<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
RELIANCE ACCEPTANCE GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
JAMES I. KAPLAN, ESQ.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
[LOGO OF RELIANCE ACCEPTANCE CORPORATION]
Dear Stockholder:
You are cordially invited to the Annual Meeting of Stockholders (the "Annual
Meeting"), of Reliance Acceptance Group, Inc. (the "Company"). The Annual
Meeting will be held in the Mesquite-Live Oak Rooms of the Embassy Suites
Hotel, 10110 U.S. Highway 281 North, San Antonio, Texas 78216, on May 29,
1997, at 9:00 a.m., Central Daylight time.
At the Annual Meeting, you will be asked to consider and vote upon two
proposals: (i) to elect three Class III directors to serve for a term of three
years or until their successors have been elected and qualified and (ii) to
approve the Company's 1997 Stock Option Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS VOTE FOR ALL OF THE NOMINEES FOR ELECTION AS DIRECTORS AT THE
ANNUAL MEETING AND FOR THE APPROVAL OF THE 1997 STOCK OPTION PLAN.
In the materials accompanying this letter, you will find a Notice of Annual
Meeting of Stockholders, a Proxy Statement relating to the actions to be taken
at the Annual Meeting and a proxy. The Proxy Statement includes certain
information about the Company which you should consider in connection with the
actions to be taken at the Annual Meeting. Also included, along with the proxy
materials is the Company's Annual Report to Stockholders.
All stockholders are invited to attend the Annual Meeting in person.
However, whether or not you plan to attend the Annual Meeting, please
complete, sign, date and return your proxy in the enclosed envelope. If you
attend the Annual Meeting, you may vote in person if you wish, even though you
have previously returned your proxy. It is important that your shares be
represented and voted at the Annual Meeting.
Sincerely,
/s/ Thomas L. Barlow
Thomas L. Barlow
President and Chief Executive
Officer
April 29, 1997
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 29, 1997
----------------
To the Stockholders of Reliance
Acceptance Group, Inc.
The Annual Meeting of the Stockholders of Reliance Acceptance Group, Inc., a
Delaware corporation (the "Company"), will be held at 9:00 a.m., Central
Daylight time on May 29, 1997, in the Mesquite-Live Oak Rooms of the Embassy
Suites Hotel, 10110 U.S. Highway 281 North, San Antonio, Texas 78216, for the
following purposes:
1. To elect three Class III directors to serve for a term of three years
or until their successors have been elected and qualified.
2. To approve the Reliance Acceptance Group, Inc. 1997 Stock Option Plan.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors of the Company has fixed the close of business on
April 2, 1997 as the record date for determining stockholders entitled to
notice of, and to vote at, the Annual Meeting and any adjournment thereof.
By Order of the Board of Directors
/s/ James I. Kaplan
James I. Kaplan
Secretary
April 29, 1997
ALL STOCKHOLDERS ARE URGED TO ATTEND THE MEETING IN PERSON OR BY PROXY.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PAID ENVELOPE FURNISHED FOR THAT PURPOSE. YOUR PROXY CAN BE WITHDRAWN
AT ANY TIME BEFORE IT IS VOTED.
<PAGE>
400 NORTH LOOP 1604 EAST
SUITE 200
SAN ANTONIO, TEXAS 78232
(210) 496-5910
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 29, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Reliance Acceptance Group, Inc. (the
"Company" or the "Parent Company"), to be voted at the Annual Meeting of
Stockholders and any adjournment or postponement thereof (the "Annual
Meeting") for the purposes set forth in the foregoing Notice of Annual
Meeting. The Annual Meeting will be held at 9:00 a.m., Central Daylight time,
on May 29, 1997 in the Mesquite-Live Oak Rooms of the Embassy Suites Hotel,
10110 U.S. Highway 281 North, San Antonio, Texas, 78216. Reliance Acceptance
Group, Inc. is the parent company of Reliance Acceptance Corporation (the
"Finance Company").
This Proxy Statement and the accompanying proxy card are being mailed to
stockholders on or about April 29, 1997, together with a copy of the Company's
Annual Report to Stockholders for the year ended December 31, 1996.
RECORD DATE AND OUTSTANDING SHARES
The Board of Directors of the Company (the "Board of Directors") has fixed
the close of business on April 2, 1997 as the record date (the "Record Date")
for determining stockholders entitled to notice of, and to vote at, the Annual
Meeting. As of the close of business on the Record Date, there were 10,878,925
shares of Common Stock outstanding and entitled to vote, held of record by 569
stockholders (although the Company has been informed that there are in excess
of 8,500 beneficial owners). The outstanding shares of Common Stock constitute
the only outstanding voting securities of the Company entitled to vote at the
Annual Meeting. Each holder of Common Stock is entitled to one vote for each
share held by such person with respect to each matter (including election of
directors) to be voted on at the Annual Meeting.
VOTING OF PROXIES
The Proxy accompanying this Proxy Statement is solicited on behalf of the
Board of Directors for use at the Annual Meeting. Stockholders are requested
to complete, sign and date the accompanying proxy and promptly return it in
the accompanying postage paid envelope or otherwise mail it to the Company.
Howard B. Silverman, James I. Kaplan and William S. Race, the persons named as
proxies on the proxy accompanying this Proxy Statement, were selected by the
Board of Directors to serve in such capacity. The shares represented by a
proxy which is properly signed, dated, returned and not revoked will be voted
in accordance with the instructions contained therein, or, if no direction is
indicated, will be voted to approve all of the proposals recommended by the
Board of Directors as indicated herein. The Board of Directors presently does
not intend to bring any matter before the Annual Meeting except those referred
to in this Proxy Statement and specified in the Notice of Annual Meeting, nor
does the Board of Directors know of any matters which anyone else proposes to
present for action at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting, the persons named in the accompanying
proxy, or their duly constituted substitutes acting at the Annual Meeting,
will be authorized to vote or otherwise act thereon in accordance with their
judgment and discretion; provided, however, that proxies directing a vote
against a proposal may not be voted, pursuant to such discretionary authority,
for a proposal to adjourn the Annual Meeting in order to permit further
solicitation with respect to such proposal.
Each stockholder giving a proxy has the power to revoke it at any time
before the shares it represents are voted. Revocation of a proxy is effective
upon receipt by the Secretary of the Company, at 980 North Michigan
<PAGE>
Avenue, Suite 1400, Chicago, Illinois 60611, of either (i) a written notice,
duly executed by the stockholder, stating that the proxy is revoked or (ii) a
duly executed proxy bearing a later date. Additionally, a stockholder may
revoke a previously executed proxy by voting in person at the Annual Meeting
(although attendance at the Annual Meeting will not, by itself, revoke a
proxy).
VOTES REQUIRED
The presence at the Annual Meeting, in person or by proxy, of the holders of
a majority of the shares of Common Stock outstanding on the Record Date is
necessary to constitute a quorum. Abstentions and broker non-votes will be
included in determining the presence of a quorum.
The vote of a plurality of the shares voted in person or by proxy will be
required to elect the nominees for directors. Stockholders will not be allowed
to cumulate their votes in the election of directors. The approval of the 1997
Stock Option Plan will require the affirmative vote of a majority of the
outstanding shares of Common Stock entitled to vote thereon. Assuming a quorum
is present at the Annual Meeting, neither abstentions nor broker non-votes
will have an effect on the proposals presented in this proxy.
SOLICITATION OF PROXIES
The cost of this proxy solicitation is being borne by the Company. The
Company has engaged a proxy solicitation firm, MacKenzie Partners, Inc., to
assist in the required search for beneficial owners of the Company's Common
Stock and in the distribution of proxy materials. The Company will pay
MacKenzie Partners, Inc. a fee of approximately $3,000 in connection with such
services. In addition to the solicitation of proxies by the use of the mails,
certain officers and associates (who will receive no compensation therefor in
addition to their regular salaries) may be used to solicit proxies personally
and by telephone and telegraph. In addition, banks, brokers and other
custodians, nominees and fiduciaries will be requested to forward copies of
the proxy materials to their principals and to request authority for the
execution of proxies. The Company will reimburse such persons for their
expenses in doing so.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of April 2, 1997, certain information
reported to the Company with respect to the beneficial ownership of the
Company's Common Stock by (i) each person known by the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock, (ii) each of
the Company's current executive officers, (iii) each director of the Company
and (iv) all executive officers and directors as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
NAME BENEFICIALLY OWNED (1) TOTAL
---- ---------------------- -------------
<S> <C> <C>
Howard B. Silverman(2)................... 70,500 *
Thomas L. Barlow(3)...................... 48,400 *
Lori Cole(4)............................. 1,600,200 14.4
Solway F. Firestone(5)................... 132,000 1.2
Dean L. Griffith......................... 1,000 *
Ross J. Mangano(6)....................... 549,300 5.0
William S. Race(7)....................... 104,732 *
Cathy Cole Williams(8)................... 1,021,440 9.2
James D. Dolph........................... 1,000 *
James I. Kaplan(9)....................... 22,530 *
Irwin H. Cole(10)........................ 188,028 1.7
Shirley Cole(11)......................... 845,300 7.6
All executive officers and directors as a
group (10 persons)(12).................. 3,551,102 32.0
</TABLE>
- --------
* Less than 1%.
(1) Unless otherwise indicated below, the persons in the above table have
sole voting and investment power with respect to all shares shown as
beneficially owned by them. The address of all holders of 5% or more of
the Company's outstanding Common Stock is c/o Reliance Acceptance Group,
Inc., 980 North Michigan Avenue, Suite 1400, Chicago, Illinois 60611,
Attention: James I. Kaplan, Secretary.
(2) Includes 40,000 shares issuable upon exercise of options which are
currently exercisable.
(3) Includes 48,400 shares issuable upon exercise of options which are
currently exercisable.
(4) Includes 1,600,200 shares held by various trusts over which Ms. Cole has
sole voting and investment power.
(5) Includes 5,000 shares held by a trust established for Mr. Firestone's
wife, 1,000 shares held by a pension plan over which Mr. Firestone has
sole voting and investment power as investment advisor and 3,000 shares
held by various trusts over which Mr. Firestone has sole voting and
investment power. Also includes 4,000 shares issuable upon exercise of
options which are currently exercisable. Mr. Firestone disclaims
beneficial ownership of the 5,000 shares held by the trust established
for his wife.
(6) Includes an aggregate of 530,300 shares over which Mr. Mangano has shared
voting power and sole investment power.
(7) Includes 102,235 shares issuable upon exercise of options which are
currently exercisable.
(8) Includes 1,021,440 shares held by various trusts over which Ms. Williams
has sole voting and investment power. Excludes 42,000 shares beneficially
owned by Ms. Williams' husband, of which shares Ms. Williams disclaims
beneficial ownership.
(9) Includes 22,530 shares issuable upon the exercise of options which are
currently exercisable.
(10) Includes 2,500 shares of which Mr. Cole shares voting and investment
power with his spouse, Shirley Cole. Excludes 842,800 shares beneficially
owned by Mr. Cole's spouse, of which shares Mr. Cole disclaims beneficial
ownership.
(11) Includes 2,500 shares of which Mrs. Cole shares voting and investment
power with her spouse, Irwin Cole. Excludes 185,528 shares beneficially
owned by Mrs. Cole's husband, Irwin H. Cole, of which shares Mrs. Cole
disclaims beneficial ownership.
(12) Includes an aggregate of 217,165 shares issuable upon exercise of options
which are currently exercisable. Excludes 47,000 shares held by spouses
of the directors and executive officers of which shares such persons
disclaim beneficial ownership.
