<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[X] Preliminary proxy statement
[_] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14A-11(c) or Rule 14a-12
First Oak Brook Bancshares, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common And Class A Common
-------------------------------------------------------------------------
(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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Please check 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.:
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(3) Filing party:
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(4) Date filed:
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<PAGE>
FIRST OAK BROOK BANCSHARES, INC.
1400 SIXTEENTH STREET
OAK BROOK, ILLINOIS 60523
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 5, 1998
April 1, 1998
To the Shareholders of First Oak Brook Bancshares, Inc:
You are cordially invited to attend the Annual Meeting of the Shareholders
of First Oak Brook Bancshares, Inc. to be held in the Conference Center
located in the Lower Level of the Oak Brook Bank Building, 1400 Sixteenth
Street, Oak Brook, Illinois 60523, on Tuesday, May 5, 1998 at 10:00 A.M. for
the purposes of considering and acting on the following:
(1) Election of eight (8) Directors to serve until the Annual Meeting of
the Shareholders in 1999;
(2) Consideration and approval of an Amendment to Certificate of
Incorporation to increase authorized shares of Common and Class A
Common Stock;
(3) Consideration and approval of an Amendment to the Company's Amended and
Restated 1987 Employee Stock Option Plan;
(4) Ratification of the selection of Ernst & Young LLP as independent
auditors for the Company; and
(5) Transaction of such other business that may properly come before the
Meeting or any adjournment thereof.
Only shareholders of record at the close of business on March 20, 1998 will
be entitled to notice of and to vote at the Meeting.
ALL PERSONS WHO FIND IT CONVENIENT TO DO SO ARE INVITED TO ATTEND THE
MEETING IN PERSON. HOWEVER, REGARDLESS OF WHETHER OR NOT YOU ATTEND THE
MEETING, IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AND VOTED.
THEREFORE, PLEASE SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. IF YOU ATTEND
THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN THOUGH YOU
PREVIOUSLY RETURNED YOUR PROXY.
By Order of the Board of
Directors
William E. Navolio
Secretary
<PAGE>
PROXY STATEMENT
THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION BY THE
BOARD OF DIRECTORS OF FIRST OAK BROOK BANCSHARES, INC. (THE "COMPANY") OF
PROXIES FOR USE AT THE 1998 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD TUESDAY,
MAY 5, 1998 AND AT ANY ADJOURNMENT THEREOF. The Company will bear all costs in
connection with this solicitation. It is intended that proxies in the
accompanying form, when returned properly executed, will be voted at the
meeting. If a choice on any matter has been specified by the shareholder, the
shares will be voted accordingly. If no choices are specified, the shares will
be voted FOR the item in question. Proxies may be revoked by notice to the
Company in writing or in open meeting at any time before they are exercised.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the inspector of election appointed for the meeting who will determine whether
or not a quorum is present. The inspector of election will treat abstentions
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. If a broker
indicates on the proxy that it does not have discretionary authority as to
certain shares to vote on a particular matter, such shares, or "non-votes",
will be considered as present for quorum purposes, but not entitled to vote
with respect to that matter.
Shareholders of record at the close of business on March 20, 1998 will be
entitled to vote. On that date, there were outstanding voting shares as
follows:
<TABLE>
<CAPTION>
NUMBER OF PAR OR
SHARES STATED VOTE PER
TITLE OF CLASS OUTSTANDING VALUE SHARE
-------------- ----------- ------ -----------
<S> <C> <C> <C>
Common..................................... $2.00 1
Class A Common............................. $2.00 1/20th of 1
</TABLE>
This Proxy Statement, Notice of Meeting and accompanying proxy card are
being mailed to shareholders on or about April 1, 1998.
ELECTION OF DIRECTORS
In accordance with the By-Laws of the Company, the Board of Directors has
fixed at eight, the number of directors to be elected at the Annual Meeting.
Unless directed otherwise, the persons named as proxies intend to vote for
the election of Eugene P. Heytow, Richard M. Rieser, Jr., Frank M. Paris, Dr.
Miriam Lutwak Fitzgerald, Geoffrey R. Stone, Robert M. Wrobel, Michael L.
Stein and Stuart I. Greenbaum as directors, each to hold office until the
Annual Meeting of Shareholders in 1999 and until his or her successor is
elected and qualified or until his or her earlier death, removal or
resignation. Each of the nominees has consented to serve as director if
elected.
Directors Heytow, Rieser, and Paris have served the Company as directors and
executive officers since its inception in 1983. Dr. Fitzgerald has served as a
director since 1988. Mr. Stone has served as a director since 1992. Mr. Wrobel
has served as a director since 1996. Messrs. Stein and Greenbaum will be
appointed to the Board in April, 1998 to fill the vacancies created by the
death of Mr. Alton Withers in November 1997 and a newly created directorship
caused by the increase in the number of directors to eight.
An affirmative vote of the holders of a plurality of the voting power of the
shares of Common Stock and Class A Common Stock, present and eligible to vote
at the meeting, will be required for a nominee to be elected as a director;
abstentions and shares for which authority to vote is not given will thus have
no effect on the election of directors. Shares cannot be voted for more than
eight nominees; there is no right to cumulative voting.
<PAGE>
INFORMATION CONCERNING SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth information concerning the beneficial
ownership of the Company's Class A Common and Common stock, as of March 20,
1998, by: (1) each person known to the Company to be the beneficial owner of
more than 5% of its Class A Common or Common stock; (2) each director and
named executive officer of the Company; and (3) all directors and executive
officers of the Company as a group. Information relating to persons other than
directors of the Company is taken from the most recent Schedule 13G filed by
such persons with the Securities and Exchange Commission. The address of all
such persons unless otherwise stated is c/o the Company, 1400 Sixteenth
Street, Oak Brook, Illinois 60523.
SECURITY OWNERSHIP OF MANAGEMENT (1)
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF ACQUIRABLE PERCENT
NAME AND ADDRESS OF BENEFICIAL WITHIN 60 OF
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP (2) DAYS (3) CLASS (4)
-------------- ------------------- ------------- ---------- ---------
<C> <S> <C> <C> <C>
Class A Common
Eugene P. Heytow.......... 460 *
Richard M. Rieser, Jr..... 4,547(5) *
Frank M. Paris............ 3,893(6) *
Miriam Lutwak Fitzgerald.. 304(7) *
Geoffrey R. Stone.........
Robert M. Wrobel.......... 579
Michael L. Stein.......... 500
Stuart I. Greenbaum.......
George C. Clam............ 6,319 *
William E. Navolio........ 138(8) *
All Directors and
Executive Officers as a
Group (13 Persons)........ 22,115 *
Common
Eugene P. Heytow.......... (9) 19,825
Richard M. Rieser, Jr..... 161,143(5) 19,825
Frank M. Paris............ 172,519 12,425
Miriam Lutwak Fitzgerald.. 307,819(7) 2,500
Geoffrey R. Stone......... 1,500 1,000 *
Robert M. Wrobel.......... *
Michael Stein.............
Stuart Greenbaum..........
George C. Clam............ 9,025 *
William E. Navolio........ 9,025 *
All Directors and
Executive Officers as a
Group (13 Persons)........ 642,981 89,185
</TABLE>
- --------
*Denotes less than 1% ownership.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS(1)
<TABLE>
<CAPTION>
TITLE OF NAME AND ADDRESS AMOUNT AND NATURE PERCENT
CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(2) OF CLASS(4)
-------- ------------------- -------------------------- -----------
<S> <C> <C> <C>
Class A Associated Banc-Corp. 104,150
Common 112 North Adams Street
Green Bay, Wisconsin 54301
First Union Corporation 125,046
One First Union Center
Charlotte, North Carolina 28288-0630
Societe Generale Asset Management Corp. 81,593
and its investment advisory client SoGen
International Fund, Inc.
1221 Avenue of the Americas
New York, New York 10020
Common Mitzi Heytow 339,774
c/o Amalgamated Bank of Chicago
One West Monroe Street
Chicago, Illinois 60603
</TABLE>
FOOTNOTES
(1) Shares of stock deemed beneficially owned at March 20, 1998.
(2) The nature of beneficial ownership for shares shown in an individual's
name is sole voting and investment power unless otherwise indicated.
(3) Reflects the number of shares that could be purchased by exercise of
options available as of March 20, 1998 or within 60 days thereafter under
the Company's 1987 Amended and Restated Stock Option Plan.
(4) The percentage for Common Stock ownership was calculated with an
outstanding shares amount which included 108,724 shares which could be
acquired within 60 days under exercisable options.
(5) Includes 6,187 shares of Common stock held in joint tenancy with Mr.
Rieser's spouse, which shares are deemed to be shared as to beneficial
interest and voting and investment power. Excludes 4,539 shares of Common
stock held solely by Mr. Rieser's spouse in and over which he disclaims
beneficial interest and voting and investment power. Excludes 4,113 shares
of Common stock held by Mr. Rieser as custodian for the benefit of his
minor children in which he disclaims beneficial interest but over which he
exercises voting and investment power. Excludes 1,600 shares of Common
stock held by Mr. Rieser's spouse as custodian for their minor children.
