FIRST BANKING CENTER, INC.
400 Milwaukee Avenue
Burlington, Wisconsin 53105
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 20, 1999
The Annual Meeting of Stockholders of First Banking Center, Inc. (the
"Corporation") will be held at 1:30 P.M. on April 20, 1999, at First Banking
Center, Inc., 400 Milwaukee Avenue, Burlington, for the purposes set forth in
the attached Notice of Annual Meeting. The accompanying Proxy is solicited on
behalf of the Board of Directors of the Corporation in connection with such
meeting or any adjournment(s) thereof. The approximate date on which the Proxy
Statement and form of Proxy are expected to be sent to security holders is March
19, 1999.
VOTING OF PROXIES AND REVOCABILITY
When the Proxy is properly executed and returned to the Secretary of the
Corporation, it will be voted as directed by the Stockholder executing the Proxy
unless revoked. If no directions are given, the shares represented by the Proxy
will be voted FOR the election of the nominees listed in the Proxy Statement,
and FOR Proposals II and III. If additional matters are properly presented, the
persons named in the Proxy will have discretion to vote in accordance with their
own judgment in such matters. Any person giving a Proxy may revoke it at any
time before it is exercised by the execution of another Proxy bearing a later
date, or by written notification to the Secretary of the Corporation, Mr. John
S. Smith, Secretary of First Banking Center, Inc., 400 Milwaukee Avenue,
Burlington, Wisconsin 53105. Stockholders who are present at the Annual Meeting
may revoke their Proxy and vote in person if they so desire.
VOTING SECURITIES, PERSONS ENTITLED TO VOTE AND VOTES REQUIRED
As of January 20, 1999, there were 1,488,631 shares of Common Stock ($1.00 par
value) (the "Common Stock") of the Corporation outstanding. The Board of
Directors has fixed March 5, 1999 as the record date and only stockholders whose
names appear of record on the books of the Corporation at the close of business
on March 5, 1999, will be entitled to notice of and to vote at the Annual
Meeting or any adjournment(s) thereof. A stockholder is entitled to one vote for
each share of stock registered in his or her name. A majority of the outstanding
Common Stock will constitute a quorum for the transaction of business at the
Annual Meeting. Abstentions will be treated as shares that are present and
entitled to vote for purposes of determining the presence of a quorum, but as
unvoted for purposes of determining the approval of any matter submitted to the
shareholders for a vote. The eleven nominees for director who receive the
largest number of affirmative votes cast at the Annual Meeting will be elected
as directors. Proposals II and III are adopted if the votes cast in favor of the
Proposals exceed the votes cast in opposition.
THE COST OF SOLICITATION OF THE PROXIES WILL BE BORNE BY FIRST BANKING CENTER,
INC. IN ADDITION TO USE OF THE MAILS, PROXIES MAY BE SOLICITED PERSONALLY BY THE
OFFICERS OF FIRST BANKING CENTER, INC., AND BY TELEPHONE.
The complete mailing address of First Banking Center, Inc. is 400 Milwaukee
Avenue, P.O. Box 660, Burlington, Wisconsin, 53105.
PRINCIPAL HOLDERS OF SECURITIES
As of January 20, 1999, the Trust Department of a wholly owned subsidiary of the
Corporation owned in a fiduciary capacity 178,024 shares of Common Stock,
constituting 11.9% of the Corporation's outstanding shares entitled to vote.
Sole voting and investment power is held with respect to 67,129 of such shares.
The only shareholder known to the Corporation to own beneficially more than 5%
of the outstanding Common Stock is Mr. Roman Borkovec. Mr. Borkovec's address is
31008 Weiler Road, Burlington, WI 53105. Mr. Borkovec's holdings consist of
57,325 shares held directly; 18,947 shares held in joint tenancy with his wife;
and 8,151 shares held by his wife in which shares Mr. Borkovec disclaims voting
and investment powers. The total shares owned by Mr. Borkovec and his wife
represent 5.67% of the outstanding Common Stock.
PROPOSAL 1
ELECTION OF DIRECTORS
It is the recommendation of the Board of Directors that 11 Directors be elected.
Unless authority is withheld by your proxy, it is intended that the shares
represented by the proxy will be voted FOR the 11 nominees listed below. All
listed nominees are incumbent directors. All listed nominees are also directors
of First Banking Center, (the "Subsidiary Bank") the wholly owned subsidiary
located in Burlington, Wisconsin. If any nominee is unable to serve for any
reason, the proxies will be voted for such person as shall be designated by the
Board of Directors to replace such nominee. The Board has no reason to expect
that any nominee will be unable to serve.
If Proposal II, as described below, is adopted, the Board will be divided into
three (3) classes and Directors will be elected to hold office for initial terms
of one (1), two (2) or three (3) years in accordance with the classification
indicated below and until their successors are elected and qualified. After such
terms of one (1), two (2) or three (3) years, as the case may be, each class of
Directors will be elected to terms of three (3) years and until their successors
are elected and qualified.
If Proposal II is not adopted, each of the eleven nominees will be elected for a
one (1) year term expiring in the year 2000 and until their successors are
elected and qualified.
<TABLE>
<CAPTION>
Director
Name and Background Since
Nominees for Directors for Term Expiring in 2000
(Class I Directors)
<S> <C>
John S. Smith, age 39, has been President and Trust Officer of the Subsidiary Bank, since April 1994. Mr. Smith
has been a director of the Subsidiary Bank, since 1992. He was Executive Vice President of the Subsidiary Bank,
from 1990 to 1994....................................................................................................1992
John M. Ernster, age 49, has been Manager of Business Development for Wisconsin Electric Power Company since 1994
and has held various positions with Wisconsin Electric Power Company since 1972. He has been a director of the
Subsidiary Bank, since 1991. ........................................................................................1992
Richard McKinney, age 61, was elected Vice Chairman of the Board in November of 1998. He has been President of
Tobin Drugs, Inc., Burlington, Wisconsin since 1981, President of Amy's Hallmark, Burlington, Wisconsin, since
1985 and owner of Sue's Hallmark, Lake Geneva, Wisconsin, since 1993. Mr. McKinney has been a director of the
Subsidiary Bank, since May 1988......................................................................................1988
Keith Blumer, age 50, has been President and owner of Plainview Stock Farms, a cattle and grain farm operation
near Albany, Wisconsin since 1979. Mr. Blumer was appointed to the Board in April 1998 and previously served on
the Board of First Banking Center - Albany, a subsidiary bank of the Corporation, from 1985 until it was merged
with First Banking Center, Burlington in April 1998. ................................................................1998
</TABLE>
<TABLE>
<CAPTION>
Director
Name and Background Since
Nominees for Directors for Term Expiring in 2001
(Class II Directors)
<S> <C>
David Boilini, age 46, has been President of J. Boilini Farms, a diversified commercial operation involved in the
growing of vegetables and grain, as well as the production of mint for the flavoring industry since 1979. Mr.
