 493,486 7.70%
Plan (1)
936 North Western Avenue
Chicago, Illinois 60622-4695
Julian E. Kulas (2) 51,674 .81%
936 North Western Avenue
Chicago, Illinois 60622-4695
All directors and executive officers of the Corporation and the 271,312 4.23%
Bank as a group (13 persons)(2)
</TABLE>
________________
(1) The amount reported represents shares held by the Employee Stock Ownership
Plan ("ESOP"), which have not been allocated to accounts of participants.
First Bankers Trust, the trustee of the ESOP, may be deemed to
beneficially own the shares held by the ESOP which have not been allocated
to accounts of participants. Participants in the ESOP are entitled to
instruct the trustee as to the voting of shares allocated to their
accounts under the ESOP. Unallocated shares held in the ESOP's suspense
account or allocated shares for which no voting instructions are received
are voted by the trustee in the same proportion as allocated shares voted
by participants.
(2) Amount includes shares held directly, shares held jointly with family
members, shares held in the Bank's profit sharing plan and retirement
accounts, shares held in fiduciary capacity or by certain family members,
with respect to which shares the group members may be deemed to have sole
voting and/or investment power. The amounts reported exclude shares
proposed to be awarded to such individuals pursuant to the Stock Option
Plan and the RRP, subject to the ratification of such plans by
stockholders at the Meeting.
PROPOSAL I - ELECTION OF DIRECTORS
General
The Company's Board of Directors consists of nine members and is
divided into three classes, with each class consisting of approximately
one-third of the Board. Approximately one-third of the directors are elected
annually and are generally elected to serve for a three-year period or until
their respective successors are elected and qualified.
The following table sets forth certain information, as of December
31, 1997, regarding the composition of the Company's Board of Directors,
including each director's term of office. The Board of Directors acting as the
nominating committee has recommended and approved the nominees identified in
the following table. It is intended that the proxies solicited on behalf of
the Board of Directors (other than proxies in which the vote is withheld as to
a nominee) will be voted at the Meeting FOR the election of the nominees
identified below. If a nominee is unable to serve, the shares represented by
all valid proxies will be voted for the election of such substitute nominee as
the Board of Directors may recommend. At this time, the Board of Directors
knows of no reason why a nominee might be unable to serve if elected. Except
as disclosed herein, there are no arrangements or understandings between any
nominee and any other person pursuant to which the nominee was selected.
2
<PAGE>
<TABLE>
<CAPTION>
Shares of
Common
Stock
Director Term Beneficially Percent
Name Age(1) Position(s) Held With First SecurityFed Since Expires Owned of Class
- ----------------------- -------- --------------------------------------- -------------------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
NOMINEES
--------
Steve Babyk 51 Director 1993 2001 25,000 .39%
Lila Maria Bodnar 38 Director and Recording Secretary 1995 2001 1,449 .02
George Kawka 54 Director 1986 2001 15,000 .23
DIRECTORS CONTINUING IN OFFICE
------------------------------
Myron Dobrowolsky 63 Director 1985 2000 6,000 .09
Julian Kulas 63 Director, President and Chief Executive 1964 2000 51,674 .81
Officer
Paul Nadzikewycz 59 Chairman of the Board 1973 2000 35,391 .55
Terry Gawryk 44 Director and Secretary 1981 1999 3,070 .05
Jaroslav H. Sydorenko 56 Director 1993 1999 1,500 .02
Chrysta Wereszczak 41 Director 1993 1999 30,369 .47
</TABLE>
- --------------------
(1) At December 31, 1997.
(2) Amount includes shares held directly, shares held jointly with family
members, shares held in the profit sharing plan and retirement accounts,
shares held in fiduciary capacity or by certain family members, with
respect to which shares the group members may be deemed to have sole
voting and/or investment power. The amounts reported exclude shares
proposed to be awarded to such individuals pursuant to the Stock Option
Plan and the RRP, subject to the ratification of such plans by
stockholders at the Meeting.
The business experience of each director of First SecurityFed is set
forth below. All directors have held their present position for at least five
years unless otherwise indicated.
Steve Babyk. Mr. Babyk has worked at Union Tank Car Company since
1969 and is currently the Director of Fleet Leasing. Mr. Babyk is primarily
responsible for the care and leasing of over 50,000 railroad cars in the
United States, Canada and Mexico.
Lila Maria Bodnar. Ms. Bodnar was an accountant with the First
National Bank of Chicago from 1981 to 1985 and was a manager in the accounting
department of the Chicago branch of the Bank of Montreal from 1985 to 1991.
Ms. Bodnar has a Masters of Business Administration from Loyola University,
Chicago, Illinois.
George Kawka. Mr. Kawka has been a senior architectural/engineering
project manager with PAL Telecom Group since 1994 and was previously a senior
project manager with AIC Security Systems, all in Chicago, Illinois.
Myron Dobrowolsky. Mr. Dobrowolsky has been a construction project
manager with the engineering firm of Dames and Moore, Chicago, Illinois since
1991. Previously, Mr. Dobrowolsky was an engineer with the Illinois Highway
Department.
Julian Kulas. Mr. Kulas has served as the President and Chief
Executive Officer of the Bank since 1964. Mr. Kulas has also been engaged in
the private practice of law since 1959. Mr. Kulas is extremely active in
community affairs and holds a variety of positions on not-for-profit
organizations. Mr. Kulas has been a Commissioner on the Chicago Commission on
Human Relations since 1981.
3
<PAGE>
Paul Nadzikewycz. Mr. Nadzikewycz, a licensed podiatrist, has been a
self-employed investor focusing primarily on real estate since 1987. In
addition, since January 1997, Mr. Nadzikewycz has served as President and
Chief Executive Officer of Oakley Assoc. Ltd., a legal software developer.
Terry Gawryk. Mr. Gawryk has practiced law in Chicago, Illinois since
1979.
Jaroslav H. Sydorenko. Mr. Sydorenko has been a credit manager at
Kanematsu USA, Inc., an import/export trading company located in Chicago,
Illinois since 1985.
Chrysta Wereszczak. Ms. Wereszczak was employed by the Unisys
Corporation from 1982 to 1989 in a variety of positions, including Financial
Manager and Regional Financial Analyst. She is currently involved with B&B
Formica, a manufacturing business she owns with her spouse. Ms. Wereszczak is
a member of the St. Nicholas School Board.
Meetings and Committees of the Board of Directors
Meetings and Committees of First SecurityFed. Meetings of First
SecurityFed's Board of Directors are generally held on a quarterly basis. The
Board of Directors met two times during the fiscal year ended December 31,
1997. During fiscal 1997, no incumbent director of First SecurityFed attended
fewer than 75% of the aggregate of the total number of Board meetings and the
total number of meetings held by the committees of the Board of Directors on
which he or she served. Directors of the Company currently do not receive a
fee for their service.
The Board of Directors of First SecurityFed has standing Executive,
Audit and Compensation Committees.
The Executive Committee is comprised of Directors Kulas, Nadzikewycz
and Gawryk. The Executive Committee has and exercises all of the powers of the
Board of Directors when such powers are required between meetings of the Board
of Directors. The Executive Committee met two times in fiscal 1997.
The Audit Committee is comprised of Directors Bodnar, Sydorenko and
Wereszczak. The Audit Committee recommends independent auditors to the Board,
reviews the results of the auditors' reports and services, reviews with
management and the internal auditors the systems of internal control and
internal audit reports to ensure effective compliance with regulatory and
internal policies and procedures. The Audit Committee did not meet during
fiscal 1997.
The Compensation Committee is comprised of Directors Babyk, Gawryk
and Wereszczak. The Compensation Committee is responsible for making
recommendations for the salary of the chief executive officer, and for
approving the salaries of all other executive officers. This committee met one
time during fiscal 1997, jointly with the Compensation Committee of the Bank.
The Company's Board of Directors selects the Company's nominees for
the annual election of directors. Pursuant to the Company's Bylaws,
nominations for directors by stockholders must be made in writing and
delivered to the Secretary of the Company at least 30 days prior to the
meeting and such written nomination must contain certain information as
provided in the Company's Bylaws. While the Board of Directors will consider
nominees recommended by stockholders, it has not actively solicited
nominations.
Meetings and Committees of the Bank. The Bank's Board of Directors
meets monthly and may have additional special meetings upon request of the
managing officer or of three directors. The Board of Directors met 14 times
during the fiscal year ended December 31, 1997. During fiscal 1997, no
incumbent director of the Bank attended fewer than 75% of the aggregate of the
total number of Board meetings and the total number of meetings held by the
committees of the Board of Directors on which he or she served. Directors of
the Bank receive a fee of $850 for each Board meeting attended and $100 for
each committee meeting attended. Chairman Paul Nadzikewycz and Recording
Secretary Lila Maria Bodnar each receive an additional fee of $250 per month.
The Executive Committee provides oversight of Board-related matters
in-between regularly scheduled Board Meetings. The Executive Committee is
comprised of Chairman Nadziekewycz, Director Gawryk and President Kulas.
This committee met approximately six times during fiscal year 1997.
4
<PAGE>
The Audit Committee is comprised of Directors Bodnar, Sydorenko and
Wereszczak. This Committee oversees and reviews the Bank's financial and
internal control matters. The Audit Committee also reviews the Bank's audited
financial statements with the Bank's outside auditors and the Report of the
Examination with the OTS examiners, either separately or with the full Board.
This committee met six times in 1997.
The Salary Review Committee oversees and reviews the Bank's
compensation policies and sets the compensation levels for Executive
Management. This committee is comprised of Directors Gawryk, Nadzikewycz,
Wereszczak and Babyk and met three times in 1997.
The Loan Committee is composed of Directors Dobrowolsky, Gawryk, and
Babyk and Vice-President Korb. The Loan Committee reviews loan applications
weekly and sets interest rates for all loan types. The Loan Committee met
three times in 1997.
The Investment Committee is composed of President Kulas, Vice
President Hawryliw, Treasurer Kucewicz and Director Bodnar. This committee
meets at least once a month to handle the investments for the Bank and the
implementation of the Bank's strategy as it relates to interest rate risk and
reinvestment options. The Investment Committee met seven times in 1997.
Executive Compensation
The following table sets forth information concerning the
compensation accrued for services in all capacities to the Company and its
affiliates for the fiscal year ended December 31, 1997 for the Company's
President and Chief Executive Officer. No other executive officer's aggregate
annual compensation (salary plus bonus) exceeded $100,000 in fiscal 1997.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Summary Compensation Table
- ------------------------------------------------------------------------------------------------------------------------------------
Long Term Compensation
Annual Compensation Awards
- ----------------------------------------------------------------------------------------------------------------
Other Annual Restricted Stock Options/ All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($) Award ($)(1) SARs (#)(1) Compensation($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Julian E. Kulas
President, Chief Executive Officer 1997 $132,206 $5,745 $9,000 --- --- $30,000(2)
and Director 1996 127,966 5,419 7,800 --- --- $22,240(2)
====================================================================================================================================
</TABLE>
- ----------
(1) Pursuant to the proposed RRP, the Holding Company intends to grant to Mr.