3
<PAGE>
RECENT DEVELOPMENTS AND RESIGNATIONS OF
CERTAIN DIRECTORS AND EXECUTIVE OFFICERS
On February 12, 1997, the Company (formerly known as Cole Taylor Financial
Group, Inc.) closed the transactions (the "Split-Off Transactions")
contemplated by the Amended and Restated Share Exchange Agreement dated as of
June 12, 1996, by and among the Company and the Taylor Family Group (as
defined below), including the following transactions: (1) the Taylor Family
Group exchanged 4,500,000 shares of the Company's common stock, $.01 par value
per share (the "Common Stock") with the Company for all of the outstanding
common stock of Taylor Capital Group, Inc. ("Taylor Capital"), which owned all
of the outstanding common stock of Cole Taylor Bank (the "Bank"), all of the
outstanding common stock of CT Mortgage Company, Inc. and an investment in
Alpha Capital Fund II, L.P., and (2) the Finance Company received $52 million
in cash and all of the used automobile receivables business of the Bank
consisting of, among other things, used automobile finance contracts having a
fair market value of $31 million. The Split-Off Transactions were previously
approved by the Company's Stockholders at a meeting held November 15, 1996.
The "Taylor Family Group" means an investor group consisting of Jeffrey W.
Taylor, Bruce W. Taylor, Sidney J. Taylor, Iris A. Taylor, Cindy Taylor Bleil,
the Taylor Family Partnership and a series of related trusts.
On February 14, 1997, Jeffrey W. Taylor, Bruce W. Taylor, Sidney J. Taylor,
Melvin E. Pearl, Richard Tinberg and Adelyn Dougherty resigned from the Board
of Directors of the Company, and Sidney J. Taylor and Jeffrey W. Taylor
resigned from the Board of Directors of the Finance Company. Furthermore,
Jeffrey W. Taylor resigned as Chairman and Chief Executive Officer of the
Company, Bruce W. Taylor resigned as President of the Company and John
Christopher Alstrin resigned as the Chief Financial Officer of the Company at
that time. In addition, on June 12, 1996, Bruce W. Taylor and Melvin E. Pearl
resigned from the Board of Directors of the Finance Company. Upon consummation
of the Split-Off Transactions, James I. Kaplan, the General Counsel of the
Company and the Bank, resigned his position with the Bank. Mr. Kaplan
continues to serve as the Company's General Counsel.
PROPOSAL NO. 1--ELECTION OF DIRECTORS
The Board of Directors is comprised of 8 members. The Amended and Restated
Certificate of Incorporation currently in effect provides that the members of
the Board of Directors shall be divided into three classes, as nearly equal as
possible, with one class being elected each year. At the Annual Meeting three
persons will be elected as Class III directors, each to be elected for a term
of three years (expiring at the Annual Meeting of Stockholders to be held in
the year 2000) or until their successors are elected and qualified. All
nominees are currently serving as directors and have consented to serve for
new terms.
If at the time of the Annual Meeting any of the nominees should be unable or
decline to serve, the persons named in the proxy will vote for such substitute
nominee or nominees as the Board of Directors recommends, or vote to allow the
vacancy created thereby to remain open until filled by the Board of Directors,
as the Board of Directors recommends. The Board of Directors has no reason to
believe that any nominee will be unable or will decline to serve as a director
if elected.
4
<PAGE>
NOMINEES FOR ELECTION AS CLASS III DIRECTORS
The following persons, if elected at the Annual Meeting, will serve as
directors until the earlier of the Annual Meeting of Stockholders to be held
in the year 2000 or until their successors are duly elected and qualified:
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR OF
THE
NAME AGE POSITION WITH THE COMPANY COMPANY SINCE
- ---- --- ------------------------- -------------
<S> <C> <C> <C>
Thomas L. Barlow (1)(2)........ 51 President, Chief Executive 1997
Officer and a Director of
the Company and the Finance
Company
Lori Cole (1)(2)(3)............ 45 Director of the Company 1995
Solway F. Firestone (3)(4)(5).. 84 Director of the Company 1993
</TABLE>
- --------
(1) Member of the Executive Committee
(2) Member of the Nominating Committee
(3) Member of the Financial Oversight Committee
(4) Member of the Compensation Committee
(5) Member of the Audit Committee
THOMAS L. BARLOW is the President and Chief Executive Officer of the Company
and has been a director of the Company since February, 1997 and the Finance
Company since its inception. Mr. Barlow is a member of the Company's Executive
Committee and Nominating Committee. Mr. Barlow has served as the President,
Chief Executive Officer and a Director of the Finance Company since November,
1992. Prior to that time, for more than twenty years Mr. Barlow was employed
as a Senior Vice President and Area General Manager for ITT Consumer Financial
Corporation (ITT CFC), during which time Mr. Barlow was responsible for
operations of one-sixth of ITT CFC's domestic business.
LORI COLE is a director of the Company, a member of the Company's Financial
Oversight Committee and Chairman of the Company's Executive and Nominating
Committees. Ms. Cole was also a director of the Finance Company from July,
1995 to February, 1997 and the Bank from July, 1995 to June, 1996. For more
than five years, Ms. Cole has been the Chairman and President of Chicago
Sound, Inc., which provides audio services, including sound systems and
engineering services, for theatrical performances, concerts and similar shows.
Ms. Cole is the daughter of Irwin H. and Shirley Cole and the sister of Cathy
Cole Williams.
SOLWAY F. FIRESTONE is a director of the Company, a member of the Company's
Compensation Committee and Financial Oversight Committee, and Chairman of the
Company's Audit Committee. Mr. Firestone was also a director of the Bank from
1983 to 1997. Mr. Firestone is a certified public accountant and served as
president of S.F. Firestone & Company, Ltd., a public accounting firm located
in Chicago, Illinois for more than five years until his retirement in June,
1994. Mr. Firestone continues to serve as a consultant to S.F. Firestone &
Company, Ltd. Mr. Firestone served as a director of the Bank of the North
Shore from 1976 to 1984 and also served as Chairman of the Board and Chief
Executive Officer of National Press Inc., a manufacturer of printed office
supplies, advertising specialties and calendars, from 1975 to 1984.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE ELECTION OF THE THREE NOMINEES NAMED IN THIS PROXY STATEMENT TO SERVE AS
DIRECTORS OF THE COMPANY.
5
<PAGE>
CONTINUING DIRECTORS
The following persons will continue to serve as directors of the Company
after the Annual Meeting until their terms of office expire (as indicated
below) or until their successors are elected and qualified.
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR OF THE TERM TO
NAME AGE POSITION WITH THE COMPANY COMPANY SINCE EXPIRE
---- --- ------------------------- --------------- -------
<S> <C> <C> <C> <C>
Dean L. Griffith (4).... 70 Director of the Company 1989 1998
Ross J. Mangano 51 Director of the Company
(1)(2)(3)(4)........... 1993 1999
William S. Race 61 Director of the Company
(2)(3)(5).............. 1989 1999
Howard B. Silverman 58 Chairman and a Director of
(1)(2)(3).............. the Company, Chairman and a
Director of the Finance
Company 1992 1999
Cathy Cole Williams 48 Director of the Company
(5).................... 1997 1998
</TABLE>
- --------
(1) Member of the Executive Committee
(2) Member of the Nominating Committee
(3) Member of the Financial Oversight Committee
(4) Member of the Compensation Committee
(5) Member of the Audit Committee
DEAN L. GRIFFITH is a director of the Company and a member of its
Compensation Committee. Mr. Griffith is the Chairman and Chief Executive
Officer of Griffith Laboratories, Inc., a global manufacturer of food
ingredients and flavor systems for the food processing and food source
industries, located in Alsip, Illinois. Mr. Griffith has been with Griffith
Laboratories since 1950.
ROSS J. MANGANO is a director of the Company, is a member of the Company's
Executive Committee, Nominating Committee and Financial Oversight Committee
and is Chairman of the Company's Compensation Committee. Since 1971, Mr.
Mangano has been employed by Oliver Estate, Inc., a management company located
in South Bend, Indiana, with which he served initially as Vice President of
Investments. Mr. Mangano is currently a director and President of Oliver
Estate, Inc. Since 1988, Mr. Mangano has been the Chairman of the Board of
CerProbe Corporation, a public company based in Tempe, Arizona, which develops
and markets testing and probing equipment for the semiconductor industry.
Since 1992, Mr. Mangano has been the President of Oliver Land Corporation, a
property development company located in South Bend, Indiana.
WILLIAM S. RACE is a director of the Company, is a member of the Company's
Audit Committee and Nominating Committee and is the Chairman of the Company's
Financial Oversight Committee. Mr. Race was also a director of the Finance
Company from its inception to February, 1997 and of the Bank from October,
1989 to June, 1996. Mr. Race served as the Chief Financial Officer of the Bank
from 1989 to August, 1995, as the Chief Financial Officer of the Company from
1990 to August, 1995, and as Executive Vice President of the Company from
August, 1995 until his retirement on December 31, 1995. Mr. Race also served
as President and Chief Executive Officer of Cole Taylor Bank, Ford City in
1988. Mr. Race began his career with the Bank in 1987 as Executive Vice
President.
HOWARD B. SILVERMAN has been a director of the Company since 1992 and has
been its Chairman since the Split-Off Transactions in February, 1997. He is a
member of the Company's Executive, Nominating and Financial Oversight
Committees. Mr. Silverman was also Chairman of the Finance Company from its
inception in 1992. Prior thereto, Mr. Silverman served as a consultant to the
Company. During his earlier career, Mr. Silverman served as Chairman and Chief
Executive Officer of First Illinois Corporation, a multi-bank and financial
services company which included a finance company subsidiary. Pursuant to a
merger agreement between Indiana Federal Corporation and Pinnacle Financial
Services, Inc., Mr. Silverman will be appointed to
6
<PAGE>
the Board of Directors of Pinnacle Financial Services, Inc., a bank holding
company, upon consummation of such merger.
CATHY COLE WILLIAMS is a director of the Company and a member of its Audit
Committee. Ms. Williams has been a private investor and a free-lance musician
for more than five years. Ms. Williams is the daughter of Irwin H. and Shirley
Cole and the sister of Lori Cole.
DIRECTOR COMPENSATION
Directors who are also employees of the Company do not receive any fees for
their service as directors. Each nonemployee director of the Company receives
an annual fee of $10,000 and an attendance fee of $500 for each directors'
meeting attended and $650 for each committee meeting attended. The Chairman of
each committee receives an additional $250 per committee meeting attended.
Certain officers of the Company who were also directors of the Company
received options under the 1991 Stock Option Plan in their capacity as
officers of the Company. See "Executive Compensation--Aggregate Option
Exercises in 1996 and Year End Option Values." In addition, on April 23, 1997,
each of the directors of the Company who was not also an officer or employee
of the Company received options under the 1991 Stock Option Plan to purchase
20,000 shares of the Company's Common Stock at an exercise price of $10.125,
for serving as a director. Such options vest as to 20% of the total on each of
the next five anniversaries of the date of grant provided the optionee is
still a director of the Company on such anniversary date.
MEETINGS
During 1996, the total number of meetings of the Board of Directors was 14
and, with the exception of Irwin H. Cole and Dean L. Griffith, each director
attended at least 75% of the total number of meetings of the Board of
Directors and committees of the Board of Directors on which he or she served.
STANDING COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors maintains five standing committees. A discussion of
the functions of each such committee follows.
The Executive Committee is vested with the powers specifically delegated to
it by the Board of Directors from time to time. The Board of Directors may
delegate all of its authority to the Executive Committee except those powers
specifically reserved by Delaware law to the full Board of Directors. The
Executive Committee exists to give the Board of Directors the flexibility to
make decisions during intervals between regular meetings of the full Board of
Directors. Through February 14, 1997, the Executive Committee consisted of
Jeffrey W. Taylor, Bruce W. Taylor, Sidney J. Taylor, Irwin H. Cole, William
S. Race and Melvin E. Pearl. Since February 14, 1997, the Executive Committee
has consisted of Lori Cole, Thomas L. Barlow, Ross J. Mangano and Howard B.
Silverman. Lori Cole serves as Chairman of the Executive Committee. The
Executive Committee held one formal meeting in 1996.