Boilini has been a director of the Subsidiary Bank, since February 1993..............................................1993
Thomas Lakin, Jr., age 56, has been President and owner of Finishing and Plating Services, a commercial
electroplating job shop located in Kenosha, Wisconsin, since 1980. Mr. Laken was appointed to the Board in
April of 1998. He has been a director of the Subsidiary Bank, since 1996. ...........................................1998
Patrick Sebranek, age 52, has been owner and editorial director of the Write Source, an educational development
house for English textbooks since 1976. Mr. Sebranek has been a director of the Subsidiary Bank since September
1995. ...............................................................................................................1996
Daniel T. Jacobson, age 41, is a CPA and partner in the firm of Reffue, Pas, Jacobson, & Koster, LLP in Monroe,
Wisconsin. Mr. Jacobson has been with the accounting firm since 1979. Mr. Jacobson was appointed to the Board
in April 1998 and previously served on the Board of First Banking Center - Albany, a subsidiary bank of the
Corporation, from 1994 until it was merged with First Banking Center, Burlington in April 1998.......................1998
</TABLE>
<TABLE>
<CAPTION>
Director
Name and Background Since
Nominees for Directors for Term Expiring in 2002
(Class III Directors)
<S> <C>
Brantly Chappell, age 45, was hired as President and CEO of the Corporation in October 1997. At that time he was
also appointed to the Board of the Corporation and the Board of the Subsidiary Bank. In April of 1998 Mr.
Chappell was elected CEO of the Subsidiary Bank. From 1983 to 1997 Mr. Chappell held various senior management
positions with Bank One most recently Executive Vice President/Market Manager of Madison Market. ....................1997
Melvin W. Wendt, age 60, was elected Chairman of the Board in November of 1998, he has owned and operated Mel
Wendt Realty, a real estate brokerage firm, since 1964. Mr. Wendt has also served as Chairman of the Board of
the Subsidiary Bank, since November 1998 has been a member of the Subsidiary Bank board since 1989. .................1989
Charles R. Wellington, age 49, has been a partner in the law firm of Kittelsen, Barry, Ross, Wellington, and
Thompson since 1981. Mr. Wellington previously served on the Board of First Banking Center - Albany, a
subsidiary bank of the Corporation, from 1989 until it was merged with First Banking Center, Burlington in
April 1998. .........................................................................................................1996
</TABLE>
Information Regarding Board of Directors and Committees
The Board of Directors of First Banking Center, Inc., held three meetings during
the year of 1998.
All Directors attended at least 75% of the meetings of the Board of Directors
and committees of which they were a member.
The committee and committee assignments are set forth below. In addition,
Directors of the Corporation serve as Directors and committee members of the
Corporation's subsidiary.
The Compensation Committee, whose members are Mr. Sebranek, Mr. McKinney and Mr.
Laken, met two times during 1998. The committee's duties are to define personnel
needs, establish compensation and fringe benefit guidelines, and evaluate senior
management performance. The committee makes its recommendations to the full
Board for their approval. The Audit Committee, whose members are Mr. Boilini,
Mr. Sebranek, Mr. Lakin, and Mr. Jacobson met four times during 1998. The
primary function is to verify and evaluate operational systems in the
Corporation and to determine that proper accounting and audit procedures are
being followed as established by company policies. Additionally, the Audit
Committee makes recommendations as to the engagement of independent auditors.
The Nominating Committee whose members are Mr. Wendt, Mr. Smith, Mr. Ernster,
Mr. Chappell, and Mr. Wellington met once during 1998. The committee is
responsible for the selection of nominees to the Board of Directors. The
Nominating Committee will consider nominees to the Board submitted by
stockholders in writing to the Secretary of First Banking Center, Inc.
CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to the beneficial ownership of
shares of Common Stock of each director, each nominee for director, and each
Named Executive Officer, individually, and all directors and executive officers
of the Corporation, as a group. Except as otherwise indicated in the footnotes
to the table, each individual has sole investment and voting power with respect
to the shares of Common Stock set forth.
<TABLE>
<CAPTION>
. Common Stock directly,
Name and Other Position with indirectly or beneficially Percent of
First Banking Center, Inc. owned as of January 20, 1999 Outstanding
- -------------------------- ---------------------------- -----------
<S> <C> <C>
Brantly Chappell (President & CEO)....................................2,457 (1) (2) . 17%
John S. Smith (Secretary)............................................15,795 (1) 1.06%
Melvin W. Wendt (Chairman)...........................................11,763 (1)(3) . 79%
Richard McKinney (Vice Chairman)......................................8,653 (1)(4) . 58%
Keith Blumer..........................................................1,762 (1)(5) . 12%
David Boilini........................................................10,512 (1)(6) . 71%
John M. Ernster.......................................................1,666 (1)(7) . 11%
Daniel T. Jacobson......................................................900 (1)(8) . 06%
Thomas Lakin, Jr......................................................2,594 (1)(9) . 17%
Patrick Sebranek......................................................4,114 (1)(10) . 28%
Charles R.Wellington..................................................2,500 (1)(11) . 17%
All directors and named executive officers as a group................62,716 4.22%
<FN>
<F1>
(1)......Includes shares issuable pursuant to incentive stock options exercisable within sixty days of January 20, 1999
as follows Mr. Chappell, 667 shares, Mr. Smith, 3,133 shares, Mr. Wendt, 300 shares, Mr. McKinney, 300 shares,
Mr. Blumer, 300 shares, Mr. Boilini, 300 shares, Mr. Ernster, 300 shares, Mr. Jacobson, 300 shares, Mr. Lakin, 100
shares, Mr. Sebranek, 200 shares, Mr. Wellington, 200 shares.
<F2>
(2)......Includes 707 shares held directly by Mr. Chappell and 1,083 shares held by his wife in which Mr. Chappell disclaims voting
or investment powers.
<F3>
(3)......Includes 2,325 shares held directly by Mr. Wendt and 9,138 shares held in joint tenancy with his wife in which shares
Mr. Wendt has shared voting and investment powers.
<F4>
(4)......Includes, 3,803 shares held directly by Mr. McKinney, 2,452 shares held in joint tenancy with his wife in which shares
Mr. McKinney shares voting and investment powers, and 2,098 shares held by his wife in which Mr.McKinney disclaims
voting or investment powers.
<F5>
(5)......Includes 1,362 shares held directly by Mr. Blumer and 100 shares held in joint tenancy with his wife in which Mr. Blumer
shares voting and investment powers.
<F6>
(6)......Includes 8,334 shares held directly by Mr. Boilini, and 1,878 shares owned by J. Boilini Farms which Mr. Boilini has
shared voting and investment powers.
<F7>
(7)......Includes 1,196 shares held directly by Mr. Ernster and 170 shares held by his wife in which shares Mr. Ernster disclaims
voting or investment powers.
<F8>
(8)......Includes 400 shares held in joint tenancy with his wife in which shares Mr. Jacobson shares voting and investment powers,
200 shares which Mr. Jacobson holds in custody for his daughter under the Wisconsin Uniform Gift to Minors Act.