Kulas 64,080 restricted shares of Common Stock. See "Proposal II - 1998
Recognition and Retention Plan." In addition, pursuant to the proposed
Stock Option Plan, the Holding Company intends to grant Mr. Kulas an
option to purchase 160,200 shares of Common Stock at an exercise price
equal to the market value per share of the Common Stock on the date of
grant. Both awards are to vest over a five year period beginning one year
from the date of shareholder ratification. See "Proposal III - 1998 Stock
Option and Incentive Plan."
(2) For 1996, represents amounts received through the Bank's Profit Sharing
Plan and, for 1997, represents amounts received through the Bank's Profit
Sharing Plan and Employee Stock Ownership Plan.
Employment Agreement and Severance Agreements. The Bank has entered
into an employment agreement with President Kulas providing for an initial
term of three years. Mr. Kulas' employment agreement provides for an annual
base salary in an amount not less than his current salary and provides for an
annual extension subject to the performance of an annual formal evaluation by
the Board of Directors of the Bank. The agreement also provides for
termination upon the employee's death, for cause or in certain events
specified by OTS regulations. The employment agreement is terminable by the
employee upon 90 days' notice to the Bank.
The employment agreement provides for payment to Mr. Kulas of an
amount equal to 299% of his five-year annual average base compensation, in the
event there is a "change in control" of the Bank where employment
involuntarily terminates in connection with such change in control, as
defined, or within twelve months thereafter. If the employment of Mr. Kulas
had been terminated as of December 31, 1997 under circumstances entitling him
to severance pay as described above, he would have been entitled to receive a
5
<PAGE>
lump sum cash payment of approximately $341,279. The agreement also provides
for the continued health coverage for the remainder of the term of his
contract should he be involuntarily terminated in the event of change in
control.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors has furnished
the following report on executive compensation:
The Company's Compensation Committee has responsibility for reviewing
the compensation policies and plans for the Bank and its affiliates. The
policies and plans established are designed to enhance both short-term and
long-term operational performance of the Bank and to build stockholder value
through appreciation in the Company's Common Stock price.
One of the Committee's primary objectives in the compensation area is
to develop and maintain compensation plans which provide the Bank with the
means of attracting and retaining quality executives at competitive
compensation levels and to implement compensation plans which seek to motivate
executives to perform to the full extent of their abilities and which seek to
enhance stockholder value by aligning closely the financial interests of the
Company's executives with those of its stockholders. In determining
compensation levels, plans and adjustments, the Committee takes into account,
among other things, compensation reviews made by third parties each year.
These studies are used to compare the compensation levels of Bank personnel to
those of personnel at other local financial institutions.
With respect to Mr. Kulas's base salary in the fiscal year ended
December 31, 1997, the Committee took into account a comparison of salaries of
chief executive officers of local financial institutions. Likewise, each
executive officer's base salary was determined utilizing financial institution
compensation surveys. Mr. Kulas's base salary for fiscal year 1997 was
increased from the level set by the Committee for fiscal year 1996 because it
was the judgment of the Committee that the competitive salary data indicated
that Mr. Kulas's base salary was lower than his peers. The Committee also
determined, based on the Bank's success in strengthening its capital ratios as
well as continued progress in executing the Bank's business plan, the
implementation of cost reduction measures and recognition of the improvement
in performance by the Bank, to award Mr. Kulas a cash bonus of $5,745.
In connection with the mutual to stock conversion, the Bank and the
Company have an Employee Stock Ownership Plan and seek to implement stock
option and restricted stock awards as elements of the overall compensation
package. Equity-based compensation provides a long-term alignment of interests
and results achieved for stockholders with the compensation rewards provided
to executive officers by providing those executives and others on whom the
continued success of the Company most depends with a proprietary interest in
the Company. In 1997, a Stock Option and Incentive Plan and a Recognition and
Retention Plan were adopted, subject to shareholder approval, providing for
the grant of several types of equity-based awards including stock option and
restricted stock awards. Upon ratification, the Bank's executive officers will
be granted restricted stock and stock option awards, vesting over a five-year
schedule. See "Proposal II - Ratification of the 1998 Recognition and
Retention Plan; and Proposal III - Ratification of the 1998 Stock Option and
Incentive Plan."
Through the compensation programs described above, a significant
portion of the Bank's executive compensation is linked directly to individual
and corporate performance. The Committee will continue to review all elements
of compensation to assure that the compensation objectives and plans meet the
Company's business objectives and philosophy of linking executive compensation
to stockholder interests of corporate performance as discussed above.
In 1993, Congress amended the Internal Revenue Code to add Section
162(m) to limit the corporate deduction for compensation paid to a
corporation's five most highly compensated officers to $1.0 million per
executive per year, with certain exemptions. The Committee carefully reviewed
the impact of this legislation on the cost of the Bank's current executive
compensation plans. Under the legislation and regulations adopted thereunder,
it is not expected that any portion of the Company's (or Bank's) deduction for
employee remuneration will be non-deductible in fiscal 1997 or in future years
by reason of compensation awards granted. The Committee intends to review the
Company's (and Bank's) executive compensation policies on an ongoing basis,
and propose appropriate modifications, if the Committee deems them necessary,
with a view toward avoiding or minimizing any disallowance of tax deductions
under Section 162(m).
6
<PAGE>
The foregoing report is furnished by the Compensation Committee of
the Board of Directors:
Steve Babyk Terry Gawryk Chrysta Wereszczak
Stockholder Return Performance Presentation
The Company completed its initial public offering of common stock at
a price of $10.00 per share on October 30, 1997. Accordingly, it is not
practicable to provide a performance graph comparing the yearly percentage
change in the Company's cumulative total stockholder return with indices at
this point in the Company's history. The last sale price of common stock as
reported on the Nasdaq Stock Market on March 16, 1998 was $15.44.
Benefit Plans
General. The Bank currently provides insurance benefits to its
employees, including health and life insurance, subject to certain deductibles
and copayments.
Profit Sharing Plan. The Bank maintains a tax-exempt profit sharing
plan and trust (the "Profit Sharing Plan"). All employees serving at least
1,000 hours per year are eligible to participate subject to certain vesting
and other qualifying factors. The Bank anticipates that future profit sharing
contributions will be reduced in order to offset, in part, the expense of the
ESOP.
Employee Stock Ownership Plan. The First Security and the Company
have established an ESOP for the benefit of employees of First Security. The
ESOP is also designed to meet the requirements of an employee stock ownership
plan as described at Section 4975(e)(7) of the Code and Section 407(d)(6) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and, as such, the ESOP is empowered to borrow in order to finance purchases of
the Common Stock.
All employees of the Bank are eligible to participate in the ESOP
after they attain age 21 and complete one year of service. The Bank's
contribution to the ESOP is allocated among participants on the basis of their
relative compensation. Each participant's account is credited with cash and
shares of Holding Company Common Stock based upon compensation earned during
the year with respect to which the contribution is made. Contributions
credited to a participant's account become fully vested upon such
participant's completing five years of service. Credit is given for prior
years of service for vesting purposes. ESOP participants are entitled to
receive distributions from their ESOP accounts only upon termination of
service. Distributions will be made in cash and in whole shares of the Holding
Company's Common Stock. Fractional shares will be paid in cash. Participants
will not incur a tax liability until a distribution is made.
Each participating employee is entitled to instruct the trustee of
the ESOP as to how to vote the shares allocated to his or her account. The
trustee is not affiliated with the Holding Company or First Security Federal
Savings Bank.
The ESOP may be amended by the Board of Directors, except that no
amendment may be made which would reduce the interest of any participant in
the ESOP trust fund or divert any of the assets of the ESOP trust fund for
purposes other than the benefit of participants or their beneficiaries.
Certain Transactions
The Bank follows a policy of granting loans to the Bank's directors,
officers and employees. The loans to executive officers and directors are made
in the ordinary course of business and on the same terms and conditions as
those of comparable transactions prevailing at the time (except that the
underwriting fee is waived), in accordance with the Bank's underwriting
guidelines and do not involve more than the normal risk of collectibility or
present other unfavorable features. All loans to directors and executive
officers cannot exceed 5% of the Bank's capital and unimpaired surplus,
whichever is greater, unless a majority of the Board of Directors approves the
credit in advance and the individual requesting the credit abstains from
voting. Loans to all directors and executive officers and their associates,
including outstanding balances and commitments totaled $33,000 at December 31,
1997. There were no loans to any single director, executive officer or their
affiliates made at preferential rates or terms which in the aggregate exceeded
$60,000 during the three most recent fiscal years.
7
<PAGE>
PROPOSAL II - RATIFICATION OF THE 1998 RECOGNITION AND RETENTION PLAN
General
Establishment and implementation of the RRP is subject to
ratification by stockholders. The RRP complies with OTS regulations; however,
the OTS has not endorsed or approved the RRP and no written or oral
representation to the contrary is made hereby.
The RRP has been adopted by the Board of Directors of the Company,
subject to stockholder ratification. The RRP is designed to provide directors,
advisory directors, directors emeritus, officers and employees with a
proprietary interest in the Company in a manner designed to encourage such
individuals to remain with the Company and the Bank. Ratification by
stockholders of the adoption of the RRP will ratify the awards proposed
thereunder as described in "Awards under the RRP" herein, and will ratify the
granting of additional restricted stock awards pursuant to the provisions of
the RRP. Pursuant to the RRP, 256,320 shares of Common Stock (or 4.0% of the
Company's shares sold in the Bank's conversion from a federal mutual savings
bank to a federal stock savings bank, the sale of the Bank's stock to the
Company and the subsequent sale of the Company's Common Stock (the
"Conversion)), funded from either authorized but unissued shares or issued
shares subsequently reacquired and held as treasury shares, will be available
for awards. The Board currently intends, to the extent practicable and
feasible, to fund the RRP from issued shares reacquired by the Company in the
open market. To the extent the Company utilizes authorized but unissued shares
to fund the RRP, the interests of current stockholders will be diluted.
Assuming all RRP Shares are awarded through the use of authorized but unissued
Common Stock, current stockholders would be diluted by approximately 3.85%.
Upon ratification of the RRP by stockholders, it is proposed that an aggregate
of 209,862 shares of Common Stock will be awarded to directors, advisory
directors, directors emeritus, officers and employees of the Company and the
Bank, which will leave 46,458 shares available for future awards.
Attached as Exhibit A to this Proxy Statement is the complete text of
the form of the RRP. The principal features of the RRP are summarized below.