Excludes 3,600 shares of Common stock held by Mr. Rieser's adult child in
and over which he disclaims beneficial interest and voting and investment
power. Excludes 4,359 shares of Class A Common stock held by Mr. Rieser's
mother's testamentary trust in and over which he disclaims any present
beneficial interest but over which he has shared voting and investment
power.
(6) Excludes 1,406 shares of Class A Common stock held by Mr. Paris as
custodian for the benefit of his minor child in which he disclaims
beneficial interest but over which he exercises voting and investment
power. Excludes 4,218 shares of Class A Common stock held by Mr. Paris'
adult children in and over which he disclaims beneficial interest and
voting and investment power.
(7) Excludes 10,200 shares of Class A Common stock held by Dr. Fitzgerald as
custodian for the benefit of her minor children in which she disclaims
beneficial interest but over which she exercises voting and investment
power. Includes 307,819 shares of Common stock of which 153,907 is held by
an irrevocable insurance trust and 153,912 is held by a revocable trust of
which Dr. Fitzgerald is the custodian for the benefit of her minor
children in which she disclaims beneficial interest but over which she
exercises voting and investment power.
(8) Excludes 117 shares held by Mr. Navolio's spouse in and over which he
disclaims beneficial interest and voting and investment power.
(9) Excludes 339,774 shares of Common stock held solely by Mitzi Heytow, Mr.
Heytow's spouse, in and over which he disclaims beneficial interest and
voting and investment power.
3
<PAGE>
BOARD OF DIRECTORS
MEETINGS, FUNCTIONS AND COMPENSATION
During 1997 the Board of Directors met four (4) times. All directors
attended more than 75% of the meetings of the Board of Directors. The Company
has the following committees: Executive, Audit, Compensation, Stock Option
Advisory and a Community Reinvestment Act Committee.
The Executive Committee met four (4) times during 1997 and is comprised of
Directors Heytow, Rieser and Paris. The Executive Committee of the Company may
exercise the full authority of the Board of Directors in the management of the
business and affairs of the Company other than a power specifically prohibited
by Delaware Law. The Executive Committee also performs functions similar to a
nominating committee in that it nominates directors and officers.
The Audit Committee met four (4) times during 1997 and is comprised of
independent Directors Fitzgerald and Stone, Director Rieser and non-director
members Mr. Navolio, General Counsel, Vice President and Secretary, and Ms.
Wojcik, the Company's Auditor. Director Withers, who passed away in November
1997, was a member of this Committee as well as the Compensation and Stock
Option Advisory Committees. The Audit Committee's functions include reviewing
reports and recommendations of the Company's inside and outside auditors and
reviewing and monitoring the internal controls of the subsidiary bank.
The Compensation Committee met once during 1997 and is comprised of
Directors Heytow and Fitzgerald. The Compensation Committee's functions
include reviewing and approving compensation and benefits for employees of the
Company and its subsidiary earning $50,000 or more and the Company-wide
percentage compensation increase for all employees. With respect to senior
executive officers, the Committee also sets compensation and benefits.
The Stock Option Advisory Committee meets as needed. It did not meet in 1997
but met in January, 1998. It is comprised of independent Directors Stone and
Fitzgerald. This Committee's primary function is to administer the Company's
1987 Amended and Restated Stock Option Plan, the Company's Performance Bonus
Plan and other compensation and bonus issues requiring a Committee consisting
solely of independent directors.
The Community Reinvestment Act ("CRA") Committee meets in conjunction with
the Company-wide Regulatory Management Committee and met eight (8) times
during 1997. It is comprised of Directors Paris and Rieser and non-director
members Messrs. Navolio and Clam. This Committee's primary function is to
monitor and direct the CRA efforts of the subsidiary bank.
The Company pays an $8,000 annual retainer to its directors in quarterly
payments of $2,000. The directors of the Company also received $2,000 for each
regular quarterly meeting attended of the Board of Directors and $200 for each
Executive, Audit, Compensation and Stock Option Advisory Committee meetings.
The members of the Community Reinvestment Act Committee do not receive
compensation. The Company's subsidiary directors' also receive $1,000 for each
quarterly meeting attended of the Board of Directors and $200 for each Trust
and Audit Committee meeting.
Each non-employee director has received, or upon being first elected as a
director will receive an option to purchase 1,000 shares of Common stock under
the formula option provisions of the Company's Amended and Restated 1987 Stock
Option Plan. In addition, on the date of each Annual Meeting of Stockholders,
each non-employee director who is continuing as a non-employee director
receives an option to purchase 500 shares of Common Stock under such formula
option provisions.
4
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning the current directors
and executive officers of the Company. Each of the current directors is
standing for re-election and each executive officer has been with the Company
since its inception in 1983 except Ms. Carnevale, who became an executive
officer in 1991, and Mr. Leckinger, who became an executive officer in October
1997. Officer appointments are made annually.
<TABLE>
<CAPTION>
EDUCATION, PRINCIPAL OCCUPATION
NAME AND AGE DURING LAST FIVE YEARS, OTHER DIRECTORSHIPS AND
POSITION WITH COMPANY POSITIONS
--------------------- -----------------------------------------------
<S> <C>
DIRECTORS AND OFFICERS
Eugene P. Heytow, 63....... Harvard College, B.A. and University of Chicago
Chairman of the Board, Law School, J.D.
Chief Executive Officer, Oak Brook Bank*: Chairman of the Executive
Chairman of the Executive Committee.
Committee Amalgamated Investments Company, Chicago
(holding company of Amalgamated Bank of Chicago)**:
Chairman of the Board.
Amalgamated Bank of Chicago**: Chairman of the
Board and Chief Executive Officer.
AmalgaTrust Company, Inc., Chicago (a wholly
owned subsidiary of Amalgamated Bank of
Chicago)**: Chairman of the Board.
Richard M. Rieser, Jr., 54. Brown University, B.A. and University of Chicago
President and Director Law School, J.D.
Oak Brook Bank*: Chairman of the Board and Chief
Executive Officer
Amalgamated Bank of Chicago**: Senior Vice
President.
Family relationship: Mr. Rieser is married to
Mr. Heytow's niece.
Frank M. Paris, 59......... Northwestern University, B.S.
Vice Chairman of the Board Oak Brook Bank*: Vice Chairman of the Board.
Miriam Lutwak Fitzgerald, Northwestern University, B.A. and Chicago
40........................ Medical School, M.D.
Director Miriam S. Lutwak M.D.S.C.: President.
Oak Brook Bank*: Director.
Amalgamated Bank of Chicago**: Director.
Geoffrey R. Stone, 51...... Wharton School of Finance and Commerce,
Director University of Pennsylvania, B.S. and University
of Chicago Law School, J.D.
The University of Chicago, Provost, 1994-
Present, and Dean of its law school, 1987-1994.
Oak Brook Bank*: Director.
Robert M. Wrobel, 48....... Northwestern University, B.A.
Director Oak Brook Bank*: Assistant to the Chairman and
Director.
Amalgamated Investments Company, Chicago
(holding company of Amalgamated Bank of Chicago)**:
President.
Amalgamated Bank of Chicago**: President and
Chief Operating Officer.
AmalgaTrust Company, Inc., Chicago, (a wholly
owned subsidiary of Amalgamated Bank of
Chicago)**: President.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
EDUCATION, PRINCIPAL OCCUPATION
NAME AND AGE DURING LAST FIVE YEARS, OTHER DIRECTORSHIPS AND
POSITION WITH COMPANY POSITIONS
- --------------------- -----------------------------------------------
<S> <C>
Michael L. Stein, 57.......... Brown University, B.A. and
Director University of Chicago Law School, J.D.
Brownson, Rehmus & Foxworth, Inc., Chicago
(Financial Counseling)--Executive Vice President
& Director
Oak Brook Bank*: Director
Stuart I. Greenbaum, 61....... New York University, B.S. and The Johns Hopkins
Director University, Ph.D., Economics
John M. Olin School of Business--Washington
University, Dean, 1995--present
Kellogg Graduate School of Management,
Northwestern University, Professor and Director
of Banking Research Center; 1983-1995
Stifel Financial Corp.: Director
Reinsurance Group of America: Director
Oak Brook Bank*: Advisory Director
OTHER EXECUTIVE OFFICERS:
Rosemarie Bouman, 41.......... Indiana University, B.S., C.P.A.
Vice President and Chief Fi- Oak Brook Bank*: Senior Executive Vice President
nancial Officer and Chief Financial Officer.
George C. Clam, 48............ Ripon College, B.A. and Northwestern University,
Vice President and Chief M.B.A.
Banking Officer Oak Brook Bank*: President.
William E. Navolio, 48........ University of Notre Dame, B.A. and Georgetown
Vice President, General Coun- University, J.D.
sel and Secretary Oak Brook Bank*: Senior Executive Vice
President, General Counsel, Secretary and
Compliance Officer.
Mary C. Carnevale, 40......... Saint Mary's College of Notre Dame, B.B.A.,
Vice President and Chief Hu- C.P.A.
man Resources Oak Brook Bank*: Executive Vice President and
Officer Chief Human Resources Officer.