<F9>
(9)......Includes 1,552 shares held directly by Mr. Lakin, 696 shares held in joint tenancy with his wife in which shares Mr. Lakin
shares voting and investment powers, and 246 shares held by his wife in which Mr. Lakin disclaims voting or investment
powers.
<F10>
(10).....Includes 3,914 shares held in joint tenancy with his wife in which shares Mr. Sebranek shares voting, and investment
powers.
<F11>
(11).....Includes of 2,300 shares held directly by Mr. Wellington.
</FN>
</TABLE>
COMPENSATION OF DIRECTORS
Fees
Directors of the Corporation are paid the following fees for their services:
$425.00 per directors meeting, and $75.00 per committee meeting attended. If the
Corporation's Board meetings are held in conjunction with the Subsidiary Bank
meeting, the fee is $100.00 per meeting attended.
Pension Plan
First Banking Center (the "Bank"), a wholly-owned subsidiary of the Corporation,
has entered into pension and death benefit agreements with its directors.
Pursuant to the agreement, pension benefits accrue at the rate of $10,000 for
each full year a director serves on the board for the first six years of
service. Upon completing six full years of service, the director is entitled to
ten annual payments of ten thousand dollars each. Payments will commence in
January of the year in which the director attains the age of 65 years. Payments
under the plan are funded through the purchase of life insurance. The Bank is
the owner and beneficiary of such life insurance policies and is responsible for
payment of the premium on such policies. Total deferred liability expense for
the Directors' pension and death benefit agreements was $56,000, $55,000, and
$55,000, respectively, for 1998, 1997, and 1996.
Deferred Compensation Plan
The Bank has also established a deferred compensation plan for its directors
pursuant to which a director may have a portion of his/her director's fees
deferred. Upon attaining the age of 65 or normal retirement, the Bank will pay
monthly benefits for a period of 15 years. The amount of such payment is
determined in each case by the amount of fees deferred and length of
participation in the deferred compensation plan. Total deferred liability
expense was $37,000, $40,000 and $18,000, respectively, for 1998, 1997, and
1996. Deferred directors' fees in each of the respective years were $4,200,
$4,200 and $12,000.
Stock Option Plan
For a description of the Stock Option Plan see "EXECUTIVE COMPENSATION Incentive
Stock Option Plan."
PROPOSAL II
Proposal to Amend the Corporation's Articles of Incorporation
to Provide for Classification of Directors
On February 24, 1999, the Corporation's Board of Directors unanimously approved
and recommended that the shareholders approve the adoption of Proposal II.
Description of Amendment
Proposal II if adopted, will amend Article VII of the Articles in its entirety
to divide the Board of Directors into three classes of Directors serving
staggered three-year terms after initial terms of one (1), two (2) and three (3)
years. Proposal II is discussed in greater detail below.
If Proposal II is adopted by the shareholders, the amendment will become
effective at the 1999 Annual Meeting of Shareholders of the Corporation. The
full text of Proposal II is attached to this Proxy Statement as Exhibit A. The
following summary of Proposal II is qualified in its entirety by reference to
Exhibit A.
Proposed Article VII would divide the Board of Directors into three classes and
provide that one class would be elected each year. Initially, however, members
of all three classes would be elected at the 1999 Annual Meeting. As explained
under "Election of Directors," the slate of eleven Directors nominated for
election at the 1999 Annual Meeting will be proposed to be elected for three
separate classes as follows: four Directors, constituting the "Class I
Directors," will be elected for a one-year term expiring at the 2000 Annual
Meeting; four Directors, constituting the "Class II Directors," will be elected
for a two-year term expiring at the 2001 Annual Meeting; and three Directors,
constituting the "Class III Directors," will be elected for a three-year term
expiring at the Annual Meeting in the year 2002, If Proposal II is adopted, at
each Annual Meeting after the 1999 Annual Meeting, Directors will be elected to
serve for a three-year term. At present, all Directors of the Corporation are
elected annually to serve one-year terms. The number of Directors to be elected
at the 1999 meeting is eleven. The Board of Directors is presently comprised of
eleven persons.
The number of Directors is presently established in the Corporation's Bylaws,
which provide that the Board of Directors shall consist of no less than 5, nor
more than 25 members, except that the Board may, by majority vote, increase the
number of Directors. The Board may also fill any vacancies occurring on the
Board.
Currently, any Director elected by the Board to fill a vacancy will serve only
until the next Annual Meeting of Shareholders. Under proposed Article VII, any
Director so elected to fill a vacancy will hold office for the same term as
other Directors of the same class, and additional Directors would be apportioned
among the three classes to make all classes as nearly equal as possible.
Reasons for and Effects of the Amendment
In recent years, there have been attempts by various individuals and entities to
acquire significant minority positions in certain companies with the intent of
obtaining actual control of the companies by electing their own slate of
Directors, or achieving some other goal, such as the repurchase of their shares
at a premium which would not be available to all shareholders. These individuals
or groups try to elect a company's entire Board of Directors through a proxy
contest or otherwise, even though they do not own a majority of its outstanding
shares entitled to vote. Such dissident shareholders frequently disrupt the
general business activity of a corporation solely for the purpose of causing it
to repurchase their shares at a premium which is not made available to other
shareholders, or causing the corporation to engage in a merger or other
corporate transaction which may not be in the best interest of all shareholders.
The Board of Directors believes that adoption of Proposal II is advantageous to
the Corporation and its shareholders because it will enhance the likelihood of
continuity and stability in the composition of the Corporation's Board of
Directors and in the policies formulated by the Board. The Board believes that
this, in turn, will permit it to represent more effectively the interests of all
shareholders in a variety of situations, including in particular, responding to
circumstances created by demands or actions by a minority shareholder or group
of shareholders. If Proposal II is adopted, the Board believes that it will be
in a stronger position to resist the personal demands of a shareholder or group
and would be able to act more effectively in the best interests of all
shareholders. The Board believes that, if adopted, Proposal II will enable the
Board to negotiate more effectively on behalf of, or to seek better alternatives
for, all shareholders in a variety of situations that may be presented, whether
or not related to attempts to effect a change in the ownership or control of the
Corporation.
Because the amendment would delay their ability to obtain control of the Board
and the Corporation the amendment set forth in Proposal II would discourage
persons or groups from pursuing actions which are not in the interest of all
shareholders. If Proposal II is adopted, it will generally take at least two
annual meetings of shareholders to elect a majority of Directors. Under the
Corporation's Articles and Bylaws as currently in effect, an entity controlling
a large block of the Corporation's Capital Stock could possibly replace the
entire Board at just one meeting of the Corporation's shareholders.
Disadvantages of the Proposed Amendment
Proposal II is designed to discourage certain hostile attempts to gain immediate
control of the Corporation without purchasing all of the outstanding Capital
Stock. However, Proposal II would apply to all shareholders, not just
shareholders intent on exacting a benefit from the Corporation without regard to
the interest of other shareholders. Under Proposal II, shareholders would have
to act at two annual meetings in order to change majority control on the Board.