Principal Features of the RRP
The RRP provides for the award of shares of Common Stock ("RRP
Shares") subject to the restrictions described below. The RRP is administered
by the Company's Compensation Committee. The Compensation Committee will
select the recipients and terms of awards pursuant to the RRP. In determining
to whom and in what amount to grant awards, the Compensation Committee
considers the position and responsibilities of eligible individuals, the value
of their services to the Company and the Bank and other factors it deems
relevant. Pursuant to the terms of the RRP, any director, advisory director,
director emeritus, officer or employee of the Company or its affiliates may be
selected by the Compensation Committee to participate in the RRP. As of the
date hereof, there are approximately 65 persons eligible to participate in the
RRP.
The RRP provides that RRP Shares used to fund awards under the RRP
may be either authorized but unissued shares or reacquired shares held by the
Company in its treasury. Any RRP Shares which are forfeited will again be
available for issuance under the RRP.
As required by OTS regulations, award recipients earn (i.e., become
vested in) awards, over a period of time as determined by the Compensation
Committee at the time of grant, provided that no award may vest earlier than
one year from the date of stockholder approval of the RRP and shall vest at a
rate not to exceed 20% of the initial award per year except in the event of
death or disability. Pursuant to OTS Regulations, no director who is not an
employee of the Company shall be granted awards with respect to more than 5%
of the total shares subject to the RRP. All non-employee directors of the
Company, in the aggregate, may not be granted awards with respect to more than
30% of the total RRP Shares and no individual shall be granted awards with
respect to more than 25% of the total RRP Shares. It is intended that no award
granted to an executive officer of the Company or its affiliates shall vest in
any fiscal year (and shall be carried over to the subsequent fiscal year) in
which the Bank fails to meet all of its fully phased-in capital requirements.
Subject to compliance with OTS regulations, the Compensation
Committee may, in its discretion, accelerate the time at which any or all
restrictions will lapse, or may remove any or all of the restrictions. In the
event a participant ceases to maintain continuous service with the Company or
8
<PAGE>
the Bank by reason of death or disability, RRP Shares still subject to
restrictions will be free of these restrictions and shall not be forfeited. In
the event of termination for any other reason, all shares will be forfeited
and returned to the Company.
Holders of RRP Shares may not vote or sell, assign, transfer, pledge
or otherwise encumber any of the RRP Shares during the restricted period.
During the restricted period, RRP Shares will be voted by an independent
trustee and not by the holder of such shares. In addition, all dividends
declared and paid on RRP Shares still subject to restrictions will be deferred
and held for the account of the participant thereof until the earlier to lapse
of the restrictions on such shares or the death or disability of the
participant.
Finally, the RRP provides for an award as of the date of stockholder
ratification of the RRP of 8,010 Shares to each director who is not a
full-time employee of the Company ("non-employee director") and 12,816 Shares
to the Chairman of the Board. As provided in the RRP, no RRP Shares granted to
a non-employee director shall not be earned in any fiscal year (and shall be
carried over to the subsequent fiscal year) in which the Bank fails to meet
all of its fully phased-in capital requirements.
Adjustments Upon Changes in Capitalization
RRP Shares awarded under the RRP will be adjusted by the Compensation
Committee in the event of a reorganization, recapitalization, stock split,
stock dividend, combination or exchange of shares, merger, consolidation or
other change in corporate structure or the Common Stock of the Company.
Federal Income Tax Consequences
Holders of RRP Shares will recognize ordinary income on the date that
the RRP Shares are no longer subject to a substantial risk of forfeiture, in
an amount equal to the fair market value of the shares on that date. In
certain circumstances, a holder may elect to recognize ordinary income and
determine such fair market value on the date of the grant of the RRP Shares.
Holders of RRP Shares will also recognize ordinary income equal to their
dividend or dividend equivalent payments when such payments are received.
Generally, the amount of income recognized by participants will be a
deductible expense for tax purposes for the Company.
Amendment to the RRP
The Board of Directors of the Company may amend, suspend or terminate
the RRP or any portion thereof at any time, subject to OTS Regulations,
provided, however, that no such amendment, suspension or termination shall
impair the rights of any participant, without his consent, in any award
theretofore made pursuant to the RRP.
Awards Under the RRP
The following table presents information at March 16, 1998 with
respect to the number of RRP Shares which are currently intended to be granted
under the RRP, subject to stockholder ratification of the RRP, to (i) the
Named Officers, (ii) all executive officers of the Company and the Bank as a
group, (iii) directors who are not executive officers of the Company or the
Bank as a group, and (iv) all non-executive officer employees of the Company
or the Bank as a group.
<TABLE>
<CAPTION>
=====================================================================================================================
1998 RECOGNITION AND RETENTION PLAN
- ---------------------------------------------------------------------------------------------------------------------
Name and Position Dollar value(1) Shares of Restricted Stock
=====================================================================================================================
<S> <C> <C>
Julian E. Kulas, President, Chief Executive Officer and Director........ $ 989,235 64,080
Executive Officer Group (4 persons)..................................... 1,187,082 76,896
Non-Executive Director Group (8 persons)................................ 1,063,428 68,886
Non-Executive Officer Employee Group (3 persons)........................ 231,563 15,000
=====================================================================================================================
</TABLE>
- ------------------
(1) Assumes an aggregate market value of the RRP Shares based on the closing
price of the Common Stock of $15.44 as reported on the Nasdaq Stock Market
on March 16, 1998.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE ADOPTION OF THE 1998 RECOGNITION AND RETENTION PLAN.
9
<PAGE>
PROPOSAL III - RATIFICATION OF THE 1998 STOCK OPTION AND INCENTIVE PLAN
General
Establishment and implementation of the Stock Option Plan is subject
to ratification by stockholders. The Stock Option Plan is in compliance with
OTS regulations; however, the OTS has not endorsed or approved the Stock
Option Plan and no written or oral representation to the contrary is made
hereby.
The Stock Option Plan has been adopted by the Board of Directors of
the Company, subject to ratification by stockholders at the Meeting.
Ratification by stockholders of the adoption of the Stock Option Plan will
ratify the awards proposed thereunder and as described in "Awards Under the
Stock Option Plan" herein, and will ratify the granting of additional awards
pursuant to the provisions of the Stock Option Plan. Pursuant to the Stock
Option Plan, the Company will reserve for issuance thereunder either from
authorized but unissued shares or from issued shares reacquired and held as
treasury shares, 640,080 shares of the Common Stock (10% of the shares issued
in the Bank's Conversion). Management may, to the extent practicable and
feasible, fund the Stock Option Plan from issued shares reacquired by the
Company in the open market. To the extent the Company utilizes authorized but
unissued Common Stock to fund the Stock Option Plan, the exercise of stock
options will have the effect of diluting the holdings of persons who own the
Common Stock. Assuming all options under the Stock Option Plan are awarded and
exercised through the use of authorized but unissued Common Stock, current
stockholders would be diluted by approximately 9.1%. Upon ratification of the
Stock Option Plan by stockholders, it is proposed that options to purchase an
aggregate of 519,048 shares of Common Stock will be awarded, which will leave
available 121,032 shares for future awards.
The Board of Directors believes that it is appropriate for the
Company to adopt a flexible and comprehensive Stock Option Plan which permits
the granting of a variety of long-term incentive awards to directors, advisory
directors, directors emeritus, officers and employees as a means of enhancing
and encouraging the recruitment and retention of those individuals on whom the
continued success of the Company most depends. However, because the awards are
granted only to persons affiliated with the Company, the adoption of the Stock
Option Plan could make it more difficult for a third party to acquire control
of the Company and therefore could discourage offers for the Company's stock
that may be viewed by the Company's stockholders to be in their best interest.
In addition, certain provisions included in the Company's Certificate of
Incorporation and Bylaws may discourage potential takeover attempts,
particularly those that have not been negotiated directly with the Board of
Directors of the Company. Included among these provisions are provisions (i)
limiting the voting power of shares held by persons owning 10% or more of the
Common Stock, (ii) requiring a supermajority vote of stockholders for approval
of certain business combinations, (iii) establishing a staggered Board of
Directors, (iv) permitting special meetings of stockholders to be called only
by the Board of Directors and (v) authorizing a class of preferred stock with
terms to be established by the Board of Directors. These provisions could
prevent the sale or merger of the Company even where a majority of the
stockholders approve of such transaction.
In addition, federal regulations prohibit the beneficial ownership of
more than 10% of the stock of a converted savings institution or its holding
company without prior approval of the OTS. Federal law and regulations also
require OTS approval prior to the acquisition of "control" (as defined in the
OTS regulations) of an insured institution, including a holding company
thereof. These regulations could have the effect of discouraging takeover
attempts of the Company.
Attached as Exhibit B to this Proxy Statement is the complete text of
the Stock Option Plan. The principal features of the Stock Option Plan are
summarized below.
Principal Features of the Stock Option Plan
The Stock Option Plan provides for awards in the form of stock
options, stock appreciation rights ("SARs") and limited stock appreciation
rights ("LSARs"). Each award shall be on such terms and conditions, consistent
with the Stock Option Plan and applicable OTS regulations, as the committee
administering the Stock Option Plan may determine. Subject to certain
exceptions described herein, awards made under such plan generally vest at a
rate of no quicker than one-fifth of the initial award per year, subject to
the participant maintaining continuous service to the Company or its
subsidiaries from the date of grant.
10
<PAGE>
Pursuant to OTS regulations, each non-employee director of the
Company and all non-employee directors of the Company as a group, may not be
awarded more than 5% and 30% of the total shares subject to the Stock Option
Plan, respectively. In addition, no individual may be granted awards with
respect to more than 25% of the total shares subject to the Stock Option Plan.
Shares awarded pursuant to the Stock Option Plan may be either
authorized but unissued shares or reacquired shares held by the Company in its
treasury. Any shares subject to an award which expires or is terminated
unexercised will again be available for issuance under the Stock Option Plan
or any other plan of the Company or its subsidiaries. Generally, no award or
any right or interest therein is assignable or transferable except under
certain limited exceptions set forth in the Stock Option Plan.
The Stock Option Plan is administered by the Compensation Committee.
Pursuant to the terms of the Stock Option Plan, any director, advisory
director, director emeritus, officer or employee of the Company or its
affiliates is eligible to participate in the Stock Option Plan. Accordingly,
there are currently 65 persons eligible to participate in the Plan. In
granting awards under the Stock Option Plan, the Compensation Committee
considers, among other things, position and years of service, value of the
participant's services to the Company and the Bank and the added
responsibilities of such individuals with respect to operations as a public
company.
Stock Options
Under the terms of the SOP, the Compensation Committee may grant
either "incentive stock options" as defined under Section 422 of the Code or
stock options not intended to qualify as such ("non-qualified stock options").