The Audit Committee has responsibility for (i) recommending independent
auditors for selection by the full Board of Directors, (ii) reviewing the plan
and scope of the accountants' audit, (iii) reviewing the Company's audit and
control functions and (iv) reporting to the full Board of Directors regarding
all of the foregoing. Through February 14, 1997, the Audit Committee consisted
of Dean L. Griffith, Ross J. Mangano and Solway F. Firestone. Since February
14, 1997, the Audit Committee has consisted of Solway F. Firestone, William S.
Race and Cathy Cole Williams. Mr. Firestone serves as Chairman of the Audit
Committee. The Audit Committee held six formal meetings in 1996.
The Compensation Committee reviews and makes recommendations to the Board of
Directors on the compensation payable to certain executive officers of the
Company. Specifically, among other things, the Compensation Committee reviews
and approves the Company's compensation strategy, including the individual
elements of total compensation for the Company's executive officers, reviews
the Company's employee benefit programs and approves changes to such programs,
subject to approval by the full Board of Directors or the Company's
stockholders, as necessary, and assures that the Company's annual incentive
compensation plans are
7
<PAGE>
designed and administered in a manner consistent with the Company's
compensation strategy. See "Compensation Committee Report on Executive
Compensation." Through February 14, 1997, the Compensation Committee consisted
of Ross J. Mangano, Adelyn Dougherty and Richard W. Tinberg. Since February
14, 1997, the Compensation Committee has consisted of Ross Mangano, as
Chairman, Solway F. Firestone, and Dean L. Griffith. The Compensation
Committee held four formal meetings in 1996.
The Nominating Committee (i) conducts a continuing study of the size,
structure and composition of the Board of Directors; (ii) seeks out and
interviews possible candidates and reports its recommendations to the Board of
Directors; (iii) determines the criteria for selection and retention of
members of the Board of Directors and (iv) presents to the Board of Directors
proposed nominees for directors. Through February 14, 1997, the Nominating
Committee consisted of Lori Cole, Solway F. Firestone, Dean L. Griffith, Ross
J. Mangano and Jeffrey W. Taylor. Since February 14, 1997, the Nominating
Committee has consisted of Lori Cole, as Chairman, Thomas L. Barlow, Ross J.
Mangano, William S. Race and Howard B. Silverman. The Nominating Committee
held one formal meeting in 1996.
The Financial Oversight Committee was created on February 14, 1997 to review
financial results of the Company and to make recommendations to ensure the
continued growth of earnings of the Company. The Financial Oversight Committee
consists of William S. Race, Lori Cole, Solway F. Firestone, Ross Mangano and
Howard B. Silverman. Mr. Race serves as Chairman of the Financial Oversight
Committee. As the Financial Oversight Committee was not created until 1997, it
held no meetings during 1996.
OTHER EXECUTIVE OFFICERS
Set forth below is a table identifying each executive officer of the Company
who is not also a director of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
James D. Dolph................ 47 Senior Vice President and Chief Financial
Officer of the Company
James I. Kaplan............... 42 Senior Vice President, General Counsel and
Corporate Secretary; Director of the
Finance Company
</TABLE>
JAMES D. DOLPH is the Senior Vice President and Chief Financial Officer of
the Company. Mr. Dolph served as Senior Vice President and Chief Financial
Officer of Sun Star Acceptance Corporation from October, 1993 to December,
1996 and as Senior Vice President and Treasurer of EquiCredit Corp. from May,
1990 to June, 1993.
JAMES I. KAPLAN is the Senior Vice President, General Counsel and Corporate
Secretary of the Company and a Director of the Finance Company. Mr. Kaplan has
been General Counsel and Corporate Secretary of the Company and the Bank since
December, 1991. Prior to joining the Company, Mr. Kaplan was a partner at the
law firm of Altheimer & Gray.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers (as defined in the Exchange
Act), directors and persons who own greater than ten percent of a registered
class of the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission and The
Nasdaq Stock Market. Based solely on a review of the forms it has received,
and on representations from certain reporting persons that no such forms were
required for them, the Company believes that, except as set forth below,
during the fiscal year ended December 31, 1996, all Section 16(a) filing
requirements applicable to its officers, directors and 10% beneficial owners
were complied with by
8
<PAGE>
such persons. Adelyn Dougherty, a former director of the Company,
inadvertently did not timely report one transaction on a Form 5 for 1996.
EXECUTIVE COMPENSATION
The Summary Compensation Table below provides information concerning the
annual and long-term compensation for services in all capacities to the
Company for the fiscal years ended December 31, 1996, 1995 and 1994 of the
persons who were at December 31, 1996 (i) the Chief Executive Officer and (ii)
the four other most highly compensated (based upon combined salary and bonus)
executive officers of the Company (collectively, with the Chief Executive
Officer, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------------- ---------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#)(1) (#) ($)
- --------------------------- ---- ------- ------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas L. Barlow,....... 1996 295,798 810,000 38,264 -- -- 73,060
President and Chief 1995 197,500 668,409 -- -- 30,500 71,831
Executive Officer 1994 152,083 188,000 -- -- 40,000 7,843
of the Finance Company
and a Director of the
Finance Company(2)(3)
Irwin H. Cole........... 1996 300,000 -- 113,670 -- -- 88,884
Vice Chairman of the 1995 300,000 -- 151,044 -- -- 86,960
Executive Committee of 1994 300,000 56,250 138,101 -- -- 90,122
the Company and a
Director of the Company
and the Finance
Company(4)(5)
Howard B. Silverman..... 1996 222,004 240,000 -- -- -- 6,764
Director of the Company 1995 132,000 137,690 -- -- -- 6,640
and Chairman and a 1994 120,000 58,700 -- -- -- 5,740
Director of the Finance
Company(3)
Bruce W. Taylor,........ 1996 333,438 -- -- -- -- 36,156
President of the Company 1995 322,500 75,000 -- -- 20,270 26,625
and a Director of the 1994 300,000 100,000 -- -- 40,000 14,514
Company(4)(6)
Jeffrey W. Taylor,...... 1996 353,646 -- -- -- -- 39,592
Chairman and Chief 1995 337,494 92,000 -- -- 20,270 29,286
Executive Officer of 1994 300,000 125,000 -- -- 40,000 15,110
the Company and a
Director of the Company
and the Finance
Company(4)(7)
Sidney J. Taylor,....... 1996 300,000 -- 84,675 -- -- 93,654
Chairman of the 1995 300,000 -- 86,659 -- -- 93,849
Executive Committee of 1994 300,000 56,250 86,239 -- -- 124,189
the Company and a
Director of the Company
and the Finance
Company(4)(8)
</TABLE>
- --------
(1) As of December 31, 1996, none of the Named Officers held any restricted
stock.
(2) For 1996, "Other Annual Compensation" includes $10,213 in reimbursements
for country club dues, payments totaling $250 in reimbursements for
payments made by Mr. Barlow for split-dollar life insurance for Mr. Barlow
and $27,801, the cost of the Company provided car used by Mr. Barlow and
reimbursement for expenses related thereto. For 1996, "All Other
Compensation" includes $5,250 in contributions by the Company pursuant to
the Profit Sharing Plan, $1,882 in contributions by the Company pursuant
to the ESOP, $37,992 in contributions by the Company pursuant to the
Deferred Compensation Plan and payments totaling $27,936 representing the
full dollar value of all premiums paid by the Company for split-dollar
life insurance for Mr. Barlow.
(3) With respect to Mr. Barlow's and Mr. Silverman's bonus for 1996, the
amount includes all amounts actually received. These amounts were based on
preliminary estimates of the Finance Company's earnings, made in October,
1996, which resulted in an overpayment of Mr. Barlow's and Mr. Silverman's
bonus, as well as
9
<PAGE>
the bonuses of all other employees, for 1996. The excess amount of the 1996
bonus for Mr. Barlow and Mr. Silverman and the Finance Company's other
employees will reduce the bonus pool available in 1997 and, if necessary,
subsequent years.
(4) Upon consummation of the Split-Off Transactions, Sidney J. Taylor, Irwin H.
Cole, Jeffrey W. Taylor and Bruce W. Taylor resigned as officers of the
Company. See "Recent Developments and Resignations of Certain Directors and
Executive Officers."
(5) "Other Annual Compensation" includes $99,558, $120,000 and $115,453 in
reimbursements for premiums paid by Mr. Cole for split-dollar life
insurance for Mr. Cole for 1996, 1995 and 1994, respectively, and $14,112,
$25,615, and $20,694 in reimbursements for country club dues for such
years, respectively. For 1996, "All Other Compensation" includes $5,250 in
contributions by the Company pursuant to the Profit Sharing Plan, $3,514 in
contributions by the Company pursuant to the ESOP and payments totaling
$80,120 representing the full dollar value of all premiums paid by the
Company for split-dollar life insurance for Mr. Cole.
(6) For 1996, "All Other Compensation" includes $5,250 in contributions by the
Company pursuant to the Profit Sharing Plan, $5,392 in contributions by the
Company pursuant to the ESOP, $18,855 in contributions by the Company
pursuant to the Deferred Compensation Plan and payments totaling $6,659
representing the full dollar value of all premiums paid by the Company for
split-dollar life insurance for Bruce Taylor.
(7) For 1996, "All Other Compensation" includes $5,250 in contributions by the
Company pursuant to the Profit Sharing Plan, $3,514 in contributions by the
Company pursuant to the ESOP, $23,386 in contributions by the Company
pursuant to the Cole Taylor Financial Group, Inc. Deferred Compensation
Plan (the "Deferred Compensation Plan") and payments totaling $7,442
representing the full dollar value of all premiums paid by the Company for
split-dollar life insurance for Jeffrey Taylor.
(8) "Other Annual Compensation" includes $69,893, $61,893 and $58,133 in
reimbursements for premiums paid by Mr. Taylor for split-dollar life
insurance in 1996, 1995 and 1994, respectively, and $14,782, $19,076 and
$21,662 in reimbursements for country club dues for such years,
respectively. For 1996, "All Other Compensation" includes $5,250 in
contributions by the Company pursuant to the Cole Taylor Financial Group
Profit Sharing and Savings Plan (the "Profit Sharing Plan"), $3,514 in
contributions by the Company pursuant to the Cole Taylor Financial Group,
Inc. Stock Ownership Plan (the "ESOP") and payments totaling $84,890
representing the full dollar value of all premiums paid by the Company for
split-dollar life insurance for Sidney Taylor.
The following table provides information on options exercised by the Named
Officers during 1996 and the number of unexercised options held by the Named
Officers at December 31, 1996. All options were granted to the Named Executive
Officers pursuant to the Company's 1991 Stock Option Plan and 1985 Stock
Incentive Plan (collectively, the "Plans"). None of the Named Officers received
grants of options under the Plans or otherwise during 1996.
AGGREGATE OPTION EXERCISES IN 1996
AND YEAR END 1996 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 1996 (#) DECEMBER 31, 1996 ($)(1)
ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas L. Barlow........ 22,100 352,825 48,400 -- $ 562,300 --
Irwin H. Cole........... -- -- -- -- -- --
Howard B. Silverman..... -- -- -- -- -- --
Bruce W. Taylor......... -- -- 140,270 -- $2,494,963 --
Jeffrey W. Taylor....... -- -- 140,270 -- $2,494,963 --
Sidney J. Taylor........ -- -- -- -- -- --
</TABLE>
- --------
(1) The value per option is calculated by subtracting the exercise price from
of $26.50, the closing price of the Company's Common Stock on December 31,
1996 as reported on the Nasdaq National Market.
10
<PAGE>
EMPLOYMENT AND SEVERANCE AGREEMENTS
In October 1995, the Company and the Bank entered into an agreement with
William S. Race which provided for Mr. Race's employment by the Company
through December 31, 1995 and his engagement as a consultant for the period
from January 1, 1996 through December 31, 1997. Under the agreement, the
Company is required to pay Mr. Race a total of $500,000 in consulting fees.