Thus, Proposal II would make it impossible to effect an immediate change in the
Board. A classified Board could delay shareholders who do not agree with the
policies of the Board of Directors from removing a majority of the Board for up
to two years.
The Board has no knowledge of any specific current efforts to accumulate the
Corporation's Capital Stock or to obtain control of the Corporation by means of
merger, tender offer, proxy contest or otherwise.
Conclusion
Because Proposal II limits shareholders authority, it involves certain
disadvantages. Nonetheless, the Board believes that the advantages of adopting
Proposal II outweigh any disadvantages and that it is prudent and in the best
interest of all shareholders to adopt Proposal II. The Board believes that the
advantages which will result from the greater assurance of Board continuity and
Board review of acquisition proposals will outweigh any disadvantages which may
result from discouraging potential acquirers from making an effort to obtain
control of the Corporation.
Vote Required for the Adoption of Amendment and Board Recommendation
The amendment to the Articles of Incorporation is approved if the votes cast
favoring the amendment exceed the votes cast in opposition to the amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR PROPOSAL II.
THE PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
SHAREHOLDERS SPECIFY TO THE CONTRARY IN THEIR PROXIES OR SPECIFICALLY ABSTAIN
FROM VOTING ON THIS MATTER.
If Proposal II is approved by the shareholders, the Corporation will amend its
Bylaws to conform the Bylaws with the provisions of the amended Articles.
EXECUTIVE COMPENSATION
The following table sets forth information concerning paid or accrued
compensation for services to the Corporation and its subsidiary for the fiscal
years ended December 31, 1998, 1997 and 1996 earned by or awarded or paid to the
persons who were chief executive officer and other executive officers of the
Corporation (the "Named Executive Officers") whose salary and bonus exceeded
$100,000 during 1998.
<TABLE>
Summary Compensation Table
============================ =========================================================== =======================================
Long-Term
Annual Compensation Compensation
Awards
============================ =========================================================== =======================================
============================ --------- -------------- ------------- -------------------- -------------------- ==================
<CAPTION>
Securities
Name and Salary Bonus Other Underlying All Other
Principal Year ($) ($) Annual Options/SARs Comp.
Position Comp.(1) (#)
============================ ========= ============== ============= ==================== ==================== ==================
<S> <C> <C> <C> <C> <C> <C>
Brantly Chappell, 1998 $165,000 2,000 $14,000(2)
President and CEO 1997 $ 19,000 4,000 $ -0-
1996 -0- (3)
John S. Smith 1998 $101,000 $7,000 4,000 $ 6,000(4)
Secretary 1997 (5)
1996 (5)
============================ ========= ============== ============= ==================== ==================== ==================
<FN>
* Messrs. Chappell and Smith also serve in various capacities as directors and/or officers of the Corporation's
subsidiary.
<F1>
(1) Aggregate amount of other annual compensation does not exceed the lesser of $50,000 or 10% of executive officer's
salary and bonus, and therefore no disclosure is made.
<F2>
(2) Contribution to the Corporation's Defined Contribution (401(k)) Plan of $2,000; accrued liability with respect to
Salary Continuation Agreement of $12,000.
<F3>
(3) Mr. Chappell commenced employment with Corporation in 1997.
<F4>
(4) Contribution to the Corporation's Defined Contribution (401(k)) Plan of $5,000; accrued liability of $1,000 under the
Directors' pension plan of First Banking Center, the wholly owned subsidiary of the Corporation.
<F5>
(5) No disclosure is made because Mr. Smith did not meet the definition of "Named Executive Officer" in 1997 and 1996.
</FN>
</TABLE>
Employment Agreement and Salary Continuation Agreement
Effective October 6, 1997, the Corporation and Mr. Brantly Chappell entered into
an employment agreement (the "Chappell Employment Agreement") pursuant to which
Mr. Chappell will serve as President and Chief Executive Officer of the
Corporation. The Chappell Employment Agreement has an initial term of two years,
and is automatically renewed for an additional year at each anniversary date
unless either party gives written notice that no such renewal shall occur.
Under the Chappell Employment Agreement, Mr. Chappell will perform the customary
duties of the Chief Executive Officer of the Corporation, as further set forth
in the Corporation's Bylaws and as may, from time to time, be determined by the
Corporation's Board of Directors. As compensation for such service, the
Corporation will pay Mr. Chappell the greater of $165,000 annually or
compensation as may be established from time to time during the employment
period by the Board of Directors of the Corporation. During the employment
period, Mr. Chappell is entitled to participate in such other benefits of
employment such as are generally made available to executive officers of the
Corporation and its subsidiary.
The Chappell Employment Agreement further provides that on or before December
31, 1997, the Corporation shall grant Mr. Chappell an option to purchase 2,000
shares of the Corporation's common stock, and on or before December 31, 1998, an
additional option to purchase 2,000 shares of the Corporation's common stock
shall be granted to Mr. Chappell. Both options are granted pursuant to the terms
and conditions of the Corporation's 1994 Incentive Stock Plan. The exercise
price for each grant is 100% of the market price of the stock on the date of
grant.
If the Chappell Employment Agreement is terminated by the Corporation other than
for reasons of Mr. Chappell's death, disability or retirement, or without
"cause" as defined in the Chappell Employment Agreement; or if Mr. Chappell
terminates the Chappell Employment Agreement following a "change in control" as
defined in the Chappell Employment Agreement, then Mr. Chappell shall be
entitled to receive severance payments equal to $75,000 annually for a period of
two years from the termination date. In addition to the aforementioned severance
payments, Mr. Chappell will be entitled to fringe benefits for the two-year
period during which he is entitled to severance payments.
If Mr. Chappell is terminated due to disability, as defined in the Chappell
Employment Agreement, he will be entitled to payment of his salary for one year
at the rate in effect at the time notice of termination is given. Such
disability payments will be reduced by payments received under any disability
plan or Social Security or other governmental compensation program. If
termination occurs for any reason other than those enumerated, the Corporation
will be obligated to pay the compensation and benefits only through the date of
termination.
The Chappell Employment Agreement provides that during the employment period and
for one (1) year thereafter, Mr. Chappell shall not engage in any activity which
will result in his competing with the Corporation or its subsidiary.
To further the objective of providing continued successful operation of the
Corporation and its subsidiary and to provide additional incentive for Mr.
Chappell to enter into the Chappell Employment Agreement, the Corporation and
Mr. Chappell have entered into a Salary Continuation Agreement (the
"Continuation Agreement") as of October 6, 1997. The Continuation Agreement
provides for monthly payments of $5,833.33 upon retirement at age 65 for the
remainder of Mr. Chappell's life, with a guarantee of 180 such monthly payments
to Mr. Chappell or his beneficiaries.
Upon Mr. Chappell's voluntary termination of employment prior to age 65 for
reasons other than death or disability or upon Mr. Chappell's discharge at any
time "for cause" as defined in the Chappell Employment Agreement, the
Corporation will not be obligated to pay any benefits pursuant to the
Continuation Agreement; however, if Mr. Chappell incurs voluntary or involuntary
termination of employment prior to age 65 for reasons other that death,
disability, or discharge for cause, but on or after a change in control as
defined in the Continuation Agreement, Mr. Chappell will be entitled to the
benefits payable under the Continuation Agreement.