James E. Leckinger, 35........ University of Illinois, B.S. and
Treasurer University of Chicago, M.B.A., C.P.A.
Oak Brook Bank*: Executive Vice President and
Treasurer
</TABLE>
- --------
*Subsidiary of the Company
**Affiliate of the Company
6
<PAGE>
CERTAIN TRANSACTIONS
During 1997, directors and executive officers of the Company and their
associates were customers of and had transactions with the Company's
subsidiary bank. All such transactions were in the ordinary course of
business.
The subsidiary bank has made loans to certain of the directors and executive
officers of the Company. These loans were made in the ordinary course of
business and on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and do not involve more than the normal risk of collectibility
or present other unfavorable features.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Mr. Heytow, the Company's Chief Executive Officer, is a member of the
Company's Compensation Committee. Mr. Heytow participated in the deliberations
with regard to the compensation of the other named executive officers, but did
not participate in the Committee's deliberations with respect to his own
compensation.
The following report of the Compensation Committee and the Performance Graph
included elsewhere in this Proxy Statement do not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other company filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 except to the extent the Company specifically
incorporates this Report or the Performance Graph by reference therein.
REPORT OF COMPENSATION COMMITTEE AND
STOCK OPTION ADVISORY COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee ("Committee") and Stock Option Advisory Committee
have furnished the following report on Executive Compensation:
The Committee is responsible for reviewing and approving the recommendations
of Management regarding a) overall compensation and benefits for the Company
and its subsidiary and b) the specific compensation and benefits for each
employee earning $50,000 or more at the Company and its subsidiary. In
addition, the Committee is responsible for reviewing and setting the specific
compensation and benefits for each executive officer (as disclosed in the
Summary Compensation Table).
In so doing, the Committee reviews information provided by Management and
considers a wide variety of factors. With respect to overall compensation and
benefits, these include cost of living changes, competitive pay scales and
Company performance. With respect to individual salaries, the factors include
the level and complexity of the position, education and special training
necessary or helpful to the position, promotions and growth in responsibility,
relative pay within the Company, competitive pay (as determined by independent
compensation surveys targeting national and local peer groups of financial
institutions), cost of living changes, and individual, departmental and
Company performance. With respect to discretionary bonuses, these factors
emphasize individual performance (as determined in individual performance
reviews) and, for executive officers especially, departmental and overall
Company performance.
For those reviewed by the Compensation Committee, performance is considered
both subjectively and objectively. For the lower pay group, bonuses generally
relate most closely to higher than expected personal effort and/or results.
For certain marketing officers, bonuses are primarily incentives tied directly
to new business results. For the senior management group, bonuses generally
relate most closely to the achievement of goals and departmental business
plans and budgets and short- and medium-term Company growth and profitability.
7
<PAGE>
The Company's Amended and Restated Performance Bonus Plan (the "Plan")
provides additional incentive to the Company's three senior executive officers
through an objective, performance-based bonus payable only in the event that
the Company's annual performance meets certain levels, as measured by several
criteria. The maximum bonus under the Plan is two times annual salary. With
the establishment of this Plan, the Committee has limited the maximum
discretionary bonus award to one times the senior executive officer's annual
salary, providing a maximum overall bonus opportunity of three times annual
salary. The Committee did not award discretionary bonuses to the three senior
executive officers in 1997.
The Plan is administered by the Stock Option Advisory Committee currently
consisting of two independent directors, due to the death of Director Withers
in November 1997. In April 1998, a third independent director will be
appointed to the Committee. Pursuant to the Plan, the Stock Option Advisory
Committee established a number of objective performance goals (the "Targets")
for the calendar year 1997. The Targets are formulated using a minimum,
maximum and range of numeric standards for each of the performance measures,
and each performance measure is then assigned a relative percentage weighting
by the Committee. The performance measures for the Targets must be one, all or
a combination of the following: return on assets (ROA), return on equity
(ROE), net income, market price of the Company's Class A Common Stock relative
to the book value of such shares, the market price of the Company's Class A
Common Stock, and the level of nonperforming assets. The numeric standards for
the Targets may be based on peer group results, the Company's historical
levels or such other standards as the Committee deems appropriate in light of
the Company's objectives. The combination of the Company's strong financial
results in 1997, the net income generated by the sale of the Company's credit
card portfolio and the year-to-year growth in the market price of the
Company's Class A Common stock generated performance relative to the targets
which produced bonus levels in excess of the Plan maximum of two times annual
salary. Accordingly, the Stock Option Advisory Committee certified maximum
bonuses of $504,000 for Eugene P. Heytow, $672,000 for Richard M. Rieser, Jr.
and $190,800 for Frank M. Paris.
For executive officers (non-director officers of the Company) subjective,
discretionary bonuses may be awarded. These bonuses generally relate most
closely to the achievement of goals and departmental business plans and
budgets and short-and medium-term Company growth and profitability. The
Committee also considers the criteria used to evaluate the senior executive
officers subjective, discretionary bonuses, which are described below, in
determining an award of these bonuses.
For senior executive officers (Messrs. Heytow, Rieser and Paris) subjective,
discretionary bonuses may be awarded. Such bonuses generally relate most
closely to maintenance of safety and soundness and to consistent medium-term
and longer-term Company growth and profitability, areas of achievement that
may not be reflected within the objective criteria of the Performance Bonus
Plan. In awarding senior executive officers' subjective discretionary bonuses,
the Compensation Committee's policy of emphasizing both safety and soundness
and consistent medium-term and longer-term growth and profitability is
predicated on its cognizance that commercial banking is a highly regulated
industry in which management's ability to maintain safety and soundness is a
necessary condition to growth in assets and earnings. Thus, to evaluate the
senior executive officers' performance for this purpose, the Compensation
Committee reviews the Company's overall safety and soundness, compliance with
laws and regulations, its current year's performance, in relation to
historical performance, departmental performance, and individual performance.
Even though the Committee considers the Company's performance in relation to
net profits, the Committee does not base salary and discretionary bonus
increases on the year to year increases in profits.
Mr. Heytow's salary and benefits were determined by the Committee based upon
the aforementioned considerations. The Compensation Committee granted Mr.
Heytow an increase in his salary and benefits, as set forth in the
Compensation Table. This compensation was in keeping with the Company's policy
of rewarding senior executive officers based on the safety and soundness of
the Company and subsidiary bank and medium-and long-term growth and
profitability. Mr. Heytow was also granted 4,000 stock options in January
1998.
8
<PAGE>
With regard to Mr. Rieser's salary and benefits, the Committee also used the
same considerations. The Compensation Committee granted Mr. Rieser an increase
in his salary and benefits, as set forth in the Compensation Table. This
compensation was based upon the Committee's determination of the importance of
Mr. Rieser's involvement in the day-to-day management and leadership of the
Company, as evidenced by the Company's overall safety and soundness and its
medium-and long-term growth and profitability. Mr. Rieser was also granted
4,000 stock options in January 1998.
In addition to cash compensation, the Stock Option Advisory Committee
granted stock options to the senior executive officers, executive officers,
certain members of the senior management group and top performing middle
managers.
Section 162(m) of the Internal Revenue Code limits to $1 million the
Company's allowable Federal income tax deduction for compensation paid for a
calendar year to each of its Chief Executive Officer and four other most
highly compensated executive officers. The allowable deduction for certain
"performance-based" and other compensation is not, however, subject to the $1
million limitation. Based upon regulations, compensation attributable to the
Company's Stock Option Plan and Performance Bonus Plan should be exempt from
the deduction limitation as "performance-based." The Committee has not made
any changes in its policies relating to the other cash compensation paid to
the executive officers in response to the $1 million deduction limitations
because salary and discretionary bonuses which have been or can be expected to
be paid to the Company's executive officers do not approach such level.
Notwithstanding the above, the Committee or Stock Option Advisory Committee
may determine after consideration of applicable circumstances that it would be
in the best interests of the Company to pay compensation in an amount or
manner that does not satisfy such rules governing deductibility.
Eugene P. Heytow
Dr. Miriam Lutwak Fitzgerald
Geoffrey R. Stone
9
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the indicated compensation with respect to
each of the last three fiscal years for the Company's Chief Executive Officer
and its four other most highly compensated executive officers:
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
NAME AND SALARY ALL OTHER
PRINCIPAL ($) BONUS OTHER ANNUAL OPTION COMPENSATION
POSITION YEAR (1) (2) ($) (2) COMPENSATION AWARDS (#) ($) (3)
- --------- ---- ------- ------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Eugene P.
Heytow CEO.... 1997 271,500 504,000 -- 84,486
1996 262,700 157,491 10,000 101,615
1995 251,417 172,343 8,000 44,893
Richard M.
Rieser, Jr.
President..... 1997 355,600 672,000 -- 85,312
1996 340,975 209,987 10,000 113,826
1995 307,600 214,124 8,000 49,182
Frank M. Paris
Vice Chairman. 1997 115,632 190,800 -- 38,967
1996 112,225 59,626 5,000 42,144
1995 107,900 65,207 4,000 15,256
George C. Clam,
Vice
President-
Chief Banking
Officer....... 1997 137,660 66,000(4) -- 11,543
1996 119,000 52,750(4) 2,000 15,386
1995 111,650 55,000(4) 3,000 15,744
William E.