In general, stock options will not be exercisable after the
expiration of their terms. The term of stock options may not exceed ten years
from the date of grant. Unless otherwise determined by the Compensation
Committee, in the event a participant ceases to maintain continuous service
(as defined in the Stock Option Plan) with the Company or one of its
affiliates, for any reason (excluding death, disability and termination for
cause), an exercisable stock option will continue to be exercisable for three
months thereafter but in no event after the expiration date of the option.
Unless otherwise provided by the Compensation Committee, in the event that
continuous service terminates as a result of the disability of a participant,
all options not then exercisable shall become exercisable in full and remain
exercisable for a period of three months from the date of such disability.
Unless otherwise provided by the Compensation Committee, in the event of death
of a participant, all options not then exercisable shall become exercisable in
full. Unless otherwise provided by the Compensation Committee, in the event of
the death of a participant during such service or within the three-month
period described above following termination of service described above, an
exercisable option will continue to be exercisable for one year, to the extent
exercisable by the participant upon his death, but in no event later than ten
years after grant. Following the death of any participant, the Compensation
Committee may, as an alternative means of settlement of an option, elect to
pay to the holder thereof an amount of cash equal to the amount by which the
market value of the shares covered by the option on the date of exercise
exceeds the exercise price. A stock option will automatically terminate and
will no longer be exercisable as of the date a participant is notified of
termination for cause.
The exercise price for the purchase of shares subject to a stock
option at the date of grant may not be less than 100% of the market value of
the shares covered by the option on that date. The exercise price must be paid
in full in cash or, if permitted by the Compensation Committee, shares of
Common Stock, or a combination of both.
The Stock Option Plan provides for the grant of a stock option to
purchase 20,121 shares of Common Stock to each director who is not a full-time
employee of the Company, 32,040 shares of Common Stock to the Chairman of the
Board, and 3,204 shares of Common Stock to each director emeritus, as of the
date of stockholder ratification of the Stock Option Plan. Such options have a
term of ten years, are not transferable, and vest at the rate of 20% per year
commencing on the one-year anniversary of the date of grant. The exercise
price per share of such options shall be equal to the fair market value of the
Common Stock on the date of grant.
Stock Appreciation Rights
The Compensation Committee may grant SARs at any time, whether or not
the participant then holds stock options, granting the right to receive the
excess of the market value of the shares represented by the SARs on the date
exercised over the exercise price. SARs generally will be subject to the same
terms and conditions and exercisable to the same extent as stock options, as
described above. Upon the exercise of a SAR, the participant will receive the
amount due in cash or shares, or a combination of both, as determined by the
Compensation Committee. SARs may be related to stock options ("tandem SARs"),
in which case the exercise of one will reduce to that extent the number of
shares represented by the other.
11
<PAGE>
SARs will require an expense accrual by the Company each year for the
appreciation on the SARs which it is anticipated will be exercised. The amount
of the accrual is dependent upon whether and the extent to which the SARs are
granted and the amount, if any, by which the market value of the SARs exceeds
the exercise price.
Limited Stock Appreciation Rights
Limited SARs will be exercisable only for a limited period in the
event of a tender or exchange offer for shares of the Company's Common Stock,
other than by the Company, where 25% or more of the outstanding shares are
acquired in that offer or any other offer which expires within 60 days of that
offer. The amount paid on exercise of a Limited SAR will be the excess of (a)
the market value of the shares on the date of exercise, or (b) the highest
price paid pursuant to the offer, over the exercise price. Payment upon
exercise of a Limited SAR will be in cash.
Limited SARs may be granted at the time of, and must be related to,
the grant of a stock option or SAR. The exercise of one will reduce to that
extent the number of shares represented by the other. Subject to vesting
requirements contained in OTS regulations, Limited SARs will be exercisable
only for the 45 days following the expiration of the tender or exchange offer,
during which period the related stock option or SAR will be exercisable.
However, no Limited SAR will be exercisable by a director, Senior Officer or
Ten Percent Beneficial Owner of the Company within six months of the date of
its grant.
Effect of Merger and Other Adjustments
Shares as to which awards may be granted under the Stock Option Plan,
and shares then subject to awards, will be adjusted appropriately by the
Compensation Committee in the event of any merger, consolidation,
reorganization, recapitalization (including a return of capital, whether
non-taxable or otherwise), combination or exchange of shares, stock dividend,
stock split or other change in the corporate structure or Common Stock of the
Company.
In the event of any merger, consolidation or combination of the
Company with or into another company or other entity, whereby either the
Company is not the continuing entity or its outstanding shares of Common Stock
are converted into or exchanged for different securities, cash or property, or
any combination thereof, pursuant to a plan or agreement the terms of which
are binding upon all stockholders, any participant to whom a stock option or
SAR has been granted at least six months prior to such event will have the
right upon exercise of the option or SAR (subject to the terms of the Stock
Option Plan and any other limitation or vesting period applicable to such
option or SAR) to an amount equal to the excess of fair market value on the
date of exercise of the consideration receivable in the merger, consolidation
or combination with respect to the shares covered or represented by the stock
option or SAR over the exercise price of the option or SAR multiplied by the
number of shares with respect to which the option or SAR has been exercised.
Amendment and Termination
The Board of Directors of the Company may at any time amend, suspend
or terminate the Stock Option Plan or any portion thereof, subject to
compliance with OTS regulations, but may not, without the prior ratification
of the stockholders, make any amendment which shall (i) increase the aggregate
number of securities which may be issued under the Stock Option Plan (except
as specifically set forth under the Stock Option Plan), (ii) materially change
the requirements as to eligibility for participation in the Stock Option Plan
or (iii) change the class of persons eligible to participate in the Stock
Option Plan, provided, however, that no such amendment, suspension or
termination shall impair the rights of any participant, without his consent,
in any award made pursuant to the Stock Option Plan. Unless previously
terminated, the Stock Option Plan shall continue in effect for a term of ten
years, after which no further awards may be granted under the Stock Option
Plan.
Federal Income Tax Consequences
Under present federal income tax laws, awards under the Stock Option
Plan will have the following consequences:
(1) The grant of an award will neither, by itself, result in the recognition
of taxable income to the participant nor entitle the Company to a
deduction at the time of such grant.
12
<PAGE>
(2) In order to qualify as an "Incentive Stock Option," a stock option awarded
under the Stock Option Plan must meet the conditions contained in Section
422 of the Code, including the requirement that the shares acquired upon
the exercise of the stock option be held for one year after the date of
exercise and two years after the grant of the option. The exercise of an
Incentive Stock Option will generally not, by itself, result in the
recognition of taxable income to the participant nor entitle the Company
to a deduction at the time of such exercise. However, the difference
between the exercise price and the fair market value of the option shares
on the date of exercise is an item of tax preference which may, in certain
situations, trigger the alternative minimum tax. The alternative minimum
tax is incurred only when it exceeds the regular income tax. The
alternative minimum tax will be payable at the rate of 26% on the first
$175,000 of "minimum taxable income" above the exemption amount ($33,750
single person or $45,000 married person filing jointly). This tax applies
at a flat rate of 28% of so much of the taxable excess as exceeds $175,000
and 28% on minimum taxable income more than $175,000 above the applicable
exemption amounts. If a taxpayer has alternative minimum taxable income in
excess of $150,000 (married persons filing jointly) or $112,500 (single
person), the $45,000 or $33,750 exemptions are reduced by an amount equal
to 25% of the amount by which the alternative minimum taxable income of
the taxpayer exceeds $150,000 or $112,500, respectively. Provided the
applicable holding periods described above are satisfied, the participant
will recognize long term capital gain or loss upon the resale of the
shares received upon such exercise.
(3) The exercise of a stock option which is not an Incentive Stock Option will
result in the recognition of ordinary income by the participant on the
date of exercise in an amount equal to the difference between the exercise
price and the fair market value on the date of exercise of the shares
acquired pursuant to the stock option.
(4) The exercise of a SAR will result in the recognition of ordinary income by
the participant on the date of exercise in an amount of cash, and/or the
fair market value on that date of the shares, acquired pursuant to the
exercise.
(5) The Company will be allowed a deduction at the time, and in the amount of,
any ordinary income recognized by the participant under the various
circumstances described above, provided that the Company meets its federal
withholding tax obligations.
Awards Under the Stock Option Plan
The following table presents information at March 16, 1998 with
respect to the number of awards, all of which are options, which are currently
intended to be granted under the Stock Option Plan, subject to stockholder
ratification of the Stock Option Plan, to (i) the Named Officers, (ii) all
executive officers of the Company and the Bank as a group, and (iii) directors
who are not executive officers of the Company and the Bank as a group. The
Committee does not currently intend to grant any options to non-officer
employees. On March 16, 1998, the closing price for the Common Stock as quoted
on the Nasdaq Stock Market was $15.44 per share.
<TABLE>
<CAPTION>
==================================================================================================================
1998 STOCK OPTION AND INCENTIVE PLAN
- ------------------------------------------------------------------------------------------------------------------
Name and Position Dollar Value(1) Number of Shares
==================================================================================================================
<S> <C> <C>
Julian E. Kulas, President, Chief Executive Officer and Director............ $ --- 160,200
Executive Officer Group (4 persons)......................................... --- 185,832
Non-Executive Director Group (8 persons).................................... --- 172,888
==================================================================================================================
</TABLE>
- -----------
(1) Any value realized will be the difference between the exercise price and
the market value upon exercise. Since the options have not been granted,
there is no current value.
Subject to the conditions of the Stock Option Plan, the proposed
awards described in the preceding table will vest in five equal annual
installments with the first installment vesting on the one-year anniversary of
the date of grant and the additional installments vesting ratably on each
subsequent anniversary of the date of grant. Pursuant to the terms of the
Stock Option Plan, all options are required to be granted with an exercise
price equal to not less than the fair market value of the shares on the date
of grant. To the extent permitted under applicable law, all options granted to
officers are intended to be incentive stock options. All awards to directors
who are not full time employees of the Company will be non-qualified stock
options.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE ADOPTION OF THE 1998 STOCK OPTION AND INCENTIVE PLAN.
13
<PAGE>
PROPOSAL IV RATIFICATION OF APPOINTMENT OF AUDITORS
The Company's independent auditors are Crowe, Chizek & Company, LLP,
independent certified public accountants. At the Meeting, the stockholders
will consider and vote on the ratification of the appointment of independent
auditors for the Company's fiscal year ending December 31, 1998. The Board of
Directors has appointed Crowe, Chizek & Company, LLP to be its auditors,
subject to ratification by the Company's stockholders.
Representatives of Crowe, Chizek & Company, LLP are expected to
attend the Meeting to respond to appropriate questions and to make a statement
if they so desire.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy
materials for next year's Annual Meeting of Stockholders, any stockholder
proposal to take action at such meeting must be received at the Company's
executive offices, 936 North Western Avenue, Chicago, Illinois, no later than
December 1, 1998. Any such proposals shall be subject to the requirements of
the proxy rules adopted under the Securities Exchange Act of 1934, as amended.