The benefits provided in the Continuation Agreement will be funded through the
purchase of single premium life insurance policies with cash value sufficient to
fund the payments required under the Continuation Agreement.
The Board of Directors believes that Mr. Chappell will substantially contribute
to the successful and profitable operation of the Corporation and its
subsidiary, and such contribution will result in substantial enhancement of
shareholder value. For these reasons and to provide management continuity, the
Board of Directors has determined that the Chappell Employment Agreement and
Continuation Agreement are in the best interest of the Corporation, its
subsidiary and its shareholders.
401(k) Profit Sharing Plan
The Corporation has a trusteed 401(k) profit sharing plan covering substantially
all employees of the Corporation and its subsidiary. The plan allows for
voluntary employee contributions. Total contributions to the 401(k) Plan by the
Corporation were $149,000 in 1998, $132,000 in 1997 and $98,000 in 1996.
Incentive Stock Plan
The following table presents information about stock options granted during 1998
to the executive officers named in the Summary Compensation Table.
<TABLE>
Stock Option Grants in 1998
Individual Grants
========================== ------------------------- -------------------------- ------------------------- =========================
<CAPTION>
Number of Percent of Total
Securities Options Granted to
Underlying Employees in Exercise Expiration
Name Options(1) Fiscal Year(1) Price Date
========================== ========================= ========================== ========================= =========================
<S> <C> <C> <C> <C>
Brantly Chappell 4,000 8.27% $32.50 11/09/03
John Smith 4,000 8.27% $32.50 11/09/03
========================== ========================= ========================== ========================= =========================
<FN>
<F1>
(1) All options granted in 1998 were granted under the 1994 Incentive Stock Plan.
</FN>
</TABLE>
The following table presents information concerning stock options exercised
during 1998. Also shown is information on unexercised options as of December 31,
1998.
<PAGE>
<TABLE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
====================== ---------------- ---------------- ----------------------------------- ===================================
<CAPTION>
Value of Unexercised,
Number of In-the-Money Options(3)
Shares Value Unexercised at FY End
Name Acquired Realized(1)(2) Options at FY End Exercisable Unexercisable
On Exercise Exercisable Unexercisable
====================== ================ ================ =================================== ===================================
<S> <C> <C> <C> <C> <C> <C>
Brantly
Chappell -0- -0- 667 5,333 $3,000 $6,500
500 $6,750
John 3,133 4,967
Smith $28,000 $8,500
====================== ================ ================ =================================== ===================================
<FN>
<F1>
(1) The exercise price for each grant was 100% of the market value of the shares on the date of grant.
<F2>
(2) Represents market price at date of exercise, less option price, times number of shares.
<F3>
(3) For valuation purposes, a December 31, 1998, market price of $32.50.
</FN>
</TABLE>
On August 8, 1994, the Board of Directors of the Corporation adopted the First
Banking Center, Inc. 1994 Incentive Stock Plan (the "Plan") which was
approved by the shareholders on April 11, 1995.
The Plan replaced the 1984 Incentive Stock Plan, which terminated in
April 1994. The purpose of the Plan is to advance the interests of the
Corporation and its subsidiary by encouraging and providing for the acquisition
of an equity interest in the Corporation by key employees and by enabling the
Corporation and its subsidiary to attract and retain the services of employees
upon whose skills and efforts the success of the Corporation depends. In
addition the Plan is designed to promote the best interests of the Corporation
and its shareholders by providing a means to attract and retain competent
directors who are not employees of the Corporation or of its subsidiary.
Summary Description
The following summary description of the Plan is qualified in its entirety by
reference to the full text of the Plan, a copy of which may be obtained upon
request directed to the Corporation's Secretary at First Banking Center, Inc.,
400 Milwaukee Avenue, Burlington, WI 53105. For recommended changes to the plan
please refer to Proposal III below.
The Plan is administered by the Compensation Committee of the Board, consisting
of not less than three (3) directors (the "Committee"). The Committee is
comprised of directors who are disinterested persons within the meaning of Rule
16b-3 as promulgated by the Securities and Exchange Commission. Subject to the
terms of the Plan and applicable law, the Committee has the authority to:
establish rules for the administration of the Plan; select the individuals to
whom options are granted; determine the numbers of shares of Common Stock to be
covered by such options; and take any other action it deems necessary for
administration of the Plan.
Participants in the Plan consist of all members of the Board of Directors of the
Corporation who are not employees of the Corporation or its subsidiary, and
individuals selected by the Committee. Those selected individuals may include
any executive officer or employee of the Corporation or its subsidiary and
non-employee directors of the subsidiary who, in the opinion of the Committee,
contribute to the Corporation's growth and development.
Subject to adjustment for dividends or other distributions, recapitalization,
stock splits or similar corporate transactions or events, the total number of
shares of Common Stock with respect to which options may be granted pursuant to
the Plan is 300,000. The shares of Common Stock to be delivered under the Plan
may consist of authorized but unissued stock or treasury stock.
The Committee may grant options to key employees and non-employee directors
(other than directors of the Corporation) as determined by the Committee. The
Committee has complete discretion in determining the number of options granted
to each such grantee. The Committee also determines whether an option is to be
an incentive stock option within the meaning of Section 422 of the Internal
Revenue Code or a nonqualified stock option. Following the first grant of
options in December 1994, each non-employee director of the Corporation will
automatically be granted a nonqualified stock option to purchase 100 shares of
Common Stock in December of each succeeding year.
The exercise price for all options granted pursuant to the Plan is the fair
market value of the Common Stock on the date of grant of the option; however, in
case of options granted to a person then owning more than 10% of the outstanding
Common Stock, the option price will not be less than 110% of the fair market
value on such date. The Committee will determine the method and the form of
payment of the exercise price. The payment may be in form of cash, Common Stock,
other securities or other property having a fair market value equal to the
exercise price.
Except for options granted to non-employee directors of the Corporation, options
granted pursuant to the Plan expire at such time as the Committee determines at
the time of grant, provided that no option may be exercised after the fifth
anniversary date of its grant. Options granted to directors of the Corporation
expire on the fifth anniversary of the date of grant. Options are exercisable in
increments of one-third on the first, second and third anniversaries of the date
of grant.
Stock acquired pursuant to the Plan may not be sold or otherwise disposed of
within 5 years from the date of exercise, except by gift, bequest or inheritance
or in case of participant's disability or retirement. The Corporation also has a
"right of first refusal" pursuant to which any shares of Common Stock acquired
by exercising an option must first be offered to the Corporation before they may
be sold to a third party. The Corporation may then purchase the offered shares
on the same terms and conditions (including price) as applied to the potential
third-party purchaser.
The Board of Directors of the Corporation may terminate, amend or modify the
Plan at any time, provided that no such action of the Board, without approval of
the shareholders may: increase the number of shares which may be issued under
the Plan; materially increase the cost of the Plan or increase benefits to
participants; or change the class of individuals eligible to receive options.
The following is a summary of the principal federal income tax consequences
generally applicable to awards under the Plan. The grant of an option is not
expected to result in any taxable income for the recipient. The holder of an
Incentive Stock Option generally will have no taxable income upon exercising the
Incentive Stock Option (except that a liability may arise pursuant to the
alternative minimum tax), and the Corporation will not be entitled to a tax
deduction when an Incentive Stock Option is exercised. Upon exercising a
nonqualified stock option, the optionee must recognize ordinary income equal to
the excess of the fair market value of the shares of common stock acquired on
the date of exercise over the exercise price, and the Corporation will be
entitled at that time to a tax deduction for the same amount. The tax
consequences to an optionee upon disposition of shares acquired through the
exercise of an option will depend on how long the shares have been held and upon
whether such shares were acquired by exercising an Incentive Stock Option or by
exercising a nonqualified stock option. Generally, there will be no tax
consequences to the Corporation in connection with the disposition of shares
acquired under an option.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
General Policy
The compensation objective of the Corporation and its subsidiary is to link
compensation with corporate and individual performance in a manner which will
attract and retain competent personnel with leadership qualities. The process
gives recognition to the marketplace practices of other banking organizations.
Toward the end of achieving long-term goals of the shareholders, the
compensation program ties a significant portion of total compensation to the
financial performance of the Corporation in relation to its peer group. The
Compensation Committee makes recommendations on the compensation of the
Corporation's officers to the Board of Directors. The Compensation Committee's
recommendations reflect its assessment of the contributions to the long-term
profitability and financial performance made by individual officers. In this
connection, the Committee considers, among other things, the type of the
officer's responsibilities, the officer's long-term performance and tenure,
compensation relative to peer group and the officer's role in ensuring the
financial success of the Corporation in the future. Financial performance goals
considered by the Committee include earnings per share, return on assets, return
on equity, asset quality, growth and expense control.
In addition to measuring performance in light of these financial factors, the
Committee considers the subjective judgment of the Chief Executive Officer in
evaluating performance and establishing salary, bonus and long-term incentive
compensation for individual officers, other than the Chief Executive Officer.
The Committee independently evaluates the performance of the Chief Executive
Officer, taking into consideration such subjective factors as leadership,
innovation and entrepreneurship in addition to the described financial goals.
Base Salary
In determining salaries of officers, the Committee considers surveys and data
regarding compensation practices of financial institutions of similar size,
adjusted for differences in product lines, nature of geographic market and other
relevant factors. The Committee also considers the Chief Executive Officer's
assessment of the performance, the nature of the position and the contribution
and experience of individual officers (other than the Chief Executive Officer).
The Committee independently evaluates the Chief Executive Officer's performance
and compares his compensation to peer group data.
Annual Bonuses
Officers and employees of the Corporation and its subsidiary are awarded annual
bonuses at the end of each year at the discretion of the Committee. The amount
of the bonus, if any, for each officer (other than the Chief Executive Officer)
is recommended to the Committee by the Chief Executive Officer based upon his
evaluation of the achievement of corporate and individual goals and his
assessment of subjective factors such as leadership, innovation and commitment
to the corporate advancement. The Corporation's annual incentive bonus is based
on meeting specific financial performance targets pursuant to a bonus plan. The
plan provides for a range of bonus awards based, among other things, upon return
on assets. The minimum target goal for return on assets is 1%, which is required
for payment of a bonus.
Chief Executive Officer Compensation
The compensation for the Chief Executive Officer was established at a level
which the Committee believed would approximate the compensation of chief
executive officers of similar organizations and would reflect prevailing market
conditions. The Committee also took into consideration a variety of factors,
including the achievement of corporate financial goals and individual goals. The
financial goals included increased earnings, return on assets, return on equity
and asset quality. No formula assigning weights to particular goals was used,
and achievement of other corporate performance goals was considered in general.
The Chief Executive Officer was also awarded incentive stock options under the
Corporation's Incentive Stock Plan. Based upon its review of the
Corporation's performance, the Committee believes that the total compensation
awarded to the Chief Executive Officer for 1998 is fair and appropriate under
the circumstances.
Stock Options
The Committee administers the 1994 Incentive Stock Plan. Stock options
are designed to furnish long-term incentives to the officers of the Corporation
to build shareholder value and to provide a link between officer compensation
and shareholder interest. The Committee made awards under the Stock Option Plan
to the officers of the Corporation and its subsidiary in 1998. Awards were based
upon performance, responsibilities and the officer's relative position and
ability to contribute to future performance of the Corporation. In determining
the size of the option grants (except grants to the Chief Executive Officer),
the Committee considered information and evaluations provided by the Chief
Executive Officer. The award of option grants to the Chief Executive Officer was
based on the overall performance of the Corporation and on the Committee's
assessment of the Chief Executive Officer's contribution to the Corporation's
performance and his leadership.
The Committee
The Compensation Committee currently has three members. No member of the
Committee is an employee or officer of the Corporation or of its subsidiary.
None of the Committee members has interlocking relationships as defined by the
Securities and Exchange Commission, with the Corporation or its subsidiary. The
Committee is aware of the limitations imposed by Section 162(m) of the Internal
Revenue Code of 1986, as amended, on the deductibility of compensation paid to
certain senior executives to the extent it exceeds $1 million per executive. The
Committee's recommended compensation amounts meet the requirements for
deductibility.
The Compensation Committee: Patrick Sebranek, Richard McKinney, Thomas Lakin,Jr.
The following table shows the cumulative total stockholder return on the
Company's Common Stock over the last five fiscal years compared to the returns
of the Standard & Poor's 500 Stock Index and the NASDAQ Bank Index:
<TABLE>
<CAPTION>
PERFORMANCE TABLE
(INSERT PERFORMANCE GRAPH)
<S> <C> <C> <C> <C> <C> <C>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
First Banking Center, Inc. 100 133 149 176 200 232
S&P 500 100 101 140 171 228 294
NASDAQ Bank Index 100 100 148 191 318 285
</TABLE>
Proposal III
Proposal to Amend the First Banking Center, Inc.
1994 Incentive Stock Plan
Summary of Proposal
In 1995, the shareholders of the Corporation approved the 1994 Incentive
Stock Plan (the "Plan"). A summary description of the Plan is provided under
"EXECUTIVE COMPENSATION - Incentive Stock Plan" in this Proxy Statement.
On February 24, 1999, the Board of Directors of the Corporation adopted, subject
to shareholder approval, four amendments to the Plan. The full text of the
amendments is set forth in Exhibit B and the following summary discussion is
qualified by reference to Exhibit B.
Proposed Amendment 1:
Section 7.2 of the Plan currently provides for the annual grant to each
non-employee director of the Corporation a nonqualified stock option to purchase
100 shares of Common Stock. Such option is automatically granted in December of
each year. The option price is equal to the fair market value of the Common
Stock on the date of grant.
Under the proposed amendment, beginning in December of 1998, the nonqualified
stock option granted would provide for the purchase of 500 shares of Common
Stock at an option price equal to the fair market value of the Common Stock on
the date of grant. Section 7.2 would also be amended to provide for an
expiration date for exercising options of ten years, instead of the present five
years.
Proposed Amendment 2:
Section 7.5 of the Plan currently provides that each option shall expire at such
time as the Committee shall determine, provided, however, that no option shall
be exercisable later than the fifth anniversary date of grant.
Under the proposed amendment, such maximum exercise period would be extended to
the tenth anniversary date of its grant. However, options held by a person
owning more than 10% of the Common Stock would remain subject to the five-year
exercise period.
Proposed Amendment 3:
Section 8 of the Plan currently provides that except upon the occurrence of
certain events, Common Stock acquired upon the exercise on an option may not be
sold or otherwise disposed of within the five-year period following the date of
exercise.
Under the proposed amendment, the period within which the option stock could not
be sold would be reduced to the later of two years from the date of grant or one
year from the date of exercise of the option.
Proposed Amendment 4:
This amendment provides certain protections to option-holders in the event of a
"Change In Control" as defined in proposed Section 17 of the Plan. Section 17
would be added to the existing Plan and would provide for immediate vesting and
the ability to immediately exercise in full all options granted but unexercised
in the event of change in control of the Corporation.
Under the current provisions of the Plan, and under terms of outstanding option
agreements, options are exercisable as to one-third of the shares on the first
anniversary date of the date of grant, another one-third on the second
anniversary of the date of grant and as to the remaining shares on the third
anniversary of the date of grant. Added Section 17 would accelerate such
exercise dates and would enable holders of unexercised options to exercise such
options immediately upon the occurrence of an event which meets the definition
of a "Change In Control" under proposed Section 17 of the Plan.
Reasons for the Amendments:
As to proposed Amendment 1, the board believes that the success of the
Corporation depends to a large extent on its continued ability to attract and
retain directors with relevant and beneficial experience who are motivated to
exert their best efforts on behalf of the Corporation. The Board and management
have reviewed the Corporation's current arrangements for compensation of
directors and believe that an increase in option awards will promote the
long-term success of the Corporation by further aligning the interest of the
non-employee directors with the interests of the Corporation and its
stockholders.
Proposed Amendments 2 and 3 are designed to eliminate unnecessarily burdensome
restrictions on the right of option holders to exercise options and dispose of
the option shares when personal financial circumstances would dictate a
postponement in exercising options or would make an earlier sale of the option
shares advisable. The present requirements regarding exercising of options and
sale of option shares detract from the benefits the Plan was intended to provide
and are more restrictive than provisions found in the majority of option plans
maintained by the Corporation's competitors. The Corporation's Directors believe
that implementation of proposed Amendments 2 and 3 will provide further
incentives for key employees and non-employee directors to advance the interests
of the Corporation and its shareholders.
Proposed Amendment 4 is designed to protect the rights of holders of previously
granted options in case of a change in control of the Corporation. Many, if not
the majority of the companies with which the Corporation must compete for the
services of highly skilled employees and experienced and motivated non-employee
directors have provided for the protection of the option holders upon a change
in control. The Directors believe that the proposed change in control amendment
is appropriate to safeguard the rights of participants in the Plan and carry out
the intent and purpose of the Plan.
Voting Requirements and Recommendations:
The amendments of the 1994 Incentive Stock Plan are adopted if the votes cast in
favor of the amendments exceed the votes cast in opposition.
The Directors and management of the Corporation have a personal interest in the
ratification of the proposed amendments to the 1994 Incentive Stock Plan.
Nevertheless, the Board and management believe that the proposed amendments are
in the best interests of the Corporation and its shareholders. THEREFORE, THE
BOARD OF DIRECTORS AND MANAGEMENT OF THE CORPORATION RECOMMEND THAT THE
SHAREHOLDERS VOTE FOR THE RATIFICATION OF THE PROPOSED AMENDMENTS.
ADDITIONAL INFORMATION ON MANAGEMENT
Transactions With Directors and Officers
Certain directors and executive officers of the Corporation, and their related
interests had loans outstanding in the aggregate amounts of $1,198,000 and
$1,210,000 at December 31, 1998 and 1997, respectively. During 1998, $1,178,000
of new loans were made to directors and executive officers and their interests
and repayments made by them totaled $1,190,000. These loans were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the same time for comparable transactions with other persons and
did not involve more than normal risks of collectability or present other
unfavorable features. The loans to directors and executive officers and their
related business interests at December 31, 1998 represented 3.76% of
stockholders equity.
Section 16 Reports
Under Section 16(a) of the Securities Exchange Act of 1934, as amended, the
Corporation's directors and executive officers and shareholders holding more
than 10% of the outstanding stock of the Corporation (the "insiders") are
required to report their initial ownership of stock and any subsequent change in
such ownership to the Securities and Exchange Commission and the Corporation
(the "16(a) filing requirement"). Specific time deadlines for the 16(a) filing
requirements have been established by the Securities and Exchange Commission.
To the Corporation's knowledge, and based solely upon a review of the copies of
such reports furnished to the Corporation, all 16(a) filing requirements
applicable to Insiders during 1998 were satisfied on a timely basis.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Virchow, Krause & Company, LLP performed a complete audit of First Banking
Center, Inc. during 1998 and provided a certified financial statement for the
years ended December 31, 1998 and 1997.
Virchow, Krause & Company, LLP also performed a non-audit function for the
Corporation consisting of the preparation of the Corporation's 1998 Income Tax
returns. No representative of Virchow, Krause & Company, LLP will be present at
the Annual Stockholders' Meeting on April 20, 1999. The Board of Directors will
engage the services of a public accounting firm to provide a certified financial
statement for 1999. The Board will select such accounting firm at its annual
Directors Meeting.
PROPOSALS BY STOCKHOLDERS
Shareholders' proposals to be presented at the 2000 Annual Stockholders' Meeting
must be received by the Corporation at its principal office, 400 Milwaukee
Avenue, Burlington, Wisconsin, on or before November 20, 1999.
MISCELLANEOUS
Management does not intend to bring any other matters before the meeting and
knows of no matters to be brought before the meeting by others. If any other
matters properly come before the meeting, it is the intention of the persons
named in the accompanying proxy to vote said proxy in accordance with their best
judgment.
A COPY OF THE FIRST BANKING CENTER, INC. ANNUAL REPORT ON FORM 10-K INCLUDING
FINANCIAL STATEMENTS AND SCHEDULES FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES EXCHANGE ACT OF 1934 WILL BE MADE AVAILABLE TO
STOCKHOLDERS UPON WRITTEN REQUEST AT NO CHARGE. REQUESTS SHOULD BE ADDRESSED TO:
Mr. John S. Smith, Secretary, First Banking Center, Inc., 400 Milwaukee Avenue,
P.O. Box 660, Burlington, Wisconsin, 53105.
BY ORDER OF THE BOARD OF DIRECTORS
JOHN S. SMITH, SECRETARY
Burlington, Wisconsin
March 19, 1999
EXHIBIT A
PROPOSED ARTICLE VII OF THE ARTICLES OF INCORPORATION
OF FIRST BANKING CENTER, INC.
ARTICLE VII
The business and affairs of the Corporation shall be managed by a Board of
Directors. The number of directors shall be not less than five (5) nor more than
twenty-five (25), the exact number to be determined from time to time by
resolution adopted by affirmative vote of a majority of Directors then in
office. The directors shall be divided into three classes, designated Class I,
Class II and Class III, and the term of office of directors of each class shall
be three years following the initial term of one (1), year for Class I
Directors, two(2) years for Class II Directors and three (3) years for Class III
Directors. Each class shall consist, as nearly as possible, of one-third of the
total number of directors constituting the entire Board of Directors. If the
number of directors is changed by resolution of the Board of Directors pursuant
to this Article VII, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, but in no case shall a decrease in the number directors shorten
the term of any incumbent director.
A director shall hold office until the Annual Meeting for the year in which his
term expires and until his successor shall be elected and shall qualify. Any
newly created directorship resulting from an increase in the number of directors
and any other vacancy on the Board of Directors, however caused, shall be filled
by the vote of a majority of the directors then in office, provided, however,
that if the number of directors is increased, not more than two such newly
created directorships may be filled by the directors in any period between
Annual Meetings of shareholders. Any director so elected to fill any vacancy in
the Board of Directors, including a vacancy created by an increase in the number
of directors, shall hold office for the remaining term of directors of the class
to which he has been elected and until his successor shall be elected and shall
qualify.
EXHIBIT B
AMEDMENTS OF THE 1994 INCENTIVE STOCK PLAN
The four proposed amendments would amend Section 7.2, Section 7.5 and Section 8
and would add a new Section 17, as follows:
1. Section 7.2 Grant of Options to Board of Directors reading as follows:
"Simultaneously with the first grant of Options under the Plan in
December 1994, each Board Director shall automatically be granted a
nonqualified stock option to purchase 100 shares of Stock. Thereafter,
simultaneously with the grant of Options under the Plan to other
Participants in each December beginning in 1995 (or, if no such grants
are made in a particular year, then on December 31 of such year), each
Board Director shall automatically be granted a nonqualified stock
option to purchase 100 shares of Stock. Each such option shall have an
Option price equal to the Fair Market Value of the Stock on the date of
grant, shall expire on the fifth (5th) anniversary of the date of
grant, and shall be first exercisable as to one-third (1/3) of the
shares on the first anniversary of the date of the grant, as to another
one-third (1/3) of the shares on the second anniversary of the date of
the grant as to the remaining shares on the third anniversary of the
date of the grant."
is deleted in its entirety and the following is inserted in lieu thereof:
Section 7.2 Grant of Options to Board of Directors
"Simultaneously with the first grant of Options under the Plan in
December, 1994, each Board Director shall automatically be granted a
nonqualified stock option to purchase 100 shares of Stock. Thereafter,
simultaneously with the grant of Options under the Plan to other
Participants in each December beginning in 1995 (or, if no such grants
are made in a particular year, then on December 31 of such year), each
Board Director shall automatically be granted a nonqualified stock
option to purchase 100 Shares of Stock. Beginning in December of 1998
and in each December thereafter, each Board Director shall
automatically be granted a nonqualified stock option to purchase 500
shares of Stock. Each such Option shall have an Option price equal to
the Fair Market Value of the Stock on the date of grant, shall expire
on the tenth (10th) anniversary of the date of grant, and subject to
Section 17 shall be first exercisable as to one-third (1/3) of the
shares on the first anniversary of the date of grant, as to another
one-third (1/3) of the shares on the second anniversary of the date of
grant and as to the remaining shares on the third anniversary of the
date of the grant."
2. Section 7.5: Duration of Options reading as follows:
"Subject to the provisions of Section 7.2 in the case of Options
granted to Board Directors, each Option shall expire at such time as
the Committee shall determine at the time it is granted, provided,
however, that no Option shall be exercisable later than the fifth (5th)
anniversary date of its grant."
is deleted in its entirety and the following is inserted in lieu thereof:
Section 7.5 Duration of Options
"Subject to the provisions of Section 7.2 in the case of Options
granted to the Board Directors, each Option shall expire at such time
as the Committee shall determine at the time it is granted, provided,
however, that no Option shall be exercisable later than the tenth
(10th) anniversary of its grant and provided further that in no event
shall any Option granted to a person then owning more than 10% of the
Corporation's outstanding stock be exercisable after the expiration of
five (5) years from the date of grant thereof."
3. Section 8 Additional Transfer Restrictions, reading as follows:
"No Participant may sell or otherwise dispose of Stock acquired upon
the exercise of an Option within the five (5) year period beginning on
the date of exercise, except that (a) subject to the provisions of
Section 10.4, the Participant may dispose of the Stock by gift, bequest
or inheritance at any time, and (b) in the case of a Participant's
total and permanent disability or early or normal retirement, the
Participant may sell, encumber of otherwise dispose of the stock at any
time after the expiration of one (1) year after the date of exercise of
the option and two (2) years after the date of grant of the Option
pursuant to which the Stock was acquired."
is deleted in its entirety and the following is inserted in lieu thereof:
"No participant may sell or otherwise dispose of Stock acquired upon
the exercise of an Option before the later of the expiration of the
two-year period beginning on the date of the grant of the Option or
the expiration of the one-year period beginning on the date of the
exercise of such Option, provided that a Participant may dispose of
the Stock by gift, bequest or inheritance at any time."
4. Section 17 - Change in Control is added as follows:
Section 17 - Change in Control
a) For purposes f this Plan, a "Change in Control" shall mean and
include any transaction or series of transactions pursuant to
which any person (as defined in Section 3(a) (9) and 13(d) of the
Securities Exchange Act of 1934 (the "Exchange Act")), acting
directly or indirectly, acquires or becomes the beneficial owner
(as defined in Rule 13(d)-3 promulgated pursuant to the Exchange
Act) of twenty-five percent (25%) or more of the outstanding
stock or substantially all of the assets of the Corporation or
any of its subsidiaries, or pursuant to which the Corporation or
any of its subsidiaries shall merge, consolidate or liquidate
with or into another corporation or business entity. For
purposes of this Section 17, a "Change in Control" shall occur
upon the earlier of i) the execution of any legally binding
agreement or other document of any nature (including without
limitation a stock purchase agreement, merger or consolidation
agreement, plan of liquidation, asset purchase agreement) which
will result in such acquisition, ownership, merger, consolidation
or liquidation or (ii) the consummation of the aforedescribed
events. "Change in Control" shall not refer to or include any
transaction involving only entities controlled directly or
indirectly by the Corporation.
b) Upon a Change in Control, the Options granted pursuant to this
Plan shall become fully vested and immediately exercisable in
full, the to extent that the Options had not theretofore
become exercisable, notwithstanding any other provisions of this
Plan.