Navolio
General
Counsel,
Secretary..... 1997 128,340 53,750(4) -- 11,403
1996 119,275 43,000(4) 2,000 15,536
1995 113,850 43,200(4) 3,000 13,332
</TABLE>
SUMMARY COMPENSATION TABLE FOOTNOTES
(1) This column includes annual base salary, director's fees and committee
fees of the Company and its subsidiary.
(2) These columns include amounts elected to be deferred under the Company's
qualified nonqualified deferred compensation plan.
(3) This column includes: (i) the Company's contributions under its 401(k)
Savings Plan, Stock Bonus Plan and related nonqualified deferred
compensation plan; (ii) taxable income for life insurance benefits paid by
the Company with respect to insurance policies covering the life of each
Named Executive Officer; and (iii) amounts paid to the Named Executive
Officer with respect to certain life insurance agreements, as set forth in
the table below:
<TABLE>
<CAPTION>
(I) (II) (III)
------- ------- -------
<S> <C> <C> <C>
Mr. Heytow........................................... $25,704 $13,942 $44,840
Mr. Rieser........................................... $34,240 $ 6,232 $44,840
Mr. Paris............................................ $ 7,794 $ 2,853 $28,320
Mr. Clam............................................. $10,064 $ 1,479 --
Mr. Navolio.......................................... $ 9,980 $ 1,423 --
</TABLE>
(4) Includes award of annual discretionary bonus to the executive officer;
however, at the election of the Company, payment of two-thirds of the
bonus is deferred and is payable in equal increments in the following two
years. The deferred amounts are subject to forfeiture upon the executive
leaving the Company prior to payment.
10
<PAGE>
TRANSITIONAL EMPLOYMENT AND OTHER AGREEMENTS WITH EXECUTIVE OFFICERS
The Company has entered into Transitional Employment Agreements with certain
of its executive officers. In the event of a change in control of the Company,
the Agreements provide for an employment term of three years from the date of
the change in control with compensation and benefits at the same level as in
effect immediately preceding the change in control. If the executive officer's
employment is involuntarily terminated by the Company or its successor (other
than for cause) during the three-year employment term, or in the event of the
executive officer's resignation under circumstances which constitute a
constructive discharge, the executive officer is entitled to continue to
receive salary, directors fees and bonus payments, and to continue other
benefits, for a period of 36 months from the date of such termination of
employment. For Messrs. Heytow, Rieser and Paris (the "Senior Executive
Officers"), the amount of such continuing salary, director fees and bonus
payments will be based upon the level in effect at the time of the change in
control, or if greater, termination of employment. Salary and bonus
continuation payments for the other executive officers will be based on the
average of the annual salary and bonus payments received during the five year
period prior to the year in which the change in control occurs. The Agreements
also provide for payment of any accrued but unpaid bonuses, continuing access
to the Company's group and executive medical plans after expiration of the 36-
month compensation continuation period and continuing indemnification rights.
In the event of an executive officer's death during the 36-month continuation
period, the Agreements provide for a lump sum payment equal to the present
value of the remaining salary and directors fees, and continuation of bonus
payments and certain other benefits to the executive officer's designated
beneficiary.
"Cause" is generally defined in the Agreements as a felony conviction
involving an act or acts of dishonesty or breach of trust or the continued and
willful failure of the executive officer to substantially perform the
officer's duties under the Agreement. "Constructive discharge" is defined
generally to include a breach of the Company's obligations under the
Agreement, a material diminution of the executive officer's duties and
responsibilities, a change of the executive officer's primary employment
location by more than 35 miles from the primary location in effect at the time
of the change in control or a significant change in the executive officer's
regularly-scheduled work hours from those in effect at the time of the change
in control. In the case of Senior Executive Officers' voluntary resignations
at any time during the first year of the employment terms, or in the case of
the other executive officers,' voluntary resignation at any time during the
first year of the employment term but after the termination or the
announcement of the termination of Mr. Rieser's employment will also
constitute resignation under circumstances which constitute a constructive
discharge. Salary and bonus continuation payments to those executive officers
who are not Senior Executive Officers are subject to reduction to the extent
necessary so that no portion of those amounts will be subject to the excise
tax imposed under the Internal Revenue Code on payments which may be deemed to
be "excess parachute payments." The compensation and benefits payable to the
Senior Executive Officers under the Transitional Employment Agreements will be
increased to the extent necessary to gross-up such compensation and benefits,
or the compensation and benefits payable under any other plan or program of
the Company, to the extent the Senior Executive Officer would be subject to
the excise tax upon the receipt thereof.
The Company also entered into Supplemental Pension Agreements with Messrs.
Heytow and Rieser. Under these Agreements, the Company is obligated to provide
at a prescribed retirement date, a supplemental pension in the form of a life
and 15-year certain annuity based upon a percentage of the executive officer's
final base salary. Mr. Heytow's retirement date is January 1, 2007 and the
percentage of final base salary to be used in determining his benefit is 25%;
Mr. Rieser's retirement date is January 1, 2015 and the percentage of final
base salary is 50%. In the event of termination of employment prior to the
applicable retirement date, the supplemental pension payable at the retirement
date will be prorated based on years of service from October 1994 to the date
of his termination of employment. No proration of the amount of the
supplemental pension payable is required, however, if the termination of the
executive officer's employment was involuntary (other than for cause) or
voluntary following an event that would constitute a constructive discharge as
defined in the Transitional Employment Agreements (without regard to whether
or not a change in control has occurred). An actuarially reduced supplemental
pension may be paid prior to the applicable retirement date to the executive
officer in the event of termination of employment prior to such date.
11
<PAGE>
The Company has entered into Agreements Regarding Post-Employment
Restrictive Covenants with Messrs. Heytow, Rieser and Paris, under which the
executive officers agree that following termination of employment for any
reason other than death, the executive officer will not, for a period of
twenty-four months, directly or indirectly solicit any customer of the Company
or its affiliates not to do business with the Company or such affiliates or to
solicit or encourage any employee of the Company or its affiliates to
terminate his or her employment. In addition, the Agreements impose
confidentiality obligations on the executive officer. As consideration for the
restrictive covenants, the Company is obligated to pay 12 annual payments of
$80,000 each to Messrs. Heytow and Rieser and of $25,000 to Mr. Paris.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND
YEAR-END OPTION VALUES
The following table sets forth the indicated year-end 1997 value and number
of unexercised options for each of the executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
12-31-97 12-31-97(1)
------------- ----------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED UNEXERCISABLE UNEXERCISABLE
- ---- --------------- ---------- ------------- ----------------
<S> <C> <C> <C> <C>
Eugene P. Heytow........ 28,125 $1,040,344 19,825/17,550 $667,235/484,803
Richard M. Rieser, Jr... 10,750 274,018 19,825/17,550 $667,235/484,803
Frank M. Paris.......... 7,030 128,227 12,425/8,700 $443,959/239,921
George C. Clam.......... 4,218 81,154 9,025/4,600 $340,325/127,700
William E. Navolio...... 4,218 108,571 9,025/4,600 $340,325/127,700
</TABLE>
- --------
(1) Based on Company's Class A Common stock price on December 31, 1997 of
$48.00 per share.
12
<PAGE>
FIVE YEAR PERFORMANCE COMPARISON
The graph below provides an indicator of total return performance for the
Company's Class A Common Stock for the past five years as compared with the
Center for Research in Security Prices (CRSP) Index for the Nasdaq Stock
Market(SM) (U.S. Companies) and a Peer Group, the CRSP Index for Nasdaq Bank
Stocks.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Nasdaq Bank Stocks
SIC 6020-6029,
First Oak Brook Nasdaq Stock Market 6710-6719
Bancshares, Inc. (US Companies) US & Foreign
---------------- ------------------- ------------------
<S> <C> <C> <C>
12/31/92 $100 $100 $100
12/31/93 137 114 115
12/30/94 167 112 114
12/29/95 205 159 169
12/31/96 233 195 223
12/31/97 490 240 377
</TABLE>
13
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and regulations
thereunder require directors and certain officers of the Company and persons
who beneficially own more than 10% of the Company's stock to file initial
reports of ownership and reports of changes in ownership of the Company's
stock with the Securities and Exchange Commission and to furnish the Company
with copies of such reports. Based solely upon the review of copies of such
reports furnished to the Company and representations of reporting persons,
only Mr. Clam failed to file a Form 4 on a timely basis with respect to a
stock option exercise as required by Section 16(a) during the most recent
fiscal year. The Form 4, which was due on May 10, 1997, was filed on July 21,
1997.
CONSIDERATION AND APPROVAL OF AN AMENDMENT TO CERTIFICATE
OF INCORPORATION TO INCREASE AUTHORIZED SHARES OF
COMMON STOCK AND CLASS A COMMON STOCK
At the Annual Meeting, the Company will submit to shareholders a proposal to
increase the number of shares of Common Stock and Class A Common Stock the
Company is authorized to issue. The Board of Directors ("Board") recommends
adoption of the proposal.