Under this agreement, Mr. Race currently provides consulting services relating
to corporate finance and investor relations issues. Mr. Race's agreement
contains a non-competition provision which commenced on the date of the
agreement and ends on December 31, 1997. In the event of a "change in control"
of the Company, then all future compensation payable under the agreement must
be paid at the time of such change in control. This "change in control"
provision was not triggered by the Split-Off Transactions. The agreement also
provided that all of the stock options previously granted to Mr. Race would
vest in full on October 1, 1995. Since March 28, 1997, in addition to the
compensation Mr. Race is receiving under the agreement, the Company began
paying Mr. Race $5,000 a month in consulting fees and providing health
insurance coverage.
Pursuant to a letter agreement approved by the Board of Directors on October
24, 1995 between the Finance Company and Thomas L. Barlow, upon the closing of
the Split-Off Transactions, Mr. Barlow received a cash payment equal to $1.9
million.
On July 31, 1996, the Company entered into employment agreements with Mr.
Thomas L. Barlow and Mr. Howard B. Silverman. Such employment agreements are
described under "Certain Transactions".
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION STRATEGY
The Company's goals for its total executive compensation program are to
attract, motivate and retain the highly qualified employees needed to achieve
its defined performance goals. Having a total compensation package which is
competitive for the industry, appropriately reflects internal equity
considerations, satisfies the requirements of the appropriate regulatory
bodies (prior to the Split-Off Transactions) and supports organizational
objectives and stockholder interests is a key factor in achieving Company
goals. The total compensation program provides targeted compensation
opportunities which are at or above the competitive market. The total
compensation program comprises: (i) base salaries consistent with the median
of the market and each individual executive's experience and performance, (ii)
annual incentives with awards reflecting the annual performance of the Company
and its subsidiaries against predetermined performance goals, (iii) long-term
incentives providing awards linked to longer-term stockholder value creation
and (iv) executive benefits which enhance the Company's ability to attract and
retain key executives.
COMPENSATION COMMITTEE AUTHORITY
The Board of Directors of the Company has delegated to the Compensation
Committee the basic responsibility to assure that the Chief Executive Officer
and the other Named Officers are compensated in a manner consistent with the
stated compensation strategy of the Company. The Compensation Committee is
specifically responsible for (i) reviewing and approving the Company's stated
compensation strategy, (ii) reviewing and determining the individual elements
of total compensation for the Named Officers and other executive officers of
the Company and its subsidiaries, (iii) assuring that the annual incentive
compensation plans are designed and administered in a manner consistent with
the Company's compensation strategy, (iv) approving for submission to the
stockholders of the Company all new equity related incentive plans for
management, (v) approving revisions to the Company's salary range structure,
salary increase guidelines and executive promotions, (vi) reviewing the
Company's employee benefit programs and approving changes to these programs,
subject to stockholder or Board of Directors approval (as necessary), and
(vii) preparing, reviewing and approving the Compensation Committee Report to
be provided in each year's proxy statement.
COMPENSATION COMMITTEE MEMBERSHIP
In October 1995, the Board of Directors of the Company adopted a new charter
for the Compensation Committee. Under this charter, the Compensation Committee
will consist of not less than three members of the Board of Directors who are
not (i) employees of the Company, (ii) holders of in excess of 10% of the
voting
11
<PAGE>
power of the Company in elections of directors (including Common Stock held by
certain family members) or (iii) related to an entity doing in excess of
$50,000 of annual business with the Company. In February, 1997, the Board of
Directors of the Company appointed Ross J. Mangano, Solway F. Firestone and
Dean L. Griffith as the members of the Compensation Committee. These members
satisfy both the Compensation Committee's new charter and the requirements for
an "outside director" under Section 162(m) of the Internal Revenue Code.
INDEPENDENT CONSULTANT
The Compensation Committee has used the services of KPMG Peat Marwick LLP
("KPMG"), the Company's independent public accountants, from time to time to
address selected compensation issues. KPMG consultants have provided data on
industry norms and analyzed plan design changes in terms of the Company's
business goals and best compensation practices.
BASE COMPENSATION
With respect to base compensation in 1996, the Compensation Committee took
into account (i) an officer's salary in prior years, (ii) base salaries of
similarly situated officers of comparably sized bank holding and financial
service companies, (iii) the achievement of short- and long-term revenue
performance, and (iv) the achievement of Company objectives in the prior year.
Information with respect to similarly situated officers was derived from
various market studies, national statistics identifying base salaries for
individuals in comparable positions with banks having $1 billion to $5 billion
in assets and publicly available information regarding executives of Northern
Illinois banks and other financial services companies. In 1996, the
Compensation Committee targeted the middle of the range in these studies in
establishing the base salary for Jeffrey W. Taylor, the Chairman and Chief
Executive Officer, and Bruce W. Taylor, the President, whose base salaries in
1996 increased by 1.39% and 1.39%, respectively, from 1995. Each of the
factors discussed above was considered in establishing the salaries of Messrs.
Taylor and Taylor, although the Compensation Committee did not assign any
specific weight to such factors. The base salaries for each of Sidney J.
Taylor, the Chairman of the Executive Committee and Irwin H. Cole, the Vice
Chairman of the Executive Committee, did not increase from 1995 to 1996. With
respect to executives working primarily for the Finance Company, the Committee
considered publicly available information regarding executives of medium to
large size consumer finance companies, particularly those in the sub-prime
auto finance industry. Based on that review, the Committee increased the
salary of Howard B. Silverman from $138,000 to $250,000 and the salary of
Thomas L. Barlow from $259,000 to $325,000 in June, 1996, effective April 1,
1996. In the case of Mr. Silverman, this increase was also attributable to Mr.
Silverman becoming a full-time officer of the Company, which he was not prior
to June, 1996.
BONUSES
Historically, year-end bonuses have been an important component of total
compensation for the Company's officers. Aggregate bonuses in each year are
based, in part, upon the Company's performance compared to budgeted goals set
by the Compensation Committee in January of that year. Individual bonuses are
based upon the Compensation Committee's assessment of the value of the officer
to the Company and other competitive factors. With respect to Jeffrey W.
Taylor's bonus, the Compensation Committee primarily considered the Company's
performance, including the Company's return on equity and its earnings per
share. With respect to Bruce W. Taylor's bonus, the Compensation Committee
considered both the Company's and the Bank's performance. In reviewing the
Bank's performance, the Compensation Committee considered various factors,
including growth in deposit and loan volumes, profitability factors, such as
net interest margin, fee income and mortgage servicing income, and quality
factors, such as the percentage of non-performing loans, the percentage of net
charge-offs and the ratio of non-interest expense to total income. These
factors were not assigned any specific weight by the Compensation Committee.
With respect to the Finance Company, the Compensation Committee recognizes
that bonuses are typically an extremely important component of overall
compensation in the consumer finance industry. As such, the Compensation
Committee has created a formula whereby an amount equal to 20% of the Finance
Company's earnings above a 15% return on equity are set aside in a bonus pool
for the Finance Company's employees. Pursuant to contract, Mr. Barlow is
entitled to 50% of such bonus
12
<PAGE>
pool (45% for 1997) and Mr. Silverman is entitled to 10% of such bonus pool.
The remainder of the bonus pool is split among all other employees of the
Finance Company who are eligible for bonuses.
STOCK OPTIONS
Although no options were granted to the Named Officers during 1996 options,
when granted are intended to (i) reward these officers for their past services
to the Company, (ii) reflect the relative positions of these executive
officers within the Company and their respective contributions, (iii) serve as
a means of enabling these key executives of the Company to participate in the
Company's future growth, and (iv) contribute to the Company's ability to
retain these executives. The above listed factors were not assigned any
specific weight by the Compensation Committee. In determining the terms of
these options, the Compensation Committee considered stock option grants
issued by several companies of similar size.
SECTION 162(M)
Section 162(m) of the Code provides that the compensation paid to the Named
Officers in excess of $1,000,000 cannot be deducted by the Company for U.S.
federal income tax purposes, unless, in general, such compensation is
performance based, is established by an independent committee of directors, is
objective and the plan or agreement providing for such performance-based
compensation has been approved in advance by the stockholders. The Company
generally intends to meet the requirements of Section 162(m) for all
compensation paid to the Named Officers. The Company has taken steps to meet
such requirements, including appointing members of the Compensation Committee
who satisfy the requirements for an "outside director" under Section 162(m).
Compensation Committee
Ross J. Mangano (Chairman)
Solway F. Firestone
Dean L. Griffith
13
<PAGE>
PERFORMANCE GRAPH
The Performance Graph below shall not be deemed incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act
of 1934, except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
The graph set forth below compares the cumulative total stockholder return
on the Common Stock of the Company since its initial public offering on May
25, 1994 with the cumulative total return of the Nasdaq U.S. Index and the SNL
$1B-$5B Bank Asset Size Index over the same period (assuming the investment of
$100 in the Common Stock at its closing price on May 25, 1994 and in each
index on such date, and the reinvestment of all dividends).
Historical stock price performance shown on the graph is not indicative of
the future price performance. On a going forward basis, the Company will
compare its stock price performance to the stock price performance of other
companies in the consumer finance industry.
LOGO
<TABLE>
<CAPTION>
5/25/94 6/30/94 12/30/94 6/30/95 12/31/95 6/30/96 12/31/96
------- ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Reliance Acceptance
Group, Inc. (formerly
known as Cole Taylor
Financial Group,
Inc.).................. $100 $103.18 $158.40 $129.25 $228.34 $228.80 $204.41
Nasdaq U.S. Index....... $100 $ 96.40 $103.17 $128.60 $145.79 $165.90 $180.27
SNL $1B-$5B Bank Asset
Size Index............. $100 $102.85 $101.44 $115.37 $140.29 $147.89 $176.60
</TABLE>
14
<PAGE>
CERTAIN TRANSACTIONS
Certain of the directors and officers of the Company and of the Bank and
members of their immediate families, and firms and corporations with which
they are associated, have had transactions with the Bank, including borrowings
and investments in certificates of deposit. Management believes that all such
loans and investments have been made in the ordinary course of business of the
Bank, have been made on substantially the same terms, including interest rates
paid or charged and collateral required, as those prevailing at the time for
comparable transactions with unaffiliated persons, and did not involve more
than the normal risk of collectibility or present other unfavorable features.
As of December 31, 1996, the aggregate outstanding amount of all loans which
exceeded $60,000 to officers and directors of the Company, and members of
their immediate families and firms and corporations in which they have at
least a 10% beneficial interest was approximately $23.8 million. The Company
has relied on its directors and executive officers for identification of loans
to their related interests. As of March 31, 1997, the aggregate amount of all
such outstanding loans had been reduced to zero.
Pursuant to a letter agreement approved by the Board of Directors on October
24, 1995 between the Finance Company and Thomas L. Barlow, upon the closing of
the Split-Off Transactions, Mr. Barlow received a cash payment equal to $1.9
million.
On July 31, 1996, the Company entered into employment agreements with
Messrs. Barlow and Silverman, which provided for Mr. Barlow's employment as
the Company's President and Chief Executive Officer and Mr. Silverman's
employment as the Chairman of the Board of Directors upon the closing of the
Split-Off Transactions. The terms of employment for Messrs. Barlow and
Silverman began on June 12, 1996 and end on December 31, 1999. Messrs. Barlow
and Silverman are entitled to yearly compensation at their annual base
salaries, which are currently $325,000 and $250,000, respectively. The base
rate salary is subject to periodic review by the Board of Directors, which may
increase, but not decrease the amount. Messrs. Barlow and Silverman are also
entitled to 45% and 10%, respectively, of the total incentive compensation
pool for any incentive compensation program of the Company in effect in any
year. These payments are required to be not less than that which would have
been paid using the formula provided under the incentive compensation program
that was in effect for fiscal 1995. Messrs. Barlow and Silverman are also
entitled to certain benefits, including, but not limited to, group health and
life insurance, matching contributions to the Company's 401(k) plan, deferred
compensation program, stock options and executive key man life insurance. Upon
termination other than for "Cause" as provided in the employment agreements,
Messrs. Barlow and Silverman are entitled to receive lump sum payments
amounting to all future salary and incentive compensation payable under the
agreements.