OTHER MATTERS
The Board of Directors is not aware of any business to come before
the Meeting other than the matters described above in this Proxy Statement.
However, if any other matters should properly come before the Meeting, it is
intended that holders of the proxies will act in accordance with their best
judgment.
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy
materials to the beneficial owners of Company Common Stock. In addition, First
SecurityFed has engaged Regan & Associates to assist First SecurityFed in
distributing proxy materials and contacting record and beneficial owners of
First SecurityFed Common Stock. First SecurityFed has agreed to pay Regan &
Associates approximately $4,500 plus out-of-pocket expenses for its services
to be rendered on behalf of First SecurityFed. In addition to solicitation by
mail, directors and officers of the Company and regular employees of the Bank
may solicit proxies personally or by telegraph or telephone, without
additional compensation.
14
<PAGE>
EXHIBIT A
FIRST SECURITYFED FINANCIAL, INC.
1998 RECOGNITION AND RETENTION PLAN
1. Plan Purpose. The purpose of the Plan is to promote the long-term
interests of the Corporation and its stockholders by providing a means for
attracting and retaining directors, executive officers and employees of the
Corporation and its Affiliates.
2. Definitions. The following definitions are applicable to the Plan:
"Award" - means the grant of Restricted Stock pursuant to the terms of
Section 12 of the Plan or by the Committee, as provided in the Plan.
"Affiliate" - means any "parent corporation" or "subsidiary corporation"
of the Corporation, as such terms are defined in Section 424(e) and (f),
respectively, of the Code.
"Bank" - means First Security Federal Savings Bank, a savings
institution and its successors.
"Beneficiary" - means the person or persons designated by a Participant
to receive any benefits payable under the Plan in the event of such
Participant's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time
to time by similar written notice to the Committee. In the absence of a
written designation, the Beneficiary shall be the Participant's surviving
spouse, if any, or if none, his estate.
"Code" - means the Internal Revenue Code of 1986, as amended.
"Committee" - means the Committee of the Board of Directors of the
Corporation referred to in Section 6 hereof.
"Continuous Service" - means the absence of any interruption or
termination of service as a director, director emeritus, advisory director,
executive officer or employee of the Corporation or any Affiliate. Service
shall not be considered interrupted in the case of sick leave, military leave
or any other leave of absence approved by the Corporation or any Affiliate or
in the case of transfers between payroll locations of the Corporation or its
Affiliates or between the Corporation, its Affiliates or its successor. With
respect to any director emeritus or advisory director, continuous service
shall mean availability to perform such functions as may be required of such
individuals.
"Conversion" - means the conversion of the Bank from the mutual to the
stock form of organization.
"Corporation" - means First SecurityFed Financial, Inc., a Delaware
corporation.
"Disability" - means any physical or mental impairment which qualifies
an employee, director, director emeritus or advisor director for disability
benefits under any applicable long-term disability plan maintained by the Bank
or an Affiliate, or, if no such plan applies to such individual, which renders
such employee or director, in the judgment of the Committee, unable to perform
his customary duties and responsibilities.
"ERISA" - means the Employee Retirement Income Security Act of 1974, as
amended.
A-1
<PAGE>
"Non-Employee Director" - means a director who a) is not currently an
officer or employee of the Corporation; b) is not a former employee of the
Corporation who receives compensation for prior services (other than from a
tax-qualified retirement plan); c) has not been an officer of the Corporation;
d) does not receive remuneration from the Corporation in any capacity other
than as a director; and e) does not possess an interest in any other
transactions or is not engaged in a business relationship for which disclosure
would be required under Item 404(a) or (b) of Regulation S-K.
"Participant" - means any director, director emeritus, advisory
director, executive officer or employee of the Corporation or any Affiliate
who is selected by the Committee to receive an Award or a director who is
granted an award pursuant to Section 12.
"Plan" - means the 1998 Recognition and Retention Plan of the Corporation.
"Restricted Period" - means the period of time selected by the Committee
for the purpose of determining when restrictions are in effect under Section 3
hereof with respect to Restricted Stock awarded under the Plan.
"Restricted Stock" - means Shares which have been contingently awarded
to a Participant by the Committee subject to the restrictions referred to in
Section 3 hereof, so long as such restrictions are in effect.
"Shares" - means the common stock, par value $0.01 per share, of the
Corporation.
3. Terms and Conditions of Restricted Stock. The Committee shall have
full and complete authority, subject to the limitations of the Plan, to grant
Awards and, in addition to the terms and conditions contained in paragraphs
(a) through (f) of this Section 3, to provide such other terms and conditions
(which need not be identical among Participants) in respect of such Awards,
and the vesting thereof, as the Committee shall determine, subject to Office
of Thrift Supervision Regulations.
(a) At the time of an award of Restricted Stock, the Committee shall establish
for each Participant a Restricted Period, during which or at the
expiration of which, as the Committee shall determine and provide in the
agreement referred to in paragraph (d) of this Section 3, the Shares
awarded as Restricted Stock shall vest, and subject to any such other
terms and conditions as the Committee shall provide, shares of Restricted
Stock may not be sold, assigned, transferred, pledged, voted or otherwise
encumbered by the Participant, except as hereinafter provided, during the
Restricted Period. Except for such restrictions, and subject to paragraphs
(c) and (e) of this Section 3 and Section 4 hereof, the Participant as
owner of such shares shall have all the rights of a stockholder.
No director who is not an employee of the Corporation shall be granted
Awards with respect to more than 5% of the total shares subject to the
Plan. All non-employee directors of the Corporation, in the aggregate, may
not be granted Awards with respect to more than 30% of the total shares
subject to the Plan and no individual shall be granted Awards with respect
to more than 25% of the total shares subject to the Plan. No Awards shall
begin vesting earlier than one year from the date the Plan is approved by
stockholders of the Corporation and no Award shall vest at a rate in
excess of 20% per year, except in the event of death or disability. In the
event Office of Thrift Supervision Regulations are amended (the "Amended
Regulations") to permit shorter vesting periods, any Award made pursuant
to this Plan, which Award is subject to the requirements of such Amended
Regulations, may vest, at the sole discretion of the Committee, in
accordance with such Amended Regulations.
Subject to compliance with Office of Thrift Supervision Regulations, the
Committee shall have the authority, in its discretion, to accelerate the
time at which any or all of the restrictions shall lapse with respect to
an Award, or to remove any or all of such restrictions, whenever it may
determine that such action is appropriate by reason of changes in
applicable tax or other laws or other changes in circumstances occurring
after the commencement of such Restricted Period.
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(b) Except as provided in Section 5 hereof, if a Participant ceases to
maintain Continuous Service for any reason (other than death or
disability), unless the Committee shall otherwise determine, all Shares of
Restricted Stock theretofore awarded to such Participant and which at the
time of such termination of Continuous Service are subject to the
restrictions imposed by paragraph (a) of this Section 3 shall upon such
termination of Continuous Service be forfeited and returned to the
Corporation. If a Participant ceases to maintain Continuous Service by
reason of death or disability, Restricted Stock then still subject to
restrictions imposed by paragraph (a) of this Section 3 will be free of
those restrictions.
(c) Each certificate in respect of Shares of Restricted Stock awarded under
the Plan shall be registered in the name of the Participant and deposited
by the Participant, together with a stock power endorsed in blank, with
the Corporation and shall bear the following (or a similar) legend:
The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions
(including forfeiture) contained in the 1998 Recognition and
Retention Plan of First SecurityFed Financial, Inc. Copies of such
Plan are on file in the offices of the Secretary of First
SecurityFed Financial, Inc., 936 N. Western Avenue, Chicago,
Illinois 60622- 4695.
(d) At the time of any Award, the Participant shall enter into an Agreement
with the Corporation in a form specified by the Committee, agreeing to the
terms and conditions of the Award and such other matters as the Committee,
in its sole discretion, shall determine (the "Restricted Stock
Agreement").
(e) The payment to the Participant of dividends or other distributions
declared or paid on such shares by the Corporation shall be deferred until
the lapsing of the restrictions imposed under paragraph (a) of this
Section 3, and such dividends or other distributions shall be held by the
Corporation for the account of the Participant until such time. There
shall be credited at the end of each year (or portion thereof) interest on
the amount of the deferred dividends or other distributions at a rate per
annum as the Committee, in its discretion, may determine. Payment of
deferred dividends or other distributions, together with interest accrued
thereon, shall be made upon the earlier to occur of the lapsing of the
restrictions imposed under paragraph (a) of this Section 3 or upon death
or disability of the Participant. Shares of Restricted Stock subject to
restriction on the date of any shareholder vote shall be voted by an
independent party to be named by the Committee.
(f) At the lapsing of the restrictions imposed by paragraph (a) of this
Section 3, the Corporation shall deliver to the Participant (or where the
relevant provision of paragraph (b) of this Section 3 applies in the case
of a deceased Participant, to his legal representative, beneficiary or
heir) the certificate(s) and stock power deposited with it pursuant to
paragraph (c) of this Section 3 and the Shares represented by such
certificate(s) shall be free of the restrictions referred to in paragraph
(a) of this Section 3.
4. Adjustments Upon Changes in Capitalization. In the event of any
change in the outstanding Shares subsequent to the effective date of the Plan
by reason of any reorganization, recapitalization, stock split, stock
dividend, combination or exchange of shares, merger, consolidation or any
change in the corporate structure or Shares of the Corporation, the maximum
aggregate number and class of shares as to which Awards may be granted under
the Plan and the number and class of shares with respect to which Awards
theretofore have been granted under the Plan shall be appropriately adjusted
by the Committee, whose determination shall be conclusive. Any shares of stock
or other securities received as a result of any of the foregoing by a
Participant with respect to Restricted Stock shall be subject to the same
restrictions and the certificate(s) or other instruments representing or
evidencing such shares or securities shall be legended and deposited with the
Corporation in the manner provided in Section 3 hereof.
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5. Assignments and Transfers. During the Restricted Period, no Award nor
any right or interest of a Participant under the Plan in any instrument
evidencing any Award under the Plan may be assigned, encumbered or transferred
except (i) in the event of the death of a Participant, by will or the laws of
descent and distribution, or (ii) pursuant to a qualified domestic relations
order as defined in the Code or Title I of ERISA or the rules thereunder.