The Company presently is authorized to issue 3,000,000 shares of Common
Stock and 4,000,000 shares of Class A Common Stock both having a par value of
$2.00 per share. As of March 20, 1998, and shares of
Common Stock were issued and outstanding, respectively, and shares
of Class A Common Stock were issued and outstanding.
From time to time, the Company has issued additional shares of Common Stock
and Class A Common Stock in payment of stock dividends or stock splits or for
other purposes.
On January 27, 1998, the Board unanimously approved a resolution, subject to
shareholder approval at the Annual Meeting on May 5, 1998, amending Article IV
of the Company's Certificate of Incorporation ("Certificate") to increase the
authorized number of shares of Common Stock from 3,000,000 to 6,000,000 and
Class A Common Stock from 4,000,000 to 10,000,000. The pertinent provisions of
the amendment to the Certificate are as follows:
AMENDMENT TO CERTIFICATE OF INCORPORATION
OF FIRST OAK BROOK BANCSHARES, INC.
Section 1 of Article IV of the Company's Certificate of Incorporation shall
be amended to read as follows:
Article IV Section 1. The total number of shares of all classes of stock
which this corporation shall have authority to issue is 16,100,000. The
classes and aggregate number of shares of stock of each class which this
corporation shall have authority to issue are as follows:
(i) 10,000,000 Shares of Class A Common Stock, $2.00 par value per share;
(ii) 6,000,000 Shares of Common Stock, $2.00 par value per share; and
(iii) 100,000 Shares of Preferred Series B Stock, without par value.
The remaining sections of Article IV shall remain unamended.
The affirmative vote of the holders of a majority of the voting power of the
shares of Common Stock and Class A Common Stock, voting together as a single
class, and the affirmative vote of a majority of the outstanding shares of
Common Stock and Class A Common Stock, voting as a separate class, is required
to adopt the proposed Amendment. Under Delaware Law, the Amendment, if
approved by the shareholders, will take effect upon the filing of the
appropriate certificate and with the Delaware Secretary of State, which filing
will be made as promptly as practicable after the Annual Meeting.
14
<PAGE>
The purpose of the Amendment is to provide the Company with additional
shares of Common and Class A Common Stock which may be made available for
stock dividends or splits, future financing and acquisition transactions, and
other general corporate purposes. If the amendment is approved, the Company
generally also will have greater flexibility in the future to issue shares in
excess of those presently authorized, without the expense and delay of a
special shareholders' meeting.
The Company currently has no arrangements or understandings for the issuance
of additional shares of Common and Class A Common Stock and, as set forth in
the Company's Certificate, no holder of Common and Class A Common stock has
any pre-emptive right with respect to the Common and Class A Common Stock. If
the Board deems it to be in the best interests of the Company and the
shareholders to issue additional shares of Common and Class A Common Stock in
the future, the Board generally would not seek further authorization by vote
of the shareholders, unless such authorization is otherwise required by
applicable law or stock exchange regulations.
The proposed Amendment to the Certificate, if approved by the shareholders,
will not affect those provisions of the Certificate which authorize the
issuance of 100,000 shares of Preferred Series B Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE AUTHORIZED NUMBER OF SHARES OF CLASS A COMMON STOCK FROM
4,000,000 TO 10,000,000 AND COMMON STOCK FROM 3,000,000 TO 6,000,000.
CONSIDERATION AND APPROVAL
OF THE
COMPANY'S AMENDED AND RESTATED 1987 STOCK OPTION PLAN
PROPOSED AMENDMENT AND RESTATEMENT
At the Annual Meeting, there will be submitted to shareholders a proposal to
approve the Company's Amended and Restated 1987 Stock Option Plan ("Plan")
which (i) increases the number of shares of Common Stock available for
issuance under the Plan by 100,000 shares, to 335,263 from 235,263; (ii)
extends the expiration date of the Plan to January 27, 2008; (iii) permits
optionees to elect to have shares withheld to satisfy withholding taxes; (iv)
gives the Committee the ability to make the options transferable to family
members; and (v) updates certain definitions and procedural matters to reflect
changes in applicable rules and regulations. The Board of Directors
unanimously approved the Amended and Restated 1987 Stock Option Plan on
January 27, 1998, subject to shareholder approval at the Annual Meeting on May
5, 1998. The amended and restated Plan will not take effect unless it is
approved and adopted by the affirmative vote of a majority of the voting power
of the votes cast by the holders of shares of the Company's Common Stock and
Class A Common Stock of the Company, in person or by proxy, at the Annual
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL
AND ADOPTION OF THE AMENDED AND RESTATED 1987 PLAN.
The Board of Directors of the Company believes that stock options are
effective in attracting and retaining officers, key employees and directors,
and in more closely aligning the interests for these individuals with those of
the Company's shareholders. Of the 235,263 shares authorized for issuance
under the Plan (as adjusted to reflect stock dividends and options exercised
through December 31, 1997), only 6,326 shares remain available for grants as
of December 31, 1997.
Based upon the fact that only 6,326 shares remain available for grants, the
Board has determined that additional shares authorized for issuance under the
Plan, as well as certain provisions to provide to optionees flexibility with
respect to their options, are necessary if the Company and its shareholders
are to be able to continue to use stock options to attract and retain
officers, key employees and non-employee directors. As a result, the Board of
Directors has approved, subject to approval by the shareholders at the May 5,
1998 Annual Meeting, the amended and restated Plan to incorporate the changes
described above.
15
<PAGE>
Following is a summary of the material terms of the Plan, as amended and
restated. This summary is qualified in its entirety by the full text of the
amended and restated Plan attached as Appendix A.
DESCRIPTION OF THE AMENDED AND RESTATED 1987 PLAN
Effective Date and Expiration of the Plan. The Plan was effective September
21, 1987, the date of original adoption by the Board of Directors of the
Company and has been amended in the interim, most recently in 1994. As
proposed, the amended and restated Plan will continue in effect through
January 27, 2008, unless terminated at an earlier date by the Board of
Directors.
Administration of the Plan. The Plan is administered by the Stock Option
Advisory Committee of the Board of Directors of the Company. Under the Plan,
this Committee must be comprised of at least two directors and each member of
the Committee must qualify as a "non-employee director" within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934 and as an "outside
director" for purposes of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). The Committee has authority to award options under
the Plan, interpret the Plan, determine the terms and provisions of the option
agreements by which options shall be evidenced and to make such rules and
regulations and establish such procedures as it deems appropriate for
administration of the Plan.
Eligibility. Employees eligible to participate in the Plan will be such
officers and other key employees of the Company and its subsidiaries,
including officers who are also directors of the Company, as may be selected
by the Committee. The Plan also provides for formula option grants to non-
employee directors of the Company and its subsidiaries. Options may be granted
on more than one occasion to the same person.
Except for the formula options for non-employee directors, the benefits to
be received by officers and key employees are not currently determinable.
Shares Subject to the Plan. Shares which will be issued by the Company upon
the exercise of options may be issued (i) from the authorized but unissued
shares, (ii) from treasury shares, (iii) from shares purchased by the Company
on the open market for such purpose or (iv) from any combination of the
foregoing as the Board of Directors may determine. If treasury shares or
shares purchased on the open market by the Company are issued upon the
exercise of an option, the number of authorized but unissued shares reserved
for the Plan is correspondingly reduced.
As proposed, the total number of shares which may be issued with respect to
options granted under the Plan shall be limited to an aggregate 335,263 shares
of Common stock. The aggregate limit of 335,263 shares is subject to an
additional limit of 25,000 shares with respect to which any individual may be
awarded stock options during any calendar year. Each of the 335,263 and 25,000
share limitations are subject to adjustments to reflect stock splits, stock
dividends and other capital changes.
If shares are not issued when an option is exercised, for example because
the exercise price is paid by tendering shares or because taxes are paid by
having shares withheld, or if an option lapses, expires, is forfeited
unexercised as to any shares, then such shares will again be available for
purposes of new options under the Plan.
General Terms and Conditions of Options. Other than the "formula options"
granted to non-employee directors of the Company described below, options
granted under the Plan may be exercised as to the percentage of the total
number of shares for which the option is granted in accordance with the
following schedule or as otherwise provided for in the option agreement:
<TABLE>
<CAPTION>
PERCENTAGE
YEARS AFTER DATE OF GRANT OF SHARES
------------------------- ----------
<S> <C>
Less than 1.................................................... 0%
1 but less than 2.............................................. 20%
2 but less than 3.............................................. 40%
3 but less than 4.............................................. 60%
4 but less than 5.............................................. 80%
5 but not more than 10......................................... 100%
</TABLE>
16
<PAGE>
No option may be exercised later than ten years from the date of grant. The
option price is equal to the fair market value of the Common stock on the date
the option is granted. Fair market value is equal to the closing price on the
date preceding the date the option is granted for sales made and reported
through the Nasdaq Stock Market (the "Nasdaq Market System"). If the shares
are not traded through the Nasdaq Market System and, as they are now, the
shares are convertible into shares of the Company's Class A Common stock, and
the shares of Class A Common stock are traded through the Nasdaq Market
System, the fair market value of the shares for which options are granted is
equal to the closing price on the date preceding such date for sales of shares
of the Company's Class A Common stock made and reported through the Nasdaq
Market System. If no sales of such shares have been reported with respect to
the date preceding the date the options were granted, the fair market value
shall be the closing price on the next preceding date for which sales were
reported. If neither the Common stock nor the Class A Common stock is traded
on the Nasdaq Market System on an exchange, the fair market value is equal to
such amount as the Committee shall determine in its sole discretion.