Pursuant to an agreement dated June 12, 1996, the Bank paid Louis Joseph a
severance payment of $200,000 upon the closing of the Split-Off Transactions,
subject to Mr. Joseph's resigning from employment with the Bank at the closing
of the Split-Off Transactions. In addition, the Company paid Mr. Joseph
$100,000 for his work in connection with the Split-Off Transactions. Mr.
Joseph was the Chief Administrative Officer of the Bank.
Pursuant to an agreement dated June 12, 1996, the Bank, paid James I. Kaplan
a severance payment of $200,000 upon the closing of the Split-Off
Transactions, subject to Mr. Kaplan's resigning from employment with the Bank
at the closing of the Split-Off Transactions. Mr. Kaplan was the General
Counsel for the Company and the Bank, and continues to serve as the General
Counsel of the Company.
PROPOSAL NO. 2--APPROVAL OF 1997 STOCK OPTION PLAN
The Board of Directors has approved the Reliance Acceptance Group, Inc. 1997
Stock Option Plan (the "1997 Plan"), subject to stockholder approval. The
purpose of the 1997 Plan is to assist the Company and its
15
<PAGE>
affiliates in attracting and retaining capable officers, directors and
employees by enabling such individuals to participate in the future growth of
the Company. The Board of Directors is submitting to the stockholders at the
Annual Meeting a proposal to approve and ratify the 1997 Plan. Approval of the
1997 Plan by the stockholders of the Company requires the affirmative vote of
the holders of a majority of the Common Stock of the Company present, in
person or by Proxy, at the Annual Meeting. A description of the 1997 Plan is
set forth below. A copy of the 1997 Plan is attached as Exhibit A hereto.
The 1997 Plan permits the Company to grant nonstatutory (i.e., options that
are not incentive stock options as defined in Section 422 of the Internal
Revenue Code), nonqualified options to purchase shares of Common Stock to
officers, directors and employees of the Company and its affiliates who, in
the opinion of the Committee (as defined below), shall be in a position to
contribute to the management, growth and success of the Company and its
affiliates. The Company has reserved 1,500,000 shares for issuance under the
1997 Plan. The number of shares with respect to which options may be granted
to any individual during any one-year period is limited to 300,000, subject to
any anti-dilution adjustment.
There are approximately 550 employees eligible to participate in the 1997
Plan, eight of whom received grants on April 23, 1997. Prior to the Annual
Meeting, the Committee (as defined below) granted options to purchase 60,000
shares of Common Stock each to Thomas L. Barlow, the Company's President and
Chief Executive Officer, and Howard B. Silverman, the Company's Chairman, at
an exercise price of $10.125, and granted options to purchase 40,000 shares of
Common Stock to all other executive officers in the aggregate, at an exercise
price of $10.125. In addition, the Committee granted options to purchase
80,000 shares of Common Stock in the aggregate to four other employees of the
Company, all at an exercise price of $10.125. All options granted to these
individuals vest as to 100% of the grant on the third anniversary of the date
of grant assuming the optionee continues to be an employee of the Company on
such date.
Shares issued under the 1997 Plan will be made available from authorized but
unissued shares or from treasury shares. Neither the individuals who receive
options under the 1997 Plan (the "Participants"), nor the Company, is expected
to incur fees or commissions when the Company issues shares to the
Participants, other than payment by such Participants of any purchase price
for the shares and taxes (through withholding or direct payment), as
applicable.
The 1997 Plan is not subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended. The adoption of the 1997 Plan and the
grant of options thereunder do not confer upon any Participant the right to
continued employment with the Company and/or its affiliates. The 1997 Plan is
not qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended, and is of an indefinite duration.
The 1997 Plan is administered by the Compensation Committee (the
"Committee"), which consists of two "nonemployee directors", as such term is
defined in Rule 16b-3 of the Exchange Act of 1934, as amended, and "outside
directors", as such term is defined in section 162(m) of the Internal Revenue
Code. The Committee has full and final discretion (1) to select those persons
to whom options will be granted, (2) to determine the number of shares subject
to options, (3) to determine option exercise prices, (4) to fix the term of
the options, (5) to set the rate or determine the conditions upon which
options may be exercised, (6) to determine the consideration that may be paid
to exercise options, (7) to set all other material terms related to the grant
and exercise of options, and (8) to make determinations necessary or advisable
for the administration of the 1997 Plan.
The Board of Directors may amend, alter or discontinue the 1997 Plan;
provided, however, that no amendment, alteration or discontinuation will be
made which would, without the Participant's written consent, impair the rights
of a Participant under an option previously granted.
The 1997 Plan obligates the Company to indemnify the Board of Directors, the
Committee and other officers and agents of the Company in connection with
their administration of the 1997 Plan.
The term of each option granted under the 1997 Plan shall be fixed by the
Committee; provided, however, that no option shall be exercisable more than
ten (10) years after the date on which the option was granted. The
16
<PAGE>
death, disability or retirement of a Participant may be the basis for
accelerating the right to exercise the option, and a termination of employment
usually shortens the total period within which the option may be exercised.
Options under the 1997 Plan are exercisable only during the option period
determined by the Committee and in accordance with the terms of the 1997 Plan
and the applicable Stock Option Agreement. The Committee may at any time
accelerate the exercisability of any option granted under the 1997 Plan.
The exercise price per share of Common Stock purchasable under the 1997 Plan
is determined by the Committee at the time such option is granted; provided,
however, that the exercise price shall not be less than the closing price per
share of the Common Stock on the relevant date quoted by the Nasdaq National
Market. The closing price per share of Common Stock on April 23, 1997 was
$10.125, as reported by Nasdaq National Market System.
Options granted under the 1997 Plan may be transferred by a Participant to
or for the benefit of the Participant's family. All certificates for shares or
other securities delivered under the 1997 Plan will be subject to such stop
transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the shares are then listed
and any applicable federal or state securities law.
Under the 1997 Plan, in the event of a "Change in Control" (as defined in
the 1997 Plan), (i) each outstanding option would be fully exercisable, and
(ii) upon exercise of an option, each Participant would receive, in lieu of
shares of Common Stock, such property, cash or other consideration receivable
by the Company's stockholders pursuant to the terms of the Change in Control.
In the event that there is a change in the outstanding shares of Common
Stock by reason of the declaration of any stock dividends, a stock split,
combination or exchange of shares of Common Stock, recapitalization, corporate
separation or division, rights offering, merger, consolidation, reorganization
or partial or complete liquidation, or any other corporate transaction or
event having an effect similar to any of the foregoing, the number of shares
of Common Stock available for options and subject to the 1997 Plan, the number
of such shares covered by outstanding options, and the option premium per
share shall be proportionately adjusted by the Committee on an equitable basis
to reflect such changes.
FEDERAL INCOME TAX CONSEQUENCES
The grant of nonqualified stock option to an optionee will not itself be a
taxable event, and the optionee will not be subject to any income tax
consequences with respect to the option unless and until the option is
exercised. Upon the exercise of a nonqualified stock option, the optionee will
recognize ordinary compensation income equal to the "spread" between the
exercise price and the fair market value of the Common Stock on the date of
exercise, and the Company will generally be entitled to a corresponding
deduction. Upon a subsequent disposition of the Common Stock, the capital gain
or loss will be short-term or long-term depending on the length of time the
shares are held.
During 1997, the Company's Compensation Committee has, subject to
stockholder approval of the 1997 Plan, granted options to purchase an
aggregate of approximately 240,000 shares of Common Stock to the Company's
officers, directors and employees.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE APPROVAL OF THE 1997 STOCK OPTION PLAN.
17
<PAGE>
ACCOUNTANTS
KPMG Peat Marwick LLP currently serves as the Company's independent public
accountants. It is expected that representatives of KPMG Peat Marwick LLP will
be present at the Annual Meeting and will be available to respond to
questions. They will be given an opportunity to make a statement if they
desire to do so.
PROPOSALS OF SECURITY HOLDERS
Proposals of stockholders intended to be considered at the 1998 Annual
Meeting of Stockholders must be received by the Secretary of the Company no
later than February 28, 1998 in order to be eligible for inclusion in the
Company's Proxy Statement and the form of proxy relating to that meeting.
OTHER BUSINESS
It is not anticipated that any matter will be considered by the stockholders
other than those set forth above, but if other matters are properly brought
before the Annual Meeting, the persons named in the Proxy will vote in
accordance with their best judgement.
By Order of the Board of Directors
/s/ James I. Kaplan
James I. Kaplan, Secretary
ALL STOCKHOLDERS ARE REQUESTED
TO SIGN AND MAIL THEIR PROXIES PROMPTLY
18
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
1997 STOCK OPTION PLAN
(EFFECTIVE MARCH 18, 1997)
A-1
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
1997 STOCK OPTION PLAN
(EFFECTIVE MARCH 18, 1997)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <C> <S> <C>
ARTICLE I ESTABLISHMENT AND PURPOSE..................................... 4
1.1 Purpose................................................. 4
ARTICLE II DEFINITIONS................................................... 4
2.1 Affiliate............................................... 4
2.2 Board of Directors or Board............................. 4
2.3 Cause................................................... 4
2.4 Code or Internal Revenue Code........................... 4
2.5 Committee............................................... 4
2.6 Common Stock............................................ 4
2.7 Company................................................. 4
2.8 Disability.............................................. 5
2.9 Effective Date.......................................... 5
2.10 Exchange Act............................................ 5
2.11 Fair Market Value....................................... 5
2.12 Nonqualified Stock Option............................... 5
2.13 Option.................................................. 5
2.14 Option Period........................................... 5
2.15 Option Price............................................ 5
2.16 Participant............................................. 5
2.17 Plan.................................................... 5
2.18 Representative.......................................... 5
2.19 Retirement.............................................. 6
2.20 Stock Option Agreement.................................. 6
2.21 Termination of Employment............................... 6
2.22 Transfer................................................ 6
ARTICLE III ADMINISTRATION................................................ 6
3.1 Committee Structure and Authority....................... 6
ARTICLE IV ELIGIBILITY; STOCK PROVISIONS................................. 7
4.1 Eligibility............................................. 7
4.2 Number of Shares Subject to the Plan.................... 7
4.3 Release of Shares....................................... 8
4.4 Restrictions on Shares.................................. 8
4.5 Stockholder Rights...................................... 8
4.6 Listing and Registration of Shares...................... 8
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <C> <S> <C>
ARTICLE V OPTION PROVISIONS........................................ 8
5.1 Stock Option Award................................. 8
5.2 Option Period...................................... 9
5.3 Option Price....................................... 9
5.4 Exercise of Options................................ 9
5.5 Cancellation of Options............................ 9
5.6 Payment of Purchase Price Upon Exercise............ 10
5.7 Nonassignability................................... 10
ARTICLE VI GENERAL PROVISIONS APPLICABLE TO THE PLAN................ 10
6.1 Termination of Plan................................ 10
6.2 Effect of Certain Changes.......................... 10
6.3 Withholding........................................ 13
6.4 Notice to the Company of Participant's Election.... 13
ARTICLE VII MISCELLANEOUS............................................ 13
7.1 Indemnification of the Board and Committee......... 13
7.2 Mitigation of Excise Tax........................... 13
7.3 Interpretation..................................... 14
7.4 Governing Law...................................... 14
7.5 Validity........................................... 14
7.6 Assignment......................................... 14
7.7 Captions........................................... 14
7.8 Amendments......................................... 14
7.9 Entire Agreement................................... 14
7.10 Rights with Respect to Continuance of Employment... 14
7.11 Options for Shares in Substitution for Stock
Options Granted by Other Corporations.............. 14
7.12 Procedure for Adoption............................. 14
7.13 Procedure for Withdrawal........................... 15
</TABLE>
A-3
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
1997 STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT AND PURPOSE
1.1 Purpose. The Reliance Acceptance Group, Inc. 1997 Stock Option Plan is
hereby established effective the date set forth below by Reliance Acceptance
Group, Inc. The purpose of the Plan is to promote the overall financial
objectives of the Company and its stockholders by motivating those persons
selected to participate in the Plan to achieve long-term growth in stockholder
equity in the Company and by retaining the association of those individuals
who are instrumental in achieving this growth. The Plan is expressly
conditioned upon the Plan's approval by the Board of Directors of Reliance
Acceptance Group, Inc. and upon the approval of the Company's stockholders.