6. Administration. The Plan shall be administered by a Committee
consisting of two or more members, each of whom shall be a Non-Employee
Director. The members of the Committee shall be appointed by the Board of
Directors of the Corporation. Except as limited by the express provisions of
the Plan, the Committee shall have sole and complete authority and discretion,
subject to Office of Thrift Supervision Regulations, to (i) select
Participants and grant Awards; (ii) determine the number of Shares to be
subject to types of Awards generally, as well as individual Awards granted
under the Plan; (iii) determine the terms and conditions upon which Awards
shall be granted under the Plan; (iv) prescribe the form and terms of
instruments evidencing such grants; and (v) establish from time to time
regulations for the administration of the Plan, interpret the Plan, and make
all determinations deemed necessary or advisable for the administration of the
Plan. The Committee may maintain, and update from time to time as appropriate,
a list designating selected directors as Non-Employee Directors. The purpose
of such list shall be to evidence the status of such individuals as
Non-Employee Directors and the Board of Directors may appoint to the Committee
any individual actually qualifying as a Non-Employee Directors regardless of
whether identified as such on said list.
A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee without a meeting,
shall be acts of the Committee.
7. Shares Subject to Plan. Subject to adjustment by the operation of
Section 4 hereof, the maximum number of Shares with respect to which Awards
may be made under the Plan is 4% of the total Shares issued in the
Association's Conversion. The Shares with respect to which Awards may be made
under the Plan may be either authorized and unissued Shares or issued Shares
heretofore or hereafter reacquired and held as treasury Shares. An Award shall
not be considered to have been made under the Plan with respect to Restricted
Stock which is forfeited and new Awards may be granted under the Plan with
respect to the number of Shares as to which such forfeiture has occurred.
The Corporation's obligation to deliver Shares with respect to an Award
shall, if the Committee so requests, be conditioned upon the receipt of a
representation as to the investment intention of the Participant to whom such
Shares are to be delivered, in such form as the Committee shall determine to
be necessary or advisable to comply with the provisions of the Securities Act
of 1933 or any other Federal, state or local securities legislation or
regulation. It may be provided that any representation requirement shall
become inoperative upon a registration of the Shares or other action
eliminating the necessity of such representation under such Securities Act or
other securities legislation. The Corporation shall not be required to deliver
any Shares under the Plan prior to (i) the admission of such shares to listing
on any stock exchange on which Shares may then be listed, and (ii) the
completion of such registration or other qualification of such Shares under
any state or Federal law, rule or regulation, as the Committee shall determine
to be necessary or advisable.
8. Employee Rights Under the Plan. No director, director emeritus,
advisory director, officer or employee shall have a right to be selected as a
Participant nor, having been so selected, to be selected again as a
Participant and no director, officer, employee or other person shall have any
claim or right to be granted an Award under the Plan or under any other
incentive or similar plan of the Corporation or any Affiliate. Neither the
Plan nor any action taken thereunder shall be construed as giving any officer
or employee any right to be retained in the employ of the Corporation, the
Bank or any Affiliate.
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9. Withholding Tax. Upon the termination of the Restricted Period with
respect to any shares of Restricted Stock (or at such earlier time, if any,
that an election is made by the Participant under Section 83(b) of the Code,
or any successor provision thereto, to include the value of such shares in
taxable income), the Corporation may, in its sole discretion, withhold from
any payment or distribution made under this Plan sufficient Shares or withhold
sufficient cash to cover any applicable withholding and employment taxes. The
Corporation shall have the right to deduct from all dividends paid with
respect to shares of Restricted Stock the amount of any taxes which the
Corporation is required to withhold with respect to such dividend payments. No
discretion or choice shall be conferred upon any Participant with respect to
the form, timing or method of any such tax withholding.
10. Amendment or Termination. The Board of Directors of the Corporation
may amend, suspend or terminate the Plan or any portion thereof at any time,
subject to Office of Thrift Supervision Regulations, but (except as provided
in Section 4 hereof) no amendment shall be made without approval of the
stockholders of the Corporation which shall (i) increase the aggregate number
of Shares with respect to which Awards may be made under the Plan, (ii)
materially increase the benefits accruing to Participants, (iii) materially
change the requirements as to eligibility for participation in the Plan or
(iv) change the class of persons eligible to participate in the Plan;
provided, however, that no such amendment, suspension or termination shall
impair the rights of any Participant, without his consent, in any Award
theretofore made pursuant to the Plan.
11. Term of Plan. The Plan shall become effective upon its ratification
by the stockholders of the Corporation. It shall continue in effect for a term
of ten years unless sooner terminated under Section 11 hereof.
12. Director Awards. By, and simultaneously with, the ratification of
this Plan by the stockholders of the Corporation, each member (other than the
Chairman of the Board) of the Board of Directors of the Corporation who is not
a full-time employee of the Corporation, is hereby granted an Award equal to
.125% of the shares sold in the Conversion, and the Chairman of the Board is
hereby granted an Award equal to .2% of the shares sold in the Conversion.
Each of the Awards granted in this Section 12 shall be earned in five equal
annual installments, with the first installment vesting on the first
anniversary of the date of grant, as long as the director maintains Continuous
Service with the Corporation or its affiliates, provided, however, that no
Award shall be earned in any fiscal year in which the Bank fails to meet all
of its fully phased-in capital requirements.
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EXHIBIT B
FIRST SECURITYFED FINANCIAL, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
1. Plan Purpose. The purpose of the Plan is to promote the long-term
interests of the Corporation and its stockholders by providing a means for
attracting and retaining directors, advisory directors, directors emeriti,
officers and employees of the Corporation and its Affiliates. It is intended
that designated Options granted pursuant to the provisions of this Plan to
persons employed by the Corporation or its Affiliates will qualify as
Incentive Stock Options. Options granted to persons who are not employees will
be Non-Qualified Stock Options.
2. Definitions. The following definitions are applicable to the Plan:
"Affiliate" - means any "parent corporation" or "subsidiary corporation"
of the Corporation, as such terms are defined in Section 424(e) and (f),
respectively, of the Code.
"Bank" - means First Security Federal Savings Bank and any successor
entity.
"Award" - means the grant of an Incentive Stock Option, a Non-Qualified
Stock Option, a Stock Appreciation Right, a Limited Stock Appreciation Right
or any combination thereof, as provided in the Plan.
"Code" - means the Internal Revenue Code of 1986, as amended.
"Committee" - means the Committee referred to in Section 3 hereof.
"Continuous Service" - means the absence of any interruption or
termination of service as a director, advisory director, director emeritus,
officer or employee of the Corporation or an Affiliate, except that when used
with respect to any Options or Rights which at the time of exercise are
intended to be Incentive Stock Options, continuous service means the absence
of any interruption or termination of service as an employee of the
Corporation or an Affiliate. Service shall not be considered interrupted in
the case of sick leave, military leave or any other leave of absence approved
by the Corporation or in the case of transfers between payroll locations of
the Corporation or between the Corporation, its parent, its subsidiaries or
its successor. With respect to any advisory director or director emeritus,
continuous service shall mean availability to perform such functions as may be
required of such persons.
"Corporation" - means First SecurityFed Financial, Inc., a Delaware
corporation.
"Employee" - means any person, including an officer or director, who is
employed by the Corporation or any Affiliate.
"ERISA" - means the Employee Retirement Income Security Act of 1974, as
amended.
"Exercise Price" - means (i) in the case of an Option, the price per
Share at which the Shares subject to such Option may be purchased upon
exercise of such Option and (ii) in the case of a Right, the price per Share
(other than the Market Value per Share on the date of exercise and the Offer
Price per Share as defined in Section 10 hereof) which, upon grant, the
Committee determines shall be utilized in calculating the aggregate value
which a Participant shall be entitled to receive pursuant to Sections 9, 10 or
12 hereof upon exercise of such Right.
"Incentive Stock Option" - means an option to purchase Shares granted by
the Committee pursuant to Section 6 hereof which is subject to the limitations
and restrictions of Section 8 hereof and is intended to qualify under Section
422(b) of the Code.
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"Limited Stock Appreciation Right" - means a stock appreciation right
with respect to Shares granted by the Committee pursuant to Sections 6 and 10
hereof.
"Market Value" - means the average of the high and low quoted sales
price on the date in question (or, if there is no reported sale on such date,
on the last preceding date on which any reported sale occurred) of a Share on
the Composite Tape for the New York Stock Exchange-Listed Stocks, or, if on
such date the Shares are not quoted on the Composite Tape, on the New York
Stock Exchange, or, if the Shares are not listed or admitted to trading on
such Exchange, on the principal United States securities exchange registered
under the Securities Exchange Act of 1934 on which the Shares are listed or
admitted to trading, or, if the Shares are not listed or admitted to trading
on any such exchange, the mean between the closing high bid and low asked
quotations with respect to a Share on such date on the NASDAQ System, or any
similar system then in use, or, if no such quotations are available, the fair
market value on such date of a Share as the Committee shall determine.
"Non-Employee Director" - means a director who a) is not currently an
officer or employee of the Corporation; b) is not a former employee of the
Corporation who receives compensation for prior services (other than from a
tax-qualified retirement plan); c) has not been an officer of the
Corporation; d) does not receive remuneration from the Corporation in any
capacity other than as a director; and e) does not possess an interest in any
other transactions or is not engaged in a business relationship for which
disclosure would be required under Item 404(a) or (b) of Regulation S-K.
"Non-Qualified Stock Option" - means an option to purchase Shares
granted by the Committee pursuant to Section 6 hereof which is not intended to
qualify under Section 422(b) of the Code.
"Option" - means an Incentive Stock Option or a Non-Qualified Stock
Option.
"Participant" - means any director, advisory director, director
emeritus, officer or employee of the Corporation or any Affiliate who is
selected by the Committee to receive an Award or who is granted an Award
pursuant to Section 19 hereof.
"Plan" - means the 1998 Stock Option and Incentive Plan of the
Corporation.
"Related" - means (i) in the case of a Right, a Right which is granted
in connection with, and to the extent exercisable, in whole or in part, in
lieu of, an Option or another Right and (ii) in the case of an Option, an
Option with respect to which and to the extent a Right is exercisable, in
whole or in part, in lieu thereof has been granted.
"Right" - means a Limited Stock Appreciation Right or a Stock
Appreciation Right.
"Shares" - means the shares of common stock of the Corporation.
"Stock Appreciation Right" - means a stock appreciation right with
respect to Shares granted by the Committee pursuant to Sections 6 and 9
hereof.
"Ten Percent Beneficial Owner" - means the beneficial owner of more than
ten percent of any class of the Corporation's equity securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934.
3. Administration. The Plan shall be administered by a Committee
consisting of two or more members, each of whom shall be a Non-Employee
Director. The members of the Committee shall be appointed by the Board of
Directors of the Corporation. Except as limited by the express provisions of
the Plan, the Committee shall have sole and complete authority and discretion,
subject to Office of Thrift Supervision Regulations, to (i) select
Participants and grant Awards; (ii) determine the number of Shares to be
subject to types of Awards generally, as well as to individual Awards granted
under the Plan; (iii) determine the terms and conditions upon which Awards
shall be granted under the Plan; (iv) prescribe the form and terms of
instruments evidencing such grants; and (v) establish from time to time
regulations for the administration of the Plan, interpret the Plan, and make
all determinations deemed necessary or advisable for the administration of the
Plan.