Stock purchased upon the exercise of an option granted under the Plan must
be paid for in cash, by check, in previously-acquired shares of Common stock
or in shares of Class A Common stock, or any combination thereof. Previously-
acquired shares are shares acquired on the open market or held for at least
six months. Accordingly, an optionee will not be able to make immediate use of
the market appreciation of shares covered by an option to theoretically, by
successive exercises, exercise all of his or her options, and receive the
spread (the difference between the exercise price and the market value)
thereon, with no additional cash investment.
If an optionee's employment terminates, other than because of death or
permanent disability, any unexercised, unexpired options exercisable as of
such date will be exercisable in whole or in part at any time within three
months after the date of termination. In no event, however, is any option
exercisable later than ten years from the date of the grant. If an optionee's
employment terminates because of death or disability of the optionee, any
unexercised, unexpired options shall become immediately exercisable at any
time within one year after the date of the death or disability. In the event
of the death of the optionee, the option may be exercised by the optionee's
legal representative or by such person to whom the option is transferred by
will or applicable laws of descent and distribution.
Formula Options for Non-Employee Directors of the Company. The amended and
restated Plan provides for a formula for the automatic granting of options to
individuals who are or become non-employee directors of the Company ("Formula
Options"). Except as described below, the general terms and conditions of
Formula Option are the same as those general terms applicable to the options
granted to officers and employees. Previously-acquired shares are defined to
mean shares acquired on the open market or shares which have been held for at
least six months. Accordingly, on the date on which the person is first
elected or begins to serve as a non-employee director (other than by reason of
termination of employment), the non-employee director will be granted an
option to purchase 1,000 shares of Common stock at a purchase price per share
based on the fair market value as of the date of grant. On the date of each
Annual Meeting thereafter, each non-employee director who is a non-employee
director after such meeting of shareholders is granted an option to purchase
500 shares of Common stock. The 1,000 and 500 share amounts are subject to
adjustment to reflect stock splits, stock dividends and other capital changes.
Formula options may be exercised as to the percentage of the total number of
shares for which the option is granted in accordance with the following
schedule:
<TABLE>
<CAPTION>
PERCENTAGE
YEARS AFTER DATE OF GRANT OF SHARES
------------------------- ----------
<S> <C>
Less than 1.................................................... 0%
1 but less than 2.............................................. 33 1/3%
2 but less than 3.............................................. 66 2/3%
3 but less than 10............................................. 100%
</TABLE>
No Formula Option may be exercised later than ten (10) years from the date
of grant.
17
<PAGE>
If the holder of a Formula Option ceases to be a director of the Company for
any reason other than death, each such option held by the holder may, to the
extent exercisable, be exercised by such holder (or such holder's guardian,
legal representative or similar person) for a period of three (3) years after
the date of such holder's ceasing to be a director or until the expiration of
the term of such option, whichever period is shorter. If the holder of a
Formula Option ceases to be a director of the Company by reason of death, each
such option held by such holder may, whether then exercisable or not,
thereafter be exercised by such holder (or such holder's executor,
administrator, legal representative, beneficiary or similar person) for a
period of two years after the date of such holder's death or until the
expiration of the term of such option, whichever period is shorter. If the
holder of a Formula Option granted under the Plan dies during the three (3)
year period following such holder's ceasing to be a director, to the extent
then exercisable, each such option held by such holder may thereafter be
exercised by the holder's executor, administrator, legal representative,
beneficiary or similar person for a period of one year after the date of death
or until the expiration of the term of such option, which ever period is
shorter.
Other Provisions Relating to Options. In the event that there should be a
change in control of the Company, as defined in the Plan, all options granted
become immediately exercisable upon the date of the change in control. A
change in control shall be deemed to have occurred when any person or group
shall become the beneficial owner of more than 50% of the voting power of all
of the then outstanding shares of all classes of Company stock entitled to
vote. There is no change of control, however, if more than 50% of the voting
power of all of the outstanding shares of all classes of stock are acquired by
an employee benefit plan of the Company, or any person or group which was on
September 21, 1987, the beneficial owner of five percent or more of the voting
power of all outstanding stock.
The Plan also permits the granting of substitute options which may be
exercised at the same time and under the same conditions as if the optionee
had held the substituted option since the date of the granting of the original
canceled option. The Plan also provides that the Company shall indemnify the
Board of Directors against certain liabilities with respect to the Plan.
Amendment of the Plan. The Board of Directors may terminate or amend the
Plan, subject to any requirement of shareholder approval imposed by applicable
law, rules or regulations. No amendment may adversely affect any outstanding
option without the optionee's written consent.
Federal Income Tax Consequences. The following is a brief overview of the
U.S. Federal income tax consequences generally arising with respect to awards
under the Plan.
An optionee receiving a stock option under the Amended 1987 Plan, including
options granted to non-employee directors, will not recognize taxable income
upon the grant of the option. All options granted under the Plan are "non-
qualified" for purposes of the Code and, accordingly, an optionee will
recognize taxable compensation at the time of exercise in the amount of the
difference between the exercise price and the fair market value and the date
of exercise of the shares acquired pursuant to the exercise of the option. At
that time, the Company will generally be entitled to a deduction as
compensation expense in an amount equal to the amount taxable to the
participant as income, except as such deduction may be limited by Code Section
162(m).
Upon disposition of shares, the appreciation (or depreciation) after the
date of exercise will be created by the optionee as either short-term or long-
term capital gain (or loss) depending on whether the shares have been held for
the then required holding period.
The federal income tax deduction which the Company may take for otherwise
deductible compensation payable to certain executive officers may be limited
by Code Section 162(m) to $1 million. Under Code Section 162(m), the deduction
limit on compensation does not apply to compensation deemed under Code Section
162(m) to be "performance-based." The determination of whether compensation
related to options granted under the Plan is performance-based will be
dependent upon a number of factors, including shareholder approval of the
amended and restated Plan. Code Section 162(m) also prescribes certain
limitations and procedural requirements in order for compensation to qualify
as performance-based. Although the Company has structured the Plan to satisfy
the requirements of Section 162(m) with regard to its performance-based
criteria, there is no assurance that options granted thereunder will so
satisfy such requirements, and accordingly, the Company may be limited in the
deductions it may take with respect to awards under the Plan.
18
<PAGE>
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as independent
auditors for the Company for the year ending December 31, 1998. The Board
recommends ratification of this action.
Representatives of Ernst & Young LLP are expected to be present at the
meeting and will be given the opportunity to make a statement if they desire
to do so. It is also expected that they will be available to respond to
appropriate questions from shareholders at the meeting.
The Board of Directors recommends ratification of the selection of Ernst &
Young LLP as independent auditors.
1999 SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1999 Annual
Meeting must be received by the Company no later than December 1, 1998, to be
considered for inclusion in the Proxy materials relating to that meeting. Such
proposals should be addressed to William E. Navolio, Secretary, First Oak
Brook Bancshares, Inc., 1400 Sixteenth Street, Oak Brook, Illinois 60523.
OTHER BUSINESS
At this date, management knows of no business to be presented at the meeting
which has not been described above. If, however, some other matter should be
presented, it is intended that the enclosed proxy will be voted in accordance
with the judgment of the person or persons voting the proxy.
By Order of the Board of Directors
William E. Navolio
Secretary
Oak Brook, Illinois
April 1, 1998
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APPENDIX A
FIRST OAK BROOK BANCSHARES, INC.
AMENDED AND RESTATED
1987 STOCK OPTION PLAN
1. Purpose. The purpose of the Amended and Restated 1987 Stock Option Plan
("Plan") is to advance the interests of First Oak Brook Bancshares, Inc. (the
"Company") and its stockholders by encouraging and facilitating the
acquisition of the Company's Common Stock ("Shares") by those employees and
non-employee directors, including advisory directors, of the Company and
subsidiaries upon whose judgment and interest the successful conduct of the
Company's operations is largely dependent. It is anticipated that the Plan
will encourage such key personnel to continue in the employ and the
directorship of the Company and its subsidiaries. It is also anticipated that
the opportunity to obtain such a financial interest will prove attractive to
promising new executive talent and directors and will assist the Company in
attracting such individuals.
2. Eligibility. Options (hereinafter the "Options") to purchase Shares may
be granted from time to time to such officers and other key employees of the
Company and its subsidiaries, including officers who are also directors of the
Company, as may be selected as hereinafter provided, on the terms and
conditions hereinafter established. The Committee (as defined in Paragraph 3
herein) shall also be authorized to grant options to non-employee directors of
the Company's subsidiaries. Options granted hereunder are intended to be non-
qualified stock options under the provisions of the Internal Revenue Code.
(Hereinafter, an employee, or non-employee director, who has been granted an
Option under the Plan is referred to as an "Optionee").