ARTICLE II
DEFINITIONS
The following sections of this Article II provide basic definitions of terms
used throughout the Plan, and whenever used therein in the capitalized form,
except as otherwise expressly provided, the term shall be deemed to have the
following meanings:
2.1 "Affiliate" means any company during any period in which it is a
"subsidiary corporation" (as that term is defined in Section 424(f) of the
Code with respect to the Company or any affiliate of the Company which is
designated as an Affiliate by the Committee.
2.2 "Board of Directors" or "Board" means the Board of Directors of the
Company.
2.3 "Cause" shall mean, for purposes of whether and when a Participant has
incurred a Termination of Employment for Cause, any act or omission which
permits the Company to terminate the written employment agreement or
arrangement between the Participant and the Company or an Affiliate for Cause
as defined in such agreement or arrangement, or in the event there is no such
employment agreement or arrangement or the agreement or arrangement does not
define the term "cause," then Cause shall mean (a) any act or omission of a
criminal nature; (b) the material breach of a fiduciary duty owing to the
Company or its Affiliate; or (c) conduct or the omission of conduct on the
part of the Participant which constitutes a material breach of any statutory
or common-law duty owing to the Company or its Affiliate.
2.4 "Code" or "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, and any subsequent Internal Revenue Code. If there is a
subsequent Internal Revenue Code, any references herein to Internal Revenue
Code sections shall be deemed to refer to comparable sections of any
subsequent Internal Revenue Code.
2.5 "Committee" means the person or persons appointed by the Board of
Directors to administer the Plan, as further described in the Plan.
2.6 "Common Stock" means the shares of the regular voting Common Stock of
the Company, no par value, whether presently or hereafter issued, and any
other stock or security resulting from adjustment thereof as described in
Section 6.2.
2.7 "Company" means Reliance Acceptance Group, Inc. and includes any
successor or assignee corporation or corporations into which the Company may
be merged, changed or consolidated; any corporation
A-4
<PAGE>
for whose securities the securities of the Company shall be exchanged; and any
assignee of or successor to substantially all of the assets of the Company.
2.8 "Disability" means a mental or physical illness that entitles the
Participant to receive benefits under the long term disability plan of the
Company or an Affiliate, or if the Participant is not covered by such plan, a
mental or physical illness that renders a Participant incapable of performing
his duties as an employee of the Company or an Affiliate. Notwithstanding the
foregoing, a Disability shall not qualify under this Plan if it is the result
of (a) a willfully self-inflicted injury or willfully self-induced sickness;
or (b) an injury or disease contracted, suffered, or incurred, while
participating in a criminal offense. The determination of Disability shall be
made by the Committee. The determination of Disability for purposes of this
Plan shall not be construed to be an admission of disability for any other
purpose.
2.9 "Effective Date" means March 18, 1997.
2.10 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
2.11 "Fair Market Value" means the value determined on the basis of the good
faith determination of the Committee in accordance with the following
provisions, as applicable:
(a) if the Common Stock is listed on a national securities exchange or
quoted on the NASDAQ National Market System, the closing price of the Class
A Common Stock on the relevant date, as reported on the composite tape or
by the NASDAQ/NMS System Statistics, as the case may be;
(b) if the Common Stock is not listed on a national securities exchange
or quoted on the NASDAQ National Market System, but is traded in the over-
the-counter market, the average of the closing bid and asked prices for the
Common Stock on the relevant date, or the most recent preceding day for
which such quotations are reported by NASDAQ; and
(c) if, on the relevant date, the Common Stock is not publicly traded or
reported as described in (a) or (b), on the basis of the good faith
determination of the Committee.
2.12 "Nonqualified Stock Option" means an Option to purchase common Stock in
the Company granted under the Plan other than an incentive stock option within
the meaning of Section 422 of the Code and the Treasury Regulations
thereunder.
2.13 "Option" means a Nonqualified Stock Option.
2.14 "Option Period" means the period during which the Option shall be
exercisable in accordance with the Stock Option Agreement and Article V of the
Plan.
2.15 "Option Price" means the price at which the Company's Common Stock may
be purchased under an Option as provided in Section 5.3.
2.16 "Participant" means a person who satisfies the eligibility conditions
of Article IV and to whom an Option has been granted by the Committee under
the Plan, and in the event a Representative is appointed for a Participant,
then the term "Participant" shall mean such appointed Representative, or
successor Representative appointed, as the case may be, provided that
"Termination of Employment" shall mean the Termination of Employment of the
Participant.
2.17 "Plan" means the Reliance Acceptance Group, Inc. 1997 Stock Option
Plan, as herein set forth and as may be amended from time to time.
2.18 "Representative" means (a) the person or entity acting as the executor
or administrator of a Participant's estate pursuant to the last will and
testament of a Participant or pursuant to the laws of the
A-5
<PAGE>
jurisdiction in which the Participant had his primary residence at the date of
the Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; or (c) the person or entity which is the
beneficiary of the Participant upon or following the Participant's death.
2.19 "Retirement" means the Participant's Termination of Employment after
attaining normal retirement age, as defined in the Reliance Acceptance Group,
Inc. 401(k) Savings Plan or successor plan (or an Affiliate's retirement plan,
if the Participant is covered by such plan).
2.20 "Stock Option Agreement" means an agreement entered into between a
Participant and the Company under Section 5.1.
2.21 "Termination of Employment" means the latest date on which a person
ceases, for whatever reason, to be an officer, director or employee of the
Company or any Affiliate of the Company.
2.22 "Transfer" means any sale, gift, assignment, distribution, conveyance,
pledge, hypothecation, encumbrance or other transfer of title, whether by
operation of law or otherwise.
ARTICLE III
ADMINISTRATION
3.1 Committee Structure and Authority. The Plan shall be administered by the
Committee. A majority of the Committee shall constitute a quorum at any
meeting thereof (including telephone conference) and the acts of a majority of
the members present, or acts unanimously approved in writing by the entire
Committee without a meeting, shall be the acts of the Committee for purposes
of this Plan. So long as the Company is subject to the Exchange Act, the
Committee shall be selected by the Board and shall be comprised of two (2) or
more members of the Board, each of whom shall be a "nonemployee director"
within the meaning of Rule 16b-3 under the Exchange Act and an "outside
director" within the meaning of Section 162(m) of the Code. A member of the
Committee shall not exercise any discretion respecting himself under the Plan.
The Board shall have the authority to remove, replace or fill any vacancy of
any member of the Committee upon notice to the Committee and the affected
member. Any member of the Committee may resign upon notice to the President or
to the Board. Except to the extent prohibited by applicable law or the rules
of any stock exchange or NASDAQ, the Committee may allocate among one or more
of its members, or may delegate to one or more of its agents, such duties and
responsibilities as it determines. The Committee shall keep minutes of its
meetings. Subject to the provisions of this Plan, the Committee shall have
full and final authority in its discretion to:
(a) determine from time to time those persons to whom Options are to be
granted;
(b) determine the Option Price;
(c) determine the number of shares of Common Stock subject to each
Option;
(d) determine, subject to the Plan, the time or times and the manner when
each Option shall be exercisable and the duration of the Option Period;
(e) provide for the acceleration of the right to exercise an Option (or
portion thereof);
(f) prescribe additional terms, conditions and restrictions in the Stock
Option Agreement and to provide for the forms of Stock Option Agreement to
be utilized in connection with this Plan;
(g) determine whether a Participant has a Disability;
(h) determine what securities laws requirements are applicable to the
Plan, Options, and the issuance of shares of Common Stock hereunder and to
request of a Participant that appropriate action be taken;
(i) cancel, with the consent of the holder or as otherwise provided in
the Plan or a Stock Option Agreement, outstanding Options;
A-6
<PAGE>
(j) require as a condition of the exercise of an Option or the issuance
or transfer of a certificate of Common Stock, the withholding from a
Participant the amount of any federal, state or local taxes as may be
necessary in order for the Company or any other employer to obtain a
deduction and as may be otherwise required by law;
(k) determine whether and for what reason an individual has incurred a
Termination of Employment;
(l) treat all or any portion of any period during which a Participant is
on an approved leave of absence as a period of employment for purposes of
accrual of his rights under an Option;
(m) determine whether the Company or any other person has a right or
obligation to purchase Common Stock from a Participant and, if so, the
terms and conditions on which such Common Stock is to be purchased;
(n) to determine the restrictions or limitations on the Transfer of
Common Stock;
(o) determine whether an Option is to be adjusted, modified or purchased,
or is to become fully exercisable, under Section 6.2 or the terms of a
Stock Option Agreement;
(p) adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of this Plan;
(q) appoint and compensate agents, counsel, auditors or other specialists
to aid it in the discharge of its duties;
(r) correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Stock Option Agreement, in such manner
and to the extent the Committee shall determine in order to carry out the
purposes of the Plan; and
(s) construe and interpret this Plan, any Stock Option Agreement, and
take all other actions, and to make all other determinations and take all
other actions deemed necessary or advisable for the administration of this
Plan.
ARTICLE IV
ELIGIBILITY; STOCK PROVISIONS
4.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in the Plan and be granted Options shall be those
persons who are officers, directors or employees of the Company or any
Affiliate thereof who shall be in a position, in the opinion of the Committee,
to make contributions to the growth, management, protection and success of the
Company and its Affiliates. Of those persons described in the preceding
sentence, the Committee shall, from time to time, in its sole discretion,
select those persons who are to be granted Options and shall determine the
terms and conditions with respect thereto. In making this selection and in
determining the form of the Option, the Committee may give consideration to
the functions and responsibilities of the respective individual, the present
and potential contributions of such person to the Company and its Affiliates,
the value of the individual's service to the Company and its Affiliates and
such other factors deemed relevant by the Committee. The Committee may
designate in writing any person who is not eligible to participate in the Plan
if such person would otherwise be eligible to participate in the Plan.
4.2 Number of Shares Subject to the Plan. The stock subject to the Options
granted under this Plan shall be the Company's Common Stock. Unless otherwise
amended by the Board and approved by the stockholders of the Company to the
extent required by law, a maximum number of 1,500,000 shares of Common Stock
of the Company (or such number as may result following any adjustment pursuant
to Section 6.2) shall be reserved and available for Options granted under the
Plan. The shares issued with respect to Options under the Plan may be
authorized and unissued shares, or shares issued and reacquired by the
Company. Notwithstanding any other provision of the Plan to the contrary, no
Participant shall be granted an Option under the Plan to the extent that the
sum of (i) the number of shares of Common Stock subject to such Option, (ii)
the number of shares subject to all other prior grants of Options under the
Plan during the one-year period ending on the date of the grant, and
A-7
<PAGE>
(iii) the number of shares of Common Stock subject to all other prior share
options granted to the Participant under other plans or arrangements of the
Company during the one-year period ending on the date of the grant would
exceed the Participant's Individual Limit under the Plan. The determination
made under the preceding sentence shall be based on the shares of Common Stock
subject to Options at the time of grant, regardless of when the Options become
exercisable. Subject to the provisions of Section 6.2(a), a Participant's
"Individual Limit" shall be 300,000 shares of Common Stock.
4.3 Release of Shares. If any Option granted hereunder shall be cancelled,
forfeited, expire or terminate for any reason without having been exercised or
realized in full, any shares of Common Stock subject to such Option (including
shares that are not issued because they are withheld to satisfy tax
withholding) shall again be available and may thereafter be granted or
otherwise applied under this Plan.