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A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee without a meeting,
shall be acts of the Committee.
4. Participation in Committee Awards. The Committee may select from time
to time Participants in the Plan from those directors (including advisory
directors and directors emeriti), officers and employees of the Corporation or
its Affiliates who, in the opinion of the Committee, have the capacity for
contributing to the successful performance of the Corporation or its
Affiliates.
5. Shares Subject to Plan. Subject to adjustment by the operation of
Section 11 hereof, the maximum number of Shares with respect to which Awards
may be made under the Plan is 10% of the total Shares issued in the Bank's
conversion to the capital stock form. The Shares with respect to which Awards
may be made under the Plan may be either authorized and unissued shares or
issued shares heretofore or hereafter reacquired and held as treasury shares.
Shares which are subject to Related Rights and Related Options shall be
counted only once in determining whether the maximum number of Shares with
respect to which Awards may be granted under the Plan has been exceeded. An
Award shall not be considered to have been made under the Plan with respect to
any Option or Right which terminates and new Awards may be granted under the
Plan with respect to the number of Shares as to which such termination has
occurred.
6. General Terms and Conditions of Options and Rights. The Committee
shall have full and complete authority and discretion, subject to Office of
Thrift Supervision Regulations and except as expressly limited by the Plan, to
grant Options and/or Rights and to provide the terms and conditions (which
need not be identical among Participants) thereof. In particular, the
Committee shall prescribe the following terms and conditions: (i) the Exercise
Price of any Option or Right, which shall not be less than the Market Value
per Share at the date of grant of such Option or Right, (ii) the number of
Shares subject to, and the expiration date of, any Option or Right, which
expiration date shall not exceed ten years from the date of grant, (iii) the
manner, time and rate (cumulative or otherwise) of exercise of such Option or
Right, and (iv) the restrictions, if any, to be placed upon such Option or
Right or upon Shares which may be issued upon exercise of such Option or
Right. As required by Office of Thrift Supervision Regulations, each
non-employee director of the Corporation may not be granted Awards with
respect to more than 5% of the total shares subject to the Plan and all
non-employee directors of the Corporation, in the aggregate, may not be
granted Awards with respect to more than 30% of the total shares subject to
the Plan. Notwithstanding the foregoing and subject to compliance with
applicable Office of Thrift Supervision Regulations, no individual shall be
granted Awards in any calendar year with respect to more than 25% of the total
shares subject to the Plan in any calendar year or during the entire term of
the Plan.
Any Award made pursuant to this Plan, which Award is subject to the
requirements of Office of Thrift Supervision Regulations, shall vest in five
equal annual installments with the first installment vesting on the one-year
anniversary of the date of grant, except in the event of death or disability.
In the event Office of Thrift Supervision Regulations are amended (the
"Amended Regulations") to permit shorter vesting periods, any Award made
pursuant to this Plan, which Award is subject to the requirements of such
Amended Regulations, may vest, at the sole discretion of the Committee, in
accordance with such Amended Regulations.
Furthermore, at the time of any Award, the Participant shall enter into
an agreement with the Corporation in a form specified by the Committee,
agreeing to the terms and conditions of the Award and such other matters as
the Committee, in its sole discretion, shall determine (the "Option
Agreement").
7. Exercise of Options or Rights.
(a) Except as provided herein, an Option or Right granted under the Plan shall
be exercisable during the lifetime of the Participant to whom such Option
or Right was granted only by such Participant and, except as provided in
paragraphs (c) and (d) of this Section 7, no such Option or Right may be
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exercised unless at the time such Participant exercises such Option or
Right, such Participant has maintained Continuous Service since the date
of grant of such Option or Right.
(b) To exercise an Option or Right under the Plan, the Participant to whom
such Option or Right was granted shall give written notice to the
Corporation in form satisfactory to the Committee (and, if partial
exercises have been permitted by the Committee, by specifying the number
of Shares with respect to which such Participant elects to exercise such
Option or Right) together with full payment of the Exercise Price, if any
and to the extent required. The date of exercise shall be the date on
which such notice is received by the Corporation. Payment, if any is
required, shall be made either (i) in cash (including check, bank draft or
money order) or (ii) by delivering (A) Shares already owned by the
Participant and having a fair market value equal to the applicable
exercise price, such fair market value to be determined in such
appropriate manner as may be provided by the Committee or as may be
required in order to comply with or to conform to requirements of any
applicable laws or regulations, or (B) a combination of cash and such
Shares.
(c) If a Participant to whom an Option or Right was granted shall cease to
maintain Continuous Service for any reason (excluding death, disability
and termination of employment by the Corporation or any Affiliate for
cause), such Participant may, but only within the period of three months
immediately succeeding such cessation of Continuous Service and in no
event after the expiration date of such Option or Right, exercise such
Option or Right to the extent that such Participant was entitled to
exercise such Option or Right at the date of such cessation, provided,
however, that such right of exercise after cessation of Continuous Service
shall not be available to a Participant if the Committee otherwise
determines and so provides in the applicable instrument or instruments
evidencing the grant of such Option or Right. If a Participant to whom an
Option or Right was granted shall cease to maintain Continuous Service by
reason of death or disability then, unless the Committee shall have
otherwise provided in the instrument evidencing the grant of an Option or
Right, all Options and Rights granted and not fully exercisable shall
become exercisable in full upon the happening of such event and shall
remain so exercisable (i) in the event of death for the period described
in paragraph (d) of this Section 7 and (ii) in the event of disability for
a period of one year following such date. If the Continuous Service of a
Participant to whom an Option or Right was granted by the Corporation is
terminated for cause, all rights under any Option or Right of such
Participant shall expire immediately upon the effective date of such
termination.
(d) In the event of the death of a Participant while in the Continuous Service
of the Corporation or an Affiliate or within the three-month period
referred to in paragraph (c) of this Section 7, the person to whom any
Option or Right held by the Participant at the time of his death is
transferred by will or the laws of descent and distribution, or in the
case of an Award other than an Incentive Stock Option, pursuant to a
qualified domestic relations order, as defined in the Code or Title 1 of
ERISA or the rules thereunder may, but only to the extent such Participant
was entitled to exercise such Option or Right upon his death as provided
in paragraph (c) above, exercise such Option or Right at any time within a
period of one year succeeding the date of death of such Participant, but
in no event later than ten years from the date of grant of such Option or
Right. Following the death of any Partici pant to whom an Option was
granted under the Plan, irrespective of whether any Related Right shall
have theretofore been granted to the Participant or whether the person
entitled to exercise such Related Right desires to do so, the Committee
may, as an alternative means of settlement of such Option, elect to pay to
the person to whom such Option is transferred by will or by the laws of
descent and distribution, or in the case of an Option other than an
Incentive Stock Option, pursuant to a qualified domestic relations order,
as defined in the Code or Title I of ERISA or the rules thereunder, the
amount by which the Market Value per Share on the date of exercise of such
Option shall exceed the Exercise Price of such Option, multiplied by the
number of Shares with respect to which such Option is properly exercised.
Any such settlement of an Option shall be considered an exercise of such
Option for all purposes of the Plan.
8. Incentive Stock Options. Incentive Stock Options may be granted only
to Participants who are Employees. Any provision of the Plan to the contrary
notwithstanding, (i) no Incentive Stock Option shall be granted more than ten
years from the date the Plan is adopted by the Board of Directors of the
Corporation and no Incentive Stock Option shall be exercisable more than ten
years from the date such Incentive Stock Option is granted, (ii) the Exercise
Price of any Incentive Stock Option shall not be less than the Market Value
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per Share on the date such Incentive Stock Op tion is granted, (iii) any
Incentive Stock Option shall not be transferable by the Participant to whom
such Incentive Stock Option is granted other than by will or the laws of
descent and distribution, and shall be exercisable during such Participant's
lifetime only by such Participant, (iv) no Incentive Stock Option shall be
granted to any individual who, at the time such Incentive Stock Option is
granted, owns stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Corporation or any Affiliate
unless the Exercise Price of such Incentive Stock Option is at least 110
percent of the Market Value per Share at the date of grant and such Incentive
Stock Option is not exercisable after the expiration of five years from the
date such Incentive Stock Option is granted, and (v) the aggregate Market
Value (determined as of the time any Incentive Stock Option is granted) of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by a Participant in any calendar year shall not exceed $100,000.
9. Stock Appreciation Rights. A Stock Appreciation Right shall, upon its
exercise, entitle the Participant to whom such Stock Appreciation Right was
granted to receive a number of Shares or cash or combination thereof, as the
Committee in its discretion shall determine, the aggregate value of which
(i.e., the sum of the amount of cash and/or Market Value of such Shares on
date of exercise) shall equal (as nearly as possible, it being understood that
the Corporation shall not issue any fractional shares) the amount by which the
Market Value per Share on the date of such exercise shall exceed the Exercise
Price of such Stock Appreciation Right, multiplied by the number of Shares
with respect of which such Stock Appreciation Right shall have been exercised.
A Stock Appreciation Right may be Related to an Option or may be granted
independently of any Option as the Committee shall from time to time in each
case determine. At the time of grant of an Option the Committee shall
determine whether and to what extent a Related Stock Appreciation Right shall
be granted with respect thereto, provided, however, and notwithstanding any
other provision of the Plan, that if the Related Option is an Incentive Stock
Option, the Related Stock Appreciation Right shall satisfy all the
restrictions and limitations of Section 8 hereof as if such Related Stock
Appreciation Right were an Incentive Stock Option and as if other rights which
are Related to Incentive Stock Options were Incentive Stock Options. In the
case of a Related Option, such Related Option shall cease to be exercisable to
the extent of the Shares with respect to which the Related Stock Appreciation
Right was exercised. Upon the exercise or termination of a Related Option, any
Related Stock Appreciation Right shall terminate to the extent of the Shares
with respect to which the Related Option was exercised or terminated.
10. Limited Stock Appreciation Rights. At the time of grant of an Option
or Stock Appreciation Right to any Participant, the Committee shall have full
and complete authority and discretion to also grant to such Participant a
Limited Stock Appreciation Right which is Related to such Option or Stock
Appreciation Right, provided, however and notwithstanding any other provision
of the Plan, that if the Related Option is an Incentive Stock Option, the
Related Limited Stock Appreciation Right shall satisfy all the restrictions
and limitations of Section 8 hereof as if such Related Limited Stock
Appreciation Right were an Incentive Stock Option and as if all other Rights
which are Related to Incentive Stock Options were Incentive Stock Options.
Subject to vesting requirements contained in 12 C.F.R. ss. 563b.3(g)(4) or any
successor regulation, a Limited Stock Appreciation Right shall be exercisable
only during the period beginning on the first day following the date of
expiration of any "offer" (as such term is hereinafter defined) and ending on
the forty-fifth day following such date.