3. Administration.
a. The Plan will be administered by the Stock Option Advisory Committee of
the Board of Directors of the Company (the "Committee"). The Committee shall
be comprised of at least two directors and each member of the Committee must
qualify as a "non-employee director" within the meaning of Rule 16b-3 under
the Securities Exchange Act of 1934 and as an "outside director" for purposes
of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). The Committee has authority to award Options under the Plan,
interpret the Plan, determine the terms and provisions of the Option
Agreements (as defined in Paragraph 5 herein) by which Options shall be
evidenced and to make such rules and regulations and establish such procedures
as it deems appropriate for administration of the Plan.
b. All decisions made by the Committee on the matters referred to in this
Paragraph 3 shall be conclusive and binding. No member of the Committee shall
be liable for any action or determination made in good faith with respect to
the Plan or any Option granted thereunder.
4. Shares Subject to Option. Subject to adjustment as provided in Paragraph
6(g) hereof, the maximum number of shares which may be issued and sold or
transferred upon the exercise of Options granted under this Plan and
accordingly the maximum number of Shares for which Options may be granted,
shall be 335,263 (exclusive of shares issued with respect to options exercised
prior to January 1, 1998), which number of the authorized but unissued Shares
shall be reserved for such purpose. The aggregate limit of 335,263 shares is
subject to an additional limit of 25,000 shares with respect to which any
individual may be awarded Options during any calendar year. The foregoing
335,000 and 25,000 Share limitations are subject to adjustment as provided in
Paragraph 6(g) hereof. Shares to be issued upon the exercise of Options under
this Plan may be issued (i) from the authorized but unissued Shares; (ii) from
Shares held in or acquired for the treasury of the Company; or, (iii) from any
combination of the foregoing as the Committee may determine. If treasury
Shares are issued upon the exercise of any Option, the number of authorized
but unissued Shares reserved for this Plan is correspondingly reduced. Upon:
(a) a cancellation, termination, expiration, forfeiture, or lapse for any
reason of any Option; or (b) payment of the Option price with previously-
acquired Shares and/or payment of any taxes arising upon exercise of an Option
with previously acquired Shares or by withholding Shares which otherwise would
be acquired on exercise, then the number of Shares underlying any such Option
which were not issued (as determined after netting the number of Shares
tendered or withheld) as a result of any of the foregoing actions shall again
be available for the purposes of Options under the Plan.
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<PAGE>
5. Granting of Options. The officers of the Company are authorized and
directed, upon receipt of notice from the Committee of the granting of an
Option, to sign and deliver on behalf of the Company, by mail or otherwise, to
the Optionee an Option upon the terms and conditions specified under the Plan
and in the form of an option agreement approved by the Committee (hereinafter
the "Option Agreement"). The Option Agreement shall be dated and signed by an
officer of the Company as of the date of approval of the granting of an Option
by the Committee. If the Optionee fails to sign and return the Option
Agreement, by delivery or by mailing, within 30 days after the date of its
delivery or mailing to him, the Option grant shall be deemed withdrawn.
Options may be granted, on more than one occasion, to the same person.
6. Terms and Conditions of Options. The Option Agreements, evidencing the
Options granted under the Plan, shall comply with and be subject to the
following terms and conditions:
a. Option Price. The Option price at which Options may be exercised shall be
the fair market value of the Shares, as defined below ("Fair Market Value") on
the date the Option is granted, subject to adjustment as provided in Paragraph
6(g) hereof. Fair Market Value of the Shares shall be determined as follows:
(i) at such time as the Shares are traded through the Nasdaq Stock Market (the
"Nasdaq Market System") or a national stock exchange (an "Exchange"), Fair
Market Value shall be equal to the closing price on the day immediately
preceding such date for sales made and reported through the Nasdaq Market
System or such Exchange on which the Shares are then listed and which
constitutes the principal market for the Shares, or, if no sales of Shares
shall have been so reported with respect to that day, on the next preceding
day with respect to which sales were reported; (ii) at such time as the Shares
are not so traded through the Nasdaq Market System or on an Exchange and the
Shares are convertible into shares of the Company's Class A Common Stock, and
such shares of Class A Common Stock are traded through the Nasdaq Market
System or on an Exchange, Fair Market Value of the Shares shall be equal to
the closing price on the day immediately preceding such date for sales of
shares of the Company's Class A Common Stock made and reported through the
Nasdaq Market System or such Exchange on which shares of the Class A Common
Stock are listed and which constitutes the principal market for such shares
or, if no sales of such shares shall have been so reported with respect to
that day, on the next preceding day with respect to which sales were reported;
or (iii) if neither (i) or (ii) applies, Fair Market Value shall be equal to
such amount as the Committee, in its sole discretion, shall determine.
b. Exercise and Term of Option. Other than the "Formula Options" granted to
non-employee directors of the Company described below, or as may otherwise be
provided by the Committee in the Option Agreement, Options granted under the
Plan may be exercised as to the percentage of the total number of Shares for
which the Option is granted in accordance with the following schedule:
<TABLE>
<CAPTION>
YEARS
AFTER PERCENTAGE
DATE OF GRANT OF SHARES
------------- ----------
<S> <C>
Less than 1................................................. 0%
1 but less than 2........................................... 20%
2 but less than 3........................................... 40%
3 but less than 4........................................... 60%
4 but less than 5........................................... 80%
5 but not more than 10...................................... 100%
</TABLE>
No Option may be exercised later than 10 years from the date of grant.
c. Withholding, Etc. Shares shall not be issued upon the exercise of any
Option under the Plan unless and until withholding tax, if any, or other
withholding obligation, if any, imposed by any governmental entity has, in the
opinion of the Committee, been satisfied or provision for their satisfaction
has been made. The Company shall have the power and the right to deduct or
withhold, or require an Optionee to remit to the Company, an amount sufficient
to satisfy Federal, state, and local taxes, domestic and foreign, required by
law or regulation to be withheld with respect to any taxable event arising as
a result of the Plan. With respect to the withholding required upon the
exercise of Options or upon any other taxable event arising as a result of
Options granted
21
<PAGE>
hereunder, Optionee may elect, subject to the approval of the Committee, to
satisfy the withholding requirement, in whole or in part, by having the
Company withhold Shares having a Fair Market Value on the date the tax is to
be determined equal to the minimum statutory total tax which would be imposed
on the transaction. All such elections shall be irrevocable, made in writing,
signed by the Optionee, and shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems appropriate.
d. Method of Exercise. To the extent that the right to purchase Shares has
accrued hereunder, Options may be exercised from time to time by written
notice to the Company, stating the number of Shares being purchased and
accompanied by the payment in full of the Option price for such Shares. Such
payment shall be made in cash, by check, by tendering previously-acquired
Shares of Common Stock or the Company's Class A Common Stock (including for
this purpose, Common Stock or Class A Common Stock deemed tendered by
affirmation of ownership) or any combination thereof. If Shares are used in
part or full payment for the Shares to be acquired upon exercise of the
Option, such Shares shall be valued for the purpose of such exchange as of the
date of exercise of the Option at the Fair Market Value of the Shares as
defined under Paragraph 6(a) above. If shares of the Company's Class A Common
Stock are used in part or full payment for the Shares to be acquired upon
exercise of the Option, such shares shall be valued for the purpose of such
exchange, as of the date of exercise of the Option, at the value determined in
the manner described in Paragraph 6(a)(ii) or, if applicable, 6(a)(iii) above.
Any certificates evidencing outstanding shares or shares of the Company's
Class A Common Stock tendered to pay the Option price shall be accompanied by
stock powers duly endorsed in blank by the registered holder of the
certificate (with the signature thereon guaranteed). In the event the
certificates tendered by the Optionee in such payment cover more shares or
shares of Class A Common Stock than are required for such payment, the
certificates shall also be accompanied by instructions from the Optionee to
the Company's transfer agent with regard to disposition of the balance of the
shares or shares of the Class A Common Stock covered thereby.
e. Limited Transferability of Options. Except as provided below, no Option
granted under the Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, otherwise than by will or by the laws of
descent and distribution. Further, all Options granted to Optionee under the
Plan shall be exercisable during his lifetime only by such Optionee.
Notwithstanding the foregoing, the Committee may, in its discretion, authorize
all or a portion of the Options granted to a Optionee to be on terms which
permit transfer by such Optionee to:
(a) the spouse, children or grandchildren of the Optionee ("Immediate
Family Members");
(b) a trust or trusts for the exclusive benefit of such Immediate Family
Members, or;
(c) a partnership in which such Immediate Family Members are the only
partners,
provided that:
(i) there may be no consideration for any such transfer;
(ii) the Option Agreement pursuant to which such Options are granted
expressly provides for transferability in a manner consistent with this
Paragraph 6(e); and
(iii) subsequent transfers of transferred Options shall be prohibited
except those in accordance with Paragraph 8 hereof.
Following transfer, any such Options shall continue to be subject to the
same terms and conditions as were applicable immediately prior to transfer,
provided that for purposes of Paragraph 8 hereof the term "Optionee" shall be
deemed to refer to the transferee. The provisions of Paragraphs 6 and 7
relating to the period of exercisability and expiration of the Option shall
continue to be applied with respect to the original Optionee, and the Options
shall be exercisable by the transferee only to the extent, and for the
periods, set forth in said Paragraph 6 and 7.
f. Effect of Termination of Employment, Disability, or Death.
i. Except as set forth below, or with respect to Formula Options granted
to non-employee directors, it shall be a condition of the right to exercise
any part of any Option that the Optionee remain in the employment of the
Company or its subsidiaries.