4.4 Restrictions on Shares. Shares of Common Stock issued upon exercise of
an Option shall be subject to the terms and conditions specified herein and to
such other terms, conditions and restrictions as the Committee in its
discretion may determine or provide in the Stock Option Agreement. The Company
shall not be required to issue or deliver any certificates for shares of
Common Stock prior to (1) the completion of any registration or qualification
of such shares under federal or state law, or any ruling or regulation of any
government body which the Committee, in its sole discretion, determines to be
necessary or advisable, or (2) the tendering to the Company of such documents
and/or payments as the Committee may deem necessary to satisfy any applicable
withholding obligation in order for the Company or another entity to obtain a
deduction on its federal, state or local tax return with respect to the
exercise of an Option. The Company may cause any certificate for any share of
Common Stock to be delivered to be properly marked with a legend or other
notation reflecting the limitations on transfer of such Common Stock as
provided in this Plan or as the Committee may otherwise require. Fractional
shares shall not be delivered, but shall be rounded to the next lower whole
number of shares.
4.5 Stockholder Rights. No person shall have any rights of a stockholder as
to shares of Common Stock subject to an Option until, after proper exercise of
the Option or other action required, such shares shall have been recorded on
the Company's official stockholder records as having been issued or
transferred. Upon exercise of the Option or any portion thereof, the Company
will have at least thirty (30) days during which to issue the shares, and
Participant will not be treated as a stockholder for any purpose whatsoever
prior to such issuance. No adjustment shall be made for cash dividends or
other rights for which the record date is prior to the date such shares are
recorded as issued or transferred in the Company's official stockholder
records, except as provided in Section 6.2.
4.6 Listing and Registration of Shares. If at any time the Committee shall
determine, in its discretion, that the listing, registration or qualification
of any of the shares of Common Stock subject to Options under the Plan upon
any securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of or in connection with the purchase or issue of shares thereunder,
no outstanding Options, the exercise of which would result in the purchase or
issuance of shares, may be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee. The Committee
may require any person exercising an Option to make such representations and
furnish such information as it may consider appropriate in connection with the
issuance or delivery of the shares in compliance with applicable law or
otherwise and shall have the authority to cause the Company at its expense to
take any action related to the Plan which may be required in connection with
such listing, registration, qualification, consent or approval. There shall be
no obligation to register any Option granted under the Plan or the shares of
Common Stock.
ARTICLE V
OPTION PROVISIONS
5.1 Stock Option Award. The Committee shall have authority to grant Options
under the Plan at any time or from time to time to any Participant for such
number of shares of Common Stock as the Committee may
A-8
<PAGE>
determine. Options granted under the Plan shall be only Nonqualified Stock
Options. An Option shall entitle the Participant to receive shares of Common
Stock upon exercise of such Option, subject to the Participant's satisfaction
in full of any conditions, restrictions or limitations imposed in accordance
with the Plan or a Stock Option Agreement, including without limitation,
payment of the Option Price. Each Option granted under this Plan shall be
evidenced by a Stock Option Agreement, in a form approved by the Committee,
which shall embody the terms and conditions of such Option and which shall be
subject to the express terms and conditions set forth in this Plan and to such
other terms and conditions as the Committee may deem appropriate. The grant
and exercise of Options hereunder shall be subject to all applicable federal,
state and local laws, rules and regulations and to such approvals by any
government or regulatory agency as may be required.
5.2 Option Period. Each Stock Option Agreement shall specify the Option
Period for which the Option thereunder is granted, which shall be determined
by the Committee. The Option Period shall not exceed ten (10) years from the
date of grant, and the Stock Option Agreement shall provide that the Option
shall expire at the end of such period. Each Option not exercised shall
terminate at the end of the Option Period of not subject to earlier
termination as herein provided.
5.3 Option Price. Subject to the limits stated herein, the Option Price per
share at which shares of Common Stock may be acquired upon exercise of an
Option shall be determined by the Committee at the time the Option is granted;
provided, however, that in no event shall such price be less than the par
value of a share of Common Stock on such date.
5.4 Exercise of Options. Each Option shall be exercisable only during the
Option Period determined by the Committee in accordance with the terms of the
Plan and the Stock Option Agreement which may prescribe for the exercise of
any Option in installments or pursuant to a schedule under which a Participant
accrues the right to exercise an Option only upon the completion of a period
of service or the satisfaction of other conditions, and the Participant may
purchase the total (or some fraction thereof) number of shares of Common Stock
subject thereto; provided that if the Participant shall not in any given
installment period purchase all of the shares of Common Stock which he is
entitled to purchase in such installment period, his right to purchase any
shares not purchased in such installment period, except to the extent his
Stock Option Agreement provides otherwise, shall continue until the expiration
or sooner termination of his Option. In order to exercise an Option, a
Participant shall give written notice in a form, an agreement or other
document prescribed by the Committee specifying the number of shares of Common
Stock to be acquired and making such representations as the Committee deems
appropriate, and the Participant shall make such other arrangements with the
Secretary of the Company as are acceptable to the Secretary to satisfy any
federal, state and local tax withholding obligations and to satisfy the
Participant's payment obligation under the Plan and the Stock Option
Agreement. Such notice shall be sent or delivered to the Secretary of the
Company at the following address: Suite 1400, 980 N. Michigan Avenue, Chicago,
Illinois 60611 (or any office which is otherwise designated as the officer to
which such notice is to be given).
5.5 Cancellation of Options. Except as otherwise provided in a Stock Option
Agreement, the Option Period shall terminate, unless terminated earlier under
Section 5.2, on the first to occur of (a) the expiration of sixty (60) days
following the date of the Participant's Termination of Employment if such
termination is other than for Cause, Retirement, Disability or death; (b) the
expiration of one (1) year after the Participant's Retirement, if the
Participant's Termination of Employment is due to Retirement; (c) the
expiration of one (1) year following the date on which the Participant
commences to receive benefits under the long term disability plan sponsored by
the Company or an Affiliate, or if the Participant is not covered by such a
plan, the date on which the Committee shall determine that the Participant has
a Disability, if the Participant's Termination of Employment is due to
Disability; and (d) the expiration of one (1) year following the date of the
appointment of a Representative for the estate of the Participant if the
Participant's Termination of Employment is due to death. Unless otherwise
expressly provided in a Stock Option Agreement, in the event the Participant
incurs a Termination of Employment for Cause, the Option shall be
automatically cancelled, without notice to the Participant, effective the date
of the Termination of Employment.
A-9
<PAGE>
5.6 Payment of Purchase Price Upon Exercise. Except as otherwise provided in
a Stock Option Agreement, the Option Price of the shares of Common Stock as to
which an Option shall be exercised shall be paid to the Company at the time of
exercise, which payment shall be made (a) in cash; (b) by delivery (actual or
constructive) of Common Stock certificates which have been in the name of the
Participant for at least six months endorsed in blank or accompanied by
executed stock powers with signatures guaranteed by a national bank or trust
company or a member of a national securities exchange owned by the Participant
having a total Fair Market Value on the date of such delivery equal to the
Option Price; or (c) by a combination of cash or Common Stock described in
(b). The Company shall not issue or transfer Common Stock upon exercise of an
Option until the Option Price is paid in full.
5.7 Nonassignability. Options may not be the subject of a Transfer other
than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code, and are exercisable
during a Participant's lifetime only by the Participant. Any Transfer or
attempted Transfer in derogation of this Plan shall nullify the Option.
Notwithstanding the foregoing provisions of this Section, the Committee may
permit Options under the Plan to be transferred to or for the benefit of the
Participant's family (including, without limitation, to a trust or partnership
for the benefit of a Participant's family), subject to such limits as the
Committee may establish.
ARTICLE VI
GENERAL PROVISIONS APPLICABLE TO THE PLAN
6.1 Termination of Plan. This Plan shall terminate at such time as the Board
may determine, and no Options shall be granted under the Plan after that date.
Any Options outstanding under the Plan at the time of its termination shall
remain in effect until they shall have been exercised, expired or otherwise
cancelled, settled or terminated as provided herein or in the Stock Option
Agreement, and such outstanding Options shall not be affected by such
termination of the Plan. The provisions of the Plan in respect to the full and
final authority of the Committee under the Plan, other than the authority to
grant Options, and in respect of a Participant's obligations respecting shares
of Common Stock received pursuant to the exercise of an Option shall continue
notwithstanding the termination of the Plan.
6.2 Effect of Certain Changes.
(a) Anti-Dilution. If there is any change in the outstanding shares of
Common Stock by reason of the declaration of stock dividends, or
recapitalization resulting in stock splits, or combinations or exchanges of
such shares, or recapitalizations, mergers, consolidations,
reorganizations, rights offerings, share offerings, exchanges or similar
events, the number of shares of Common Stock available for Options and
subject to the Plan, the number of such shares covered by outstanding
Options, and the Option Price per share shall be proportionately adjusted
by the Committee to reflect such changes. Appropriate adjustments may also
be made by the Committee in the terms of any Options on an equitable basis.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company following which all the conditions described
in clauses (1), (2) and (3) of subsection (iv) of Section 6.2(h) are not
satisfied (as if an event of dissolution or liquidation were described in
Section 6.2(h)), all Options shall be exercisable at the then Option Price
solely for the kind and amount of shares of stock and other securities,
property, cash, other consideration or any combination thereof receivable
upon such dissolution, liquidation, or corporate separation or division by
a holder of the number of shares of Common Stock for which such Option
might have been exercised immediately prior to such dissolution or
liquidation; provided, that each Option granted under the Plan may
terminate as of a date to be fixed by the Committee, provided that not less
than thirty (30) days' written notice of the date so fixed shall be given
to each Participant, who shall have the right, during the period of thirty
(30) days preceding such termination, to exercise all Options. The
Committee shall waive any limitations set forth in or imposed pursuant to
the
A-10
<PAGE>
terms and conditions of the Plan or a Stock Option Agreement so that all
Options, from and after a date prior to the effective date of such
dissolution or liquidation of the Company, as specified by the Committee,
shall be exercisable in full.
(c) Change in Control. If there is a Change in Control of the Company (as
defined in Section 6.2(h)), then each holder of an outstanding Option shall
be entitled, upon exercise of such Option, to receive, in lieu of shares of
Common Stock, shares of such stock or other securities, property, cash,
other consideration or any combination thereof receivable upon such Change
in Control, as the holders of shares of Common Stock received pursuant to
the terms of the Change in Control. The Committee shall waive any
limitation set forth in or imposed pursuant to the terms and conditions of
the Plan or a Stock Option Agreement so that all Options, from and after a
date prior to the effective date of such Change in Control, as the case may
be, as specified by the Committee, shall be exercisable in full.
(d) Company as Surviving Entity. In case of any consolidation or merger
of another corporation into the Company in which the Company is the
surviving corporation and in which there is a reclassification or change
(including a change in the right to receive cash or other property) of the
shares of Common Stock (other than a change in par value, or from par value
to no par value, or as a result of a subdivision or combination, but
including any change in such shares into two or more classes or series of
shares), the Committee may provide that each Option may be exercised solely
for the kind and amount of shares of stock and other securities (including
those of any new direct or indirect parent of the Company), property, cash,
other consideration or any combination thereof receivable upon such
reclassification, change, consolidation or merger by the holder of shares
of Common Stock for which such Option might have been exercised.
(e) Change in the Common Stock. In the event of a change in the Common
Stock of the Company as presently constituted, the shares resulting from
any such change shall be deemed to be the Common Stock within the meaning
of the Plan.
(f) Committee Discretion. To the extent that the foregoing adjustments
relate to stock or securities of the Company, such adjustments shall be
made by the Committee, whose determination in that respect shall be final,
binding and conclusive.
(g) Limit of Rights. Except as hereinbefore expressly provided in this
Section 6.2, the Participant shall have no rights by reason of any
subdivision or consolidation of shares of stock of any class or the payment
of any stock dividend or any other increase or decrease in the number of
shares of stock of any class or by reason of any dissolution, liquidation,
merger, or consolidation or spinoff of assets or stock of another
corporation, and any issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to the Option.
The grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structures or to
merge or to consolidate or to dissolve, liquidate, sell or transfer all or
part of its business or assets.
(h) "Change in Control." A "Change in Control" shall be deemed to have
occurred on the first to occur of any of the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, as
amended) (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of fifty-one percent
(51%) or more of either (A) the then outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that the
following acquisitions shall not constitute a Change in Control of the
Company: (1) any acquisition by the Company, (2) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, or (3) any
acquisition by any corporation pursuant to a reorganization, merger or
consolidation if,
A-11
<PAGE>
following such reorganization, merger or consolidation, the conditions
described in clauses (1), (2) and (3) of subsection (iii) of this
Section are satisfied; or
(ii) Individuals who, as of the Effective Date of this Plan,
constitute the Board of Directors of the Company (the "Incumbent Board
of the Company") cease for any reason to constitute at least a majority
of the Board of Directors of the Company; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board of the Company shall be considered as
though such individual were a member of the Incumbent Board of the
Company, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as contemplated by Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board of Directors of the Company; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (1) more than
fifty-one percent (51%) of, respectively, the then outstanding shares
of common stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (2) no Person (excluding the Company,
any employee benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger or consolidation
and any Person beneficially owing immediately prior to such
reorganization, merger or consolidation, directly or indirectly, fifty-
one percent (51%) or more of the Outstanding Company Common Stock or
Outstanding Voting Securities, as the case may be) beneficially owns,
directly or indirectly, fifty-one percent (51%) or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
or the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors and (3) at least a majority of the members of the board of
directors of the corporation resulting from such reorganization, merger
or consolidation were members of the Incumbent Board of the Company at
the time of the execution of the initial providing for such
reorganization, merger or consolidation; or
(iv) Approval by the shareholders of the Company of the sale or other
disposition of all or substantially all of the assets of the Company,
other than to a corporation, with respect to which following such sale
or other disposition, (1) more than fifty-one percent (51%) of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities
immediately prior to such sale or other disposition in substantially
the same proportion as their ownership, immediately prior to such sale
or other disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (2) no
Person (excluding the Company, any employee benefit plan (or related
trust) of the Company or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly
or indirectly, fifty-one percent (51%) or more of the Outstanding
Company Common Stock or Outstanding Company Voting Securities, as the
case may be) beneficially owns, directly or indirectly, fifty-one
percent (51%) or more of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the
then outstanding
A-12
<PAGE>
voting securities of such corporation entitled to vote generally in the
election of directors and (3) at least a majority of the members of the
board of directors of such corporation were members of the board of
directors of such corporation were members of the Incumbent Board of
the Company at the time of the execution of the initial or action of
the Board providing for such sale or other disposition of assets of the
Company.
6.3 Withholding. All options under the Plan are subject to withholding of
all applicable taxes, which withholding obligations may be satisfied, with the
consent of the Committee, through the surrender of shares of Common Stock
which the Participant already owns or to which a Participant is otherwise
entitled under the Plan; provided, however, previously-owned shares that have
been held by the Participant less than six months or shares to which the
Participant is entitled under the Plan may only be used to satisfy the minimum
tax withholding required by applicable law.
6.4 Notice to the Company of Participant's Election. Any Participant who
exercises the election under Section 83 of the Code to have his receipt of
shares of Common Stock hereunder taxed currently, without regarding to the
restrictions imposed under this Plan or a Stock Option Agreement or law, shall
provide the Company with a copy of such election immediately upon making the
election.
ARTICLE VII
MISCELLANEOUS
7.1 Indemnification of the Board and Committee. In addition to such other
rights of indemnification as they may have and to the extent permitted by law,
the Company shall indemnify, defend and hold harmless the Board, the
Committee, the members of the Committee, the officers of the Company, and any
agent or representative selected by the Board or Committee (collectively
"indemnified party") against the reasonable expenses, including attorneys'
fees, actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or any threat thereof, or in connection with any
appeal therein, to which they or any of them may be a party by reason of any
act or omission 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 legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any action, suit or proceeding, except
in relation to matters as to which it shall be adjudged in such action, suit
or proceeding that such indemnified party is liable for gross negligence or
gross misconduct in the performance of his duties; provided that within sixty
(60) days after institution of any such action, suit or proceeding the
indemnified party may in writing elect to defend the same at its sole expense,
and if such election is made, the Company shall have no further liability or
obligation to the indemnified party under this Section. The provisions of this
Section 7.1 shall in no way limit any other obligation or arrangements the
Company may have with regard to indemnifying an indemnified party.
7.2 Mitigation of Excise Tax. If any payment or right accruing to a
Participant under this Plan (without the application of this Section 7.2),
either alone or together with other payments or rights accruing to the
Participant from the Company or an Affiliate ("Total Payments") would
constitute a "parachute payment" (as defined in Section 280G of the Code and
regulations thereunder), such payment or right shall be reduced to the largest
amount or greatest right that will result in no portion of the amount payable
or right accruing under the Plan being subject to an excise tax under Section
4999 of the Code or being disallowed as a deduction under Section 280G of the
Code. The determination of whether any reduction in the rights or payments
under this Plan is to apply shall be made by the Committee in good faith after
consultation with the Participant, and such determination shall be conclusive
and binding on the Participant. The Participant shall cooperate in good faith
with the Committee in making such determination and providing the necessary
information for this purpose. The foregoing provisions of this Section 7.2
shall apply with respect to any person only if after reduction for any
applicable federal excise tax imposed by Section 4999 of the Code and federal
income tax imposed by the Code,
A-13
<PAGE>
the Total Payments accruing to such person would be less than the amount of
the Total Payments as reduced, if applicable, under the foregoing provisions
of the Plan and after reduction for only federal income taxes.
7.3 Interpretation. Whenever necessary or appropriate in this Plan and where
the context so requires, the singular term and the related pronouns shall
include the plural and the masculine and feminine gender.
7.4 Governing Law. The Plan shall be governed by the laws of the State of
Delaware (other than its laws respecting choice of law).
7.5 Validity. If any provision of this Plan shall for any reason be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof, and this Plan shall be construed as if such
invalid or unenforceable provision were omitted.
7.6 Assignment. This Plan shall inure to the benefit of and be binding upon
the parties hereof, and their respective successors and permitted assigns.
7.7 Captions. The captions to this Plan are for convenience of reference
only and in no way define, limit or describe the scope or the intent of this
Plan or any part hereof, nor in any way affect this Plan or any part hereof.
7.8 Amendments. Except as provided herein, the Board of Directors may at
anytime amend, waive, discharge or terminate the Plan. Subject to Section 6.2,
no amendment, waiver, discharge or termination of the Plan shall adversely
alter, impair, limit or terminate the rights of a Participant under the Plan
or a Stock Option Agreement with respect to any previously granted Option or
shares of Common Stock received with respect to such Option without the
written consent of the Participant. Subject to Section 6.2, only with the
prior written consent of the Participant, the Committee may modify, extend,
replace or renew an outstanding Stock Option Agreement, or accept the
surrender of an Option and grant a new Option in substitution thereof.
7.9 Entire Agreement. This Plan and the Stock Option Agreement constitute
the entire agreement with respect to the subject matter hereof and thereof,
provided that in the event of any inconsistency between the Plan and the Stock
Option Agreement, the terms and conditions of this Plan shall control.
7.10 Rights with Respect to Continuance of Employment. Nothing contained
herein shall be deemed to alter the at-will employment relationship between
the Company or an Affiliate and a Participant. Nothing contained herein shall
be construed to constitute a contract of employment between the Company or an
Affiliate and a Participant. The Company or an Affiliate and each of the
Participants continue to have the right to terminate the employment
relationship at any time for any reason. The Company or an Affiliate shall
have no obligation to retain the Participant in its employ as a result of this
Plan. There shall be no inference as to the length of employment hereby, and
the Company or an Affiliate reserves the same rights to terminate the
Participant's employment as existed prior to the individual becoming a
Participant in this Plan.
7.11 Options for Shares in Substitution for Stock Options Granted by Other
Corporations. Options may be granted under the Plan from time to time in
substitution for stock options or stock appreciation rights held by employees,
directors or service providers of other corporations who are about to become
officers, directors or employees of the Company as the result of a merger or
consolidation of the employing corporation with the Company or an Affiliate,
or the acquisition by the Company or an Affiliate of the assets of the
employing corporation, or the acquisition by the Company or Affiliate of the
stock of the employing corporation, as the result of which it becomes a
designated employer under the Plan. The terms and conditions of the Options so
granted may vary from the terms and conditions set forth in this Plan at the
time of such grant as the majority of the members of the Committee may deem
appropriate to conform, in whole or in part, to the provisions of the options
in substitution for which they are granted.
7.12 Procedure for Adoption. Any Affiliate of the Company may by resolution
of such direct or indirect subsidiary's board of directors, with the consent
of the Board of Directors and subject to such conditions as may
A-14
<PAGE>
be imposed by the Board of Directors, adopt the Plan for the benefit of its
employees as of the date specified in the board resolution.
7.13 Procedure for Withdrawal. Any Affiliate which has adopted the Plan may,
by resolution of the board of directors of such direct or indirect subsidiary,
with the consent of the Board of Directors and subject to such conditions as
may be imposed by the Board of Directors, terminate its adoption of the Plan.
A-15
<PAGE>
PROXY RELIANCE ACCEPTANCE GROUP, INC. THIS PROXY IS SOLICITED
400 NORTH LOOP 1604 EAST, SUITE 200, ON BEHALF OF THE
SAN ANTONIO, TEXAS 78232 BOARD OF DIRECTORS
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 29, 1997
TO VOTE AT THE ANNUAL MEETING IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE
BOARD OF DIRECTORS OF RELIANCE ACCEPTANCE GROUP, INC., SIGN AND DATE THE
REVERSE SIDE OF THIS CARD WITHOUT CHECKING ANY BOX.
The undersigned holder of Common Stock, par value $.01 per share, of Reliance
Acceptance Group, Inc. (the "Company") hereby appoints Howard B. Silverman,
James I. Kaplan and William S. Race, or any of them, with full power of
substitution in each, as proxies to cast all votes which the undersigned
stockholder is entitled to cast at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held in the Mesquite-Live Oak Rooms of the Embassy
Suites Hotel, 10110 U.S. Highway 281 North, San Antonio, Texas 78216, on
Thursday, May 29, 1997, at 9:00 A.M., Central Daylight time, and at any
adjournments thereof, upon the following matters. The undersigned stockholder
hereby revokes any proxy or proxies heretofore given.
1. ELECTION OF DIRECTORS TO CLASS III
[_] FOR all nominees listed below
(except as marked to the contrary below)
[_] WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name listed below.)
THOMAS L. BARLOW LORI COLE SOLWAY F. FIRESTONE
If a nominee becomes unavailable for election or unable to serve as a
director, the votes will be cast for a person that will be designated by the
Board of Directors of the Company.
2. PROPOSAL TO APPROVE AND RATIFY THE RELIANCE ACCEPTANCE GROUP, INC. 1997
STOCK OPTION PLAN.
[_] For [_] Against [_] Abstain
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting, or any adjournments
thereof.
(continued from other side)
This proxy, when properly executed, will be voted in the manner as directed
herein by the undersigned stockholder. UNLESS CONTRARY DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 AND IN THE DISCRETION OF THE PROXIES
AS TO OTHER MATTERS. The undersigned stockholder may revoke this proxy at any
time before it is voted by delivering to the Corporate Secretary of the Company
either a written revocation of the proxy or a duly executed proxy bearing a
later date, or by appearing at the Annual Meeting and voting in person. The
undersigned stockholder hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and the Proxy Statement.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. If you receive more than one proxy card, please sign and return ALL
cards in the enclosed envelope.
DATED:
----------------------------------
----------------------------------------
Signature
----------------------------------------
Signature (if held jointly)
Please date and sign exactly as the
name appears hereon. When signing as
executor, administrator, trustee,
guardian, attorney-in-fact or other
fiduciary, please give title as such.
When signing as corporation, please
sign in full corporate name by
President or other authorized officer.
If you sign for a partnership, please
sign in partnership name by an
authorized person.