A Limited Stock Appreciation Right shall, upon its exercise, entitle the
Participant to whom such Limited Stock Appreciation Right was granted to
receive an amount of cash equal to the amount by which the "Offer Price per
Share" (as such term is hereinafter defined) or the Market Value on the date
of such exercise, as shall have been provided by the Committee in its
discretion at the time of grant, shall exceed the Exercise Price of such
Limited Stock Appreciation Right, multiplied by the number of Shares with
respect to which such Limited Stock Appreciation Right shall have been
exercised. Upon the exercise of a Limited Stock Appreciation Right, any
Related Option and/or Related Stock Appreciation Right shall cease to be
exercisable to the extent of the Shares with respect to which such Limited
Stock Appreciation Right was exercised. Upon the exercise or termination of a
Related Option or Related Stock Appreciation Right, any Related Limited Stock
Appreciation Right shall terminate to the extent of the Shares with respect to
which such Related Option or Related Stock Appreciation Right was exercised or
terminated.
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<PAGE>
For the purposes of this Section 10, the term "Offer" shall mean any
tender offer or exchange offer for Shares other than one made by the
Corporation, provided that the corporation, person or other entity making the
offer acquires pursuant to such offer either (i) 25% of the Shares outstanding
immediately prior to the commencement of such offer or (ii) a number of Shares
which, together with all other Shares acquired in any tender offer or exchange
offer (other than one made by the Corporation) which expired within sixty days
of the expiration date of the offer in question, equals 25% of the Shares
outstanding immediately prior to the commencement of the offer in question.
The term "Offer Price per Share" as used in this Section 10 shall mean the
highest price per Share paid in any Offer which Offer is in effect any time
during the period beginning on the sixtieth day prior to the date on which a
Limited Stock Appreciation Right is exercised and ending on the date on which
such Limited Stock Appreciation Right is exercised. Any securities or property
which are part or all of the consideration paid for Shares in the Offer shall
be valued in determining the Offer Price per Share at the higher of (A) the
valuation placed on such securities or property by the corporation, person or
other entity making such Offer or (B) the valuation placed on such securities
or property by the Committee.
11. Adjustments Upon Changes in Capitalization. In the event of any
change in the outstanding Shares subsequent to the effective date of the Plan
by reason of any reorganization, recapitalization, stock split, stock
dividend, combination or exchange of shares, merger, consolidation or any
change in the corporate structure or Shares of the Corporation, the maximum
aggregate number and class of shares as to which Awards may be granted under
the Plan and the number, class and exercise price of shares with respect to
which Awards theretofore have been granted under the Plan shall be
appropriately adjusted by the Committee, whose determination shall be
conclusive.
12. Effect of Merger. In the event of any merger, consolidation or
combination of the Corporation (other than a merger, consolidation or
combination in which the Corporation is the continuing entity and which does
not result in the outstanding Shares being converted into or exchanged for
different securities, cash or other property, or any combination thereof)
pursuant to a plan or agreement the terms of which are binding upon all
stockholders of the Corporation (except to the extent that dissenting
stockholders may be entitled, under statutory provisions or provisions
contained in the certificate or articles of incorporation, to receive the
appraised or fair value of their holdings), any Participant to whom an Option
or Right has been granted at least six months prior to such event shall have
the right (subject to the provisions of the Plan and any limitation or vesting
period applicable to such Option or Right), thereafter and during the term of
each such Option or Right, to receive upon exercise of any such Option or
Right an amount equal to the excess of the fair market value on the date of
such exercise of the securities, cash or other property, or combination
thereof, receivable upon such merger, consolidation or combination in respect
of a Share over the Exercise Price of such Right or Option, multiplied by the
number of Shares with respect to which such Option or Right shall have been
exercised. Such amount may be payable fully in cash, fully in one or more of
the kind or kinds of property payable in such merger, consolidation or
combination, or partly in cash and partly in one or more of such kind or kinds
of property, all in the discretion of the Committee.
13. Assignments and Transfers. No Award nor any right or interest of a
Participant under the Plan in any instrument evidencing any Award under the
Plan may be assigned, encumbered or transferred except, in the event of the
death of a Participant, by will or the laws of descent and distribution or in
the case of Awards other than Incentive Stock Options pursuant to a qualified
domestic relations order, as defined in the Code or Title I of ERISA or the
rules thereunder.
14. Employee Rights Under the Plan. No director, officer or employee
shall have a right to be selected as a Participant nor, having been so
selected, to be selected again as a Participant and no director, officer,
employee or other person shall have any claim or right to be granted an Award
under the Plan or under any other incentive or similar plan of the Corporation
or any Affiliate. Neither the Plan nor any action taken thereunder shall be
construed as giving any employee any right to be retained in the employ of the
Corporation or any Affiliate.
15. Delivery and Registration of Stock. The Corporation's obligation to
deliver Shares with respect to an Award shall, if the Committee so requests,
be conditioned upon the receipt of a representation as to the investment
intention of the Participant to whom such Shares are to be delivered, in such
form as the Committee shall determine to be necessary or advisable to comply
with the provisions of the Securities Act of 1933 or any other Federal, state
or local securities legislation or regulation. It may be provided that any
B-6
<PAGE>
representation requirement shall become inoperative upon a registration of the
Shares or other action eliminating the necessity of such representation under
such Securities Act or other securities legislation. The Corporation shall not
be required to deliver any Shares under the Plan prior to (i) the admission of
such shares to listing on any stock exchange or other system on which Shares
may then be listed, and (ii) the completion of such registration or other
qualification of such Shares under any state or Federal law, rule or
regulation, as the Committee shall determine to be necessary or advisable.
16. Withholding Tax. The Corporation shall have the right to deduct from
all amounts paid in cash with respect to the exercise of a Right under the
Plan any taxes required by law to be withheld with respect to such cash
payments. Where a Participant or other person is entitled to receive Shares
pursuant to the exercise of an Option or Right pursuant to the Plan, the
Corporation shall have the right to require the Participant or such other
person to pay the Corporation the amount of any taxes which the Corporation is
required to withhold with respect to such Shares, and may, in its sole
discretion, withhold sufficient Shares to cover the amount of taxes which the
Corporation is required to withhold.
17. Amendment or Termination. The Board of Directors of the Corporation
may amend, suspend or terminate the Plan or any portion thereof at any time,
subject to Office of Thrift Supervision Regulations, but (except as provided
in Section 11 hereof) no amendment shall be made without approval of the
stockholders of the Corporation which shall (i) increase the aggregate number
of Shares with respect to which Awards may be made under the Plan, (ii)
materially increase the benefits accruing to Participants, (iii) materially
change the requirements as to eligibility for participation in the Plan or
(iv) change the class of persons eligible to participate in the Plan;
provided, however, that no such amendment, suspension or termination shall
impair the rights of any Participant, without his consent, in any Award
theretofore made pursuant to the Plan.
18. Effective Date and Term of Plan. The Plan shall become effective
upon its ratification by stockholders of the Corporation. It shall continue in
effect for a term of ten years unless sooner terminated under Section 17
hereof.
19. Initial Grant. By, and simultaneously with, the ratification of this
Plan by the stockholders of the Corporation, the Chairman of the Board of the
Corporation, each other member of the Board of Directors of the Corporation
and each director emeritus at the time of stockholder ratification of this
Plan who is not a full-time Employee is hereby granted a ten-year,
Non-Qualified Stock Option to purchase .5%, .314% and .05%, respectively, of
the shares sold in the Conversion at an Exercise Price per share equal to the
Market Value per share of the Shares on the date of grant. Each such Option
shall be evidenced by a Non-Qualified Stock Option Agreement in a form
approved by the Board of Directors and shall be subject in all respects to the
terms and conditions of this Plan, which are controlling. All Options granted
pursuant to this section shall vest in five equal annual installments with the
first installment vesting on the first anniversary of the date of grant,
subject to the Director maintaining Continuous Service with the Corporation or
its Affiliates since the date of grant. All Options granted pursuant to this
Section 19 shall be rounded down to the nearest whole share to the extent
necessary to ensure that no Options to purchase stock representing fractional
shares are granted.
B-7
<PAGE>
REVOCABLE PROXY
FIRST SECURITYFED FINANCIAL, INC.
ANNUAL MEETING OF STOCKHOLDERS
to be Held on May 6, 1998
The undersigned hereby appoints the Board of Directors of First
SecurityFed Financial, Inc. (the "Company"), with full powers of substitution,
to act as attorneys and proxies for the undersigned to vote all shares of
capital stock of the Company which the undersigned is entitled to vote at the
Annual Meeting of Stockholders (the "Meeting") to be held at the Suma Hall
located at 2457 W. Chicago Avenue, Chicago, Illinois on May 6, 1998 at 7:00
p.m., and at any and all adjournments and postponements thereof.
1. The election as directors of all nominees listed below:
/ / FOR / / VOTE WITHHELD
INSTRUCTION: To withhold your vote for any individual nominee, strike
a line in that nominee's name in the list below.
STEVE BABYK LILA MARIA BODNAR GEORGE KAWKA
2. The ratification of the adoption of the 1998 Recognition and
Retention Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. The ratification of the adoption of the 1998 Stock Option and
Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
4. Ratification of the appointment of Crowe, Chizek and Company, LLP
as auditors for the fiscal year ending December 31, 1998.
/ / FOR / / AGAINST / / ABSTAIN
In their discretion, the proxies are authorized to vote on any other
business that may properly come before the Meeting or any adjournment or
postponement thereof.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE BOARD NOMINEES AND
THE RATIFICATION OF THE OTHER PROPOSALS. IF ANY OTHER BUSINESS IS PRESENTED AT
THE MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR
BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE MEETING.
The Board of Directors recommends a vote "FOR" each of the
listed propositions.
(Continued and to be SIGNED on Reverse Side)
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This Proxy may be revoked at any time before it is voted by:
(i) filing with the Secretary of the Company at or before the Meeting a written
notice of revocation bearing a later date than this Proxy; (ii) duly executing
a subsequent proxy relating to the same shares and delivering it to the
Secretary of the Company at or before the Meeting; or (iii) attending the
Meeting and voting in person (although attendence at the Meeting will not in
and of itself constitute revocation of this Proxy). If this Proxy is properly
revoked as described above, then the power of such attorneys and proxies shall
be deemed terminated and of no further force and effect.
The undersigned acknowledges receipt from the Company, prior to the
execution of this proxy, of notice of the Meeting, a Proxy Statement dated
March 24, 1998 and an Annual Report to Stockholders.
Dated: , 1998
----------------------------
----------------------------------------
Signature of Stockholder
----------------------------------------
Signature of Stockholder
Please sign exactly as your name(s)
appear(s) to the left. When signing as
attorney, executor, administrator,
trustee or guardian, please give your
full title. If shares are held
jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE