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<PAGE>
ii. All rights under any Option granted to an Optionee shall terminate on
the date such Optionee ceases to be employed by the Company or its
subsidiaries, except that (A) if such employment is terminated by death of
such Optionee, any unexercised, unexpired Options granted hereunder to the
Optionee shall become immediately exercisable, in whole or in part, at any
time within one year after the date of death, by the Optionee's personal
representative or by the person to whom the Option is transferred pursuant
to Optionee's beneficiary designated pursuant to Paragraph 8 hereof, or by
will or the applicable laws of descent and distribution, (B) if such
employment is terminated as a result of the disability of the Optionee (as
defined in Section 72(m)(7) of the Internal Revenue Code), any unexercised,
unexpired Options granted hereunder to the Optionee shall become
immediately exercisable, in whole or in part, at any time within one year
after the date of such disability, and (C) if such employment is terminated
for reason other than the death or permanent disability of Optionee, any
unexercised, unexpired Options granted hereunder and exercisable as of the
date of such termination of employment shall be exercisable in whole or in
part at any time within three months after such date of termination;
provided, however, that in no event shall any Option be exercisable after
the expiration date of such Option.
g. Effect of Change in Stock Subject to Plan. In the event of any change in
corporate capitalization, such as a stock split, stock dividend, or a
corporate transaction, such as any merger, consolidation, separation,
including a spin-off, or other distribution of stock or property of the
Company, any reorganization (whether or not such reorganization comes within
the definition of such term in Code Section 368) or any partial or complete
liquidation of the Company, such adjustment shall be made in the number and
class of Shares available for Options, the number and class of and/or price of
Shares subject to outstanding Options granted under the Plan, the number of
Shares set forth in Paragraph 4, and the number of Shares set forth in
Paragraph 7, as may be determined to be appropriate and equitable by the
Committee, in its sole discretion, to prevent dilution or enlargement of
rights; provided, however, that the number of Shares subject to any Options
shall always be a whole number.
h. Acceleration of Rights Upon Change in Control. In the event a change in
control of the Company should occur as defined below ("Change in Control"),
then all Options granted hereunder to an Optionee shall become immediately
exercisable upon the date of the Change in Control. A Change in Control shall
be deemed to have occurred in the event that any person, entity or group shall
become the beneficial owner of such number of shares of Class A Common Stock,
Common Stock, and/or any other class of stock of the Company then outstanding
that is entitled to vote in the election of directors (or is convertible into
shares so entitled to vote) as together possess more than 50% of the voting
power of all of the then outstanding shares of all such classes of stock of
the Company so entitled to vote. For purposes of the preceding sentence,
"person, entity or group" shall not include (i) any employee benefit plan of
the Company, or (ii) any person, entity or group which, as of September 21,
1987, was the beneficial owner of such number of shares of Class A Common
Stock, Common Stock and/or such other class of stock of the Company as
together possess 5% of such voting power; and for purposes of this
subparagraph (h), "group" shall mean persons who act in concert as described
in Section 14(d)(2) of the 1934 Act.
i. Legal Compliance. No Option shall be granted under the Plan and no Shares
shall be issued, transferred or delivered upon exercise of any Option granted
under the Plan unless the Committee is satisfied that there has been full
compliance with all applicable requirements of the Securities Act of 1933 and
of state securities laws, all applicable requirements of any national
securities exchange on which securities issued by the Company are then listed,
and all other requirements of law or of any regulatory bodies having
jurisdiction over the granting of such Options or of the issuance, transfer or
delivery of Shares pursuant to the exercise thereof.
j. Rights as a Stockholder or Employee. No person shall have any right as a
stockholder with respect to any Shares covered by an Option granted under the
Plan until the date of the issuance to such person of a stock certificate
evidencing such Shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to
23
<PAGE>
the date such stock certificate is issued, except as provided in Paragraph
6(g) hereof. Nothing in this Plan or in any Option Agreement shall confer upon
any employee any right to continue in the employ of the Company (or any
subsidiary), or interfere in any way with any right of the Company (or any
subsidiary), to terminate such employee's employment at any time.
k. Fractional Shares. In no event shall the Company be required to issue
fractional Shares upon the exercise of an Option.
l. Other Provisions. Each Option Agreement may contain such other terms,
provisions and conditions not inconsistent with the Plan as may be determined
by the Committee.
7. Options for Non-Employee Directors of the Company ("Formula Options").
(a) Formula Options. On the date on which the person is first elected or
begins to serve as a non-employee director of the Company other than by reason
of termination of employment, such non-employee director shall be granted a
Formula Option to purchase 1,000 Shares at an exercise price equal to the Fair
Market Value per share as of the date of grant. On the date of each Annual
Meeting thereafter, each non-employee director who is a non-employee director
after such Annual Meeting shall be granted a Formula Option to purchase 500
Shares at an exercise price equal to the Fair Market Value per Share as of the
date of such Annual Meeting. The number of Shares set forth in this Paragraph
7 shall be subject to adjustment as provided in Paragraph 6(g).
(b) Exercise and Term of Formula Options. Formula Options may be exercised
as to the percentage of the total number of shares for which the Option is
granted in accordance with the following schedule:
<TABLE>
<CAPTION>
PERCENTAGE
YEARS AFTER DATE OF GRANT OF SHARES
------------------------- ----------
<S> <C>
Less than 1................................................... 0%
1 but less than 2............................................. 33 1/3%
2 but less than 3............................................. 66 2/3%
3 but less than 10............................................ 100%
</TABLE>
No Formula Option may be exercised later than ten (10) years from the date
of grant.
(c) Effect of Cessation of Directorship. If the holder of a Formula Option
ceases to be a director of the Company for any reason other than death, each
such Option held by the holder may, to the extent exercisable, be exercised by
such holder (or such holder's guardian, legal representative of similar
person) for a period of three (3) years after the date of such holder's
ceasing to be a director or until the expiration of the term of such Formula
Option, whichever period is shorter. If the holder of a Formula Option ceases
to be a director of the Company by reason of death, each such Option held by
such holder may, whether then exercisable or not, thereafter be exercised by
such holder (or such holder's executor, administrator, legal representative,
beneficiary of similar person) for a period of two years after the date of
such holder's death or until the expiration of the term of such Formula
Option, whichever period is shorter. If the holder of a Formula Option granted
under the Plan dies during the three (3) year period following such holder's
ceasing to be a director, to the extent then exercisable, each such Option
held by such holder may thereafter be exercised by the holder's executor,
administrator, legal representative, beneficiary or similar person for a
period of one year after the date of death or until the expiration of the term
of such option whichever period is shorter.
8. Beneficiary Designation. Each Optionee under the Plan may, from time to
time, name any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid in case of his
or her death before he or she receives any or all of such benefit. Each such
designation shall revoke all prior designations by the same Optionee, shall be
in a form prescribed by the Company, and will be effective only when filed by
the Optionee in writing with the Secretary of the Company during the
Optionee's lifetime. In the absence of any such designation, benefits
remaining unpaid at the Optionee's death shall be paid to the Optionee's
estate.
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<PAGE>
9. Substituted Options. In the event the Committee cancels, with the consent
of the Optionee, any Option granted under this Plan, and a new Option is
substituted therefor, the date the canceled Option was granted by the
Committee shall be the date used to determine the earliest date for exercising
the new substituted Option under Paragraph 6(b) hereof so that the Optionee
may exercise the substituted Option at the same time as if the Optionee had
held the substituted Option since the date of the granting of the canceled
Option.
10. Termination or Amendment of Plan. The Board may at any time and from
time to time, alter, amend, suspend or terminate the Plan in whole or in part,
subject to any requirement of shareholder approval imposed by applicable law,
rule or regulation. No termination, amendment, or modification of the Plan
shall adversely affect in any material way any Option previously granted under
the Plan, without the written consent of the Optionee holding such Option.
11. Indemnification. In addition to such other rights of indemnification as
they may have as members of the Board or Committee, the members of the Board
and Committee shall be indemnified by the Company against the reasonable
expenses, including attorneys' fees incurred in connection with the defense of
any action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any Option granted
thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such member acted in bad
faith in the performance of his duties. Provided that within 20 days after
institution of any such action, suit or proceeding, the member shall in
writing offer the Company the opportunity, at its own expense, to handle and
defend the same.
12. Use of Proceeds. The proceeds from the sale of Shares of Common Stock
pursuant to Options granted under the Plan shall constitute general funds of
the Company.
13. Duration. The Plan as amended and restated hereby is effective January
27, 1998, the date it was adopted by the Board of Directors of the Company,
subject to approval of the Amended and Restated Plan by the stockholders of
the Company. The Plan will continue in effect through January 27, 2008, unless
terminated at an earlier date by the Board of Directors. Any termination of
the Plan shall not affect any Options then outstanding under the Plan.
25
