THE BANC STOCK GROUP, INC.
June 29, 1998
Dear Shareholder:
We cordially invite you to attend the Annual Meeting of
the Shareholders of The Banc Stock Group, Inc. (the "Company") to
be held at the Marriott Northwest located at 5805 Blazer Memorial
Parkway, Dublin, Ohio 43017, on Thursday, August 6, 1998, at 10:00
A.M.
The attached Notice of Annual Meeting and Proxy Statement
describe the formal business to be transacted at the meeting.
During the meeting, we will also report on the operations of the
Company. Directors and officers of the Company, as well as
representatives of Price Waterhouse LLP, the Company's independent
auditors, will be present to respond to any questions shareholders
may have.
ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE
EVEN IF
YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING. This will not
prevent you from voting in person but will assure that your vote is
counted if you are unable to attend the meeting. Your vote is
important, regardless of the number of shares you own.
Sincerely,
THE BANC STOCK GROUP, INC.
Michael E. Guirlinger
President & CEO
THE BANC STOCK GROUP, INC.
1105 SCHROCK ROAD, SUITE 437
COLUMBUS, OHIO 43229
(614) 848-5100
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 6, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
The Banc Stock Group, Inc. (the "Company") will be held at the
Marriott Northwest located at 5805 Blazer Memorial Parkway, Dublin,
Ohio on Thursday, August 6, 1998, at 10:00 A.M. (the "Meeting") to
consider and act upon the following matters:
1. Election of two nominees to serve on the Board of
Directors, which consists of eight persons;
2. Approve the selection of Price Waterhouse LLP as auditors
of the Company for the year ending February 28, 1999;
3. To Amend the 1993 Non-Qualified and Incentive Stock
Option Plan to increase the total number of shares
subject to the Plan from One Million (1,000,000) to Two
and a half Million (2,500,000);
4. To transact such other business as may properly come
before the Meeting or any adjournment thereof.
Any action may be taken on any one of the foregoing proposals at
the Meeting on the date specified above, or on any date or dates to
which, by original or later adjournment, the Meeting may be
adjourned. Pursuant to the By-laws, the Board of Directors has
fixed the close of business on June 19, 1998, as the record date
for determination of the shareholders entitled to vote at the
Meeting and any adjournments thereof.
You are requested to fill in and sign the enclosed form of proxy
which is solicited by the Board of Directors and to mail it
promptly in the enclosed envelope. The proxy will not be used if
you attend and vote at the Meeting in person or if you revoke the
proxy prior to the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Sandra L. Quinn, Secretary
Columbus, Ohio
June 29, 1998
IMPORTANT: THE PROMPT RETURN OF YOUR PROXY WILL SAVE YOUR
COMPANY THE
EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO OBTAIN A
QUORUM. AN
ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO
POSTAGE IS
REQUIRED IF THE ENVELOPE IS MAILED IN THE UNITED STATES.
THE BANC STOCK GROUP, INC.
1105 SCHROCK ROAD, SUITE 437
COLUMBUS, OH 43229
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of
The Banc Stock Group, Inc., a Florida corporation (the "Company"),
in connection with the solicitation of proxies by the Board of
Directors for use at the annual meeting of shareholders of the
Company to be held on August 6, 1998, and any adjournment thereof.
A copy of the notice of meeting accompanies this Proxy Statement.
It is anticipated that the mailing of the Proxy Statement will
commence on June 29, 1998. This proxy is being solicited by the
Company.
Only shareholders of record at the close of business on
June 19, 1998, the record date for the meeting, will be entitled to
notice of and to vote at the meeting. On the record date the
Company had outstanding 8,059,888 of Class A Common Stock and
360,000 shares of Class C Common Stock, which are the only
securities of the Company entitled to vote at the meeting, each
share being entitled to one vote.
The purposes of this meeting are to (1) elect two new
members to serve on the Board of Directors for a three year term,
(2) to approve Price Waterhouse LLP as auditors for the year ending
February 28, 1999, and (3) to amend the 1993 Non-Qualified and
Incentive Stock Option Plan to increase the total number of shares
subject to the Plan from One Million (1,000,000) to Two and a half
Million (2,500,000). While the Company is not currently aware of
any other matters which will come before the meeting, if any other
maters do properly come before the meeting, the persons designated
as proxies intend to vote in accordance with their best judgment on
such matters.
Each of the scheduled matters will be determined by a
plurality vote of the outstanding Common Shares present and
entitled to vote at the Meeting.
Shareholders who execute proxies may revoke them by
giving notice to the Secretary of the Company at any time before
such proxies are voted. Attendance at the meeting will not have
the effect of revoking a proxy unless the shareholder so attending
notifies the Secretary of the meeting at any time prior to the
voting of the proxy.
The Company will bear the cost of the meeting and the
cost of soliciting proxies, including the cost of mailing the proxy
material. In addition to solicitation by mail, directors, officers
and employees of the Company (who will not be specifically
compensated for such services) may solicit proxies by telephone or
otherwise.
Proxies received pursuant to this solicitation will be
voted in favor of all proposals except as to matters where
authority to vote is specifically withheld, and, where a choice is
specific as to the proposal, they will be voted in accordance with
such specification. If no instructions are given, the persons
named in the proxy intend to vote FOR each of the actions specified
on page 1 of this Proxy.
No person is authorized to give any information or to
make any representation not contained in this Proxy Statement, and
if given or made, such information or representation should not be
relied upon as having been authorized. This Proxy Statement does
not constitute the solicitation of a proxy in any jurisdiction from
any person to whom it is unlawful to make such proxy solicitation
in such jurisdiction. The delivery of this Proxy Statement shall
not, under any circumstances, imply that there has not been any
change in the information set forth herein since the date of this
Proxy Statement.
BENEFICIAL OWNERSHIP OF DIRECTORS, NOMINEES AND OFFICERS
On June 19, 1998, the Company had outstanding 8,059,888
shares of Class A Common Stock, and 360,000 shares of Class C
Common Stock, each of which is entitled to one vote upon each of
the matters presented at the meeting. The holders of the majority
of the shares of Common Stock, present in person or by proxy and
entitled, to vote, will constitute a quorum at the meeting.
Shareholders of record at the close of business on June 19, 1998,
will be entitled to vote at the meeting. The following sets forth,
as of June 19, 1998, certain information concerning stock ownership
of the persons known by the Company to own beneficially five
percent or more of the outstanding shares of the Company's Common
Stock, Directors proposed for election at the annual meeting, and
the officers and directors as a group.
The following sets forth, as of June 19, 1998, certain
information concerning Class A Common Stock ownership of the
Directors and nominees at the annual meeting and the officers and
directors as a group (assuming exercise of all options and warrants
which are currently exercisable):
Class A Options or Total
Shares (A) Warrants
Term
Name, Address, Age Expires Number Number Number Percentage
Larry A. Beres, 51 2000 40,000 20,000 60,000 *
7811 Winding Way South
Tipp City, Ohio 45371
Robert K. Butner, 76 1999 371,579 45,000 416,579 5.2%
12 McGuffey Lane
Athens, Ohio 45701
James G. Mathias, 45 2000 100,175 45,000 145,175 1.8%
7707 Winding Way South
Tipp City, Ohio 45371
J. David Smith, 51 1998 45,000 20,000 65,000 *
526 Waldren Hills Road
Piketon, Ohio 45661
Harvey J. Thatcher, 64 1999 71,025 45,000 116,025 1.4%
135 East Central Avenue
Van Wert, Ohio 45891
L. Jean Thiergartner, 65 1998 251,550 45,000 296,550 3.7%
20896 Orchard Road
P.O. Box 387
Milford Center, Ohio 43045
Michael E. Guirlinger,50 2000 21,927 172,705 194,632 2.4%
5321 C Drumcally Lane
Dublin, Ohio 43017
Jeffrey C. Barton, 51 ** 5,000 20,000 25,000 *
290 E. Kossuth Street
Columbus, Ohio 43206
Mark A. Davis, 46 ** 31,228 118,200 149,428 1.9%
6215 Northgate Rd. Apt. D
Columbus, Ohio 43229
Sandra L. Quinn, 32 1999 10,500 20,000 30,500 *
6288 Chelmsford Sq. E.
Columbus, Ohio 43229
Harry J. Ryan, 53 ** 13,500 5,000 18,500 *
3888 James River Road
New Albany, Ohio 43054
Edward E. Schmidt, 51 ** -- 3,000 3,000 *
5544 Turnberry Drive
Westerville, Ohio 43082
John Rettig, 57 (B) 29,290 -- 29,290 *
826 Third Avenue
P.O. Box 972
Fremont, Ohio 43420-0972
Directors and 990,774 558,905 1,549,679 19.2%
Officers as a
Group (13 persons)
* less than 1% of Class
** These officers are not on the Board of Directors.
(A) Unless otherwise indicated, the sole voting and investment power is held by
the persons named. Mr. Butner disclaims beneficial ownership of 130,000 Class
A shares held in trust for Phyllis F. Butner.
(B) Mr. Rettig is a nominee for a three-year term.
BENEFICIAL OWNERSHIP OF MORE THAN 5% OF CLASS C COMMON STOCK,
DIRECTORS AND OFFICERS
The following sets forth, as of June 19, 1998, certain
information concerning Class C Common Stock ownership of all
persons known by the Company to own beneficially five percent or
more of the outstanding shares of the Company's Class C Common
Stock, each Director and all Officers and Directors as a group, and
the percentage of voting power:
Class C Shares
Number Percentage
First Eldorado Bancshares, Inc. 131,949 36.7%
946 Fourth Street
Eldorado, Illinois 62930
John W. Walden 65,160 18.1%
1132 Broadway
Columbus, Georgia 31901
James T. Coppage 32,580 9.1%
6001 River Road, Suite 402
Columbus, Georgia 31904
Carol A. Wright 34,233 9.5%
755 Wagon Wheel Drive
Northport, Michigan 49670
James G. Mathias 6,511 1.8%
7707 Winding Way South
Tipp City, Ohio 45371
Directors and Officers 6,511 1.8%
as a group (1 person)
1. Election of Directors
Nominees and Directors
The Board of Directors has previously fixed the size of
the Board at eight Directors. Two nominees for the Board of
Directors of the company will be elected at the Annual Meeting.
The Directors will hold office for a three-year term expiring at
the Annual Meeting of Shareholders in 2001 or until their
successors are elected and qualified. Proxies solicited by the
Board of Directors, if properly signed and returned, will be voted
in favor of approving these nominees. In the event any of the
nominees shall be unable or unwilling to serve as a director, it is
intended that the proxies will be voted for the election of such
person nominated by the Board of Directors in substitution.
The Company has no reason to believe that any nominee of
the Board of Directors will be unable to serve as a director if
elected. However, in the event that any of the nominees should
become unavailable, proxies solicited by the Board of Directors
will be voted either for the election of substitute nominees
designated by the Board of Directors or to fix the number of
Directors at a number less than eight which will equal the number
of nominees available for election.
The Board of Directors recommends that you vote in favor
of each of the persons listed below.
Nominees for Election at the 1998 Annual Meeting:
L. Jean Thiergartner became a Director of the Company in
1991, as well as a Director of Banc Stock Exchange of America, Inc.
("BSA"), an affiliate of the Company. Ms. Thiergartner is also the
Secretary-Treasurer of Thiergartner Farms, Inc. for which she
worked for more than twenty years. She is past Treasurer of the
Ohio Beef Council, past President of the Ohio Cattle Women's
Association, has been a member and past President of the Union
County Health Board for over 14 years and is a past delegate to the
State Convention for the Ohio Farm Bureau. She is a member of St.
Paul Lutheran Church and active on many committees, including the
Parsonage Building Committee. She is presently serving on the
Advisory Board for Ohio Hi-Point and Clark Tech Adult Education.
John Rettig has been owner and operator of The Quality
Cleaners since 1970. The volume Dry-cleaning Company does
residential, commercial and fires restoration cleaning. Mr. Rettig
has achieved the recognized Certified Environmental Dry cleaner
status. Mr. Rettig attended Bowling Green State University from
1960 through 1961 studying Business Administration. In 1961, Mr.
Rettig volunteered for the US Army draft and served in the Adjutant
General Corps. Until 1963. During this tenure in the service, Mr.
Rettig served as team chief in a Chemical, Biological and
Radiological Warfare Team. During his service, he continued his
education with a US Army Correspondence School Business Course.
From 1988 until 1998, Mr. Rettig served as Chairman of Sandusky
County Republican Party. Mr. Rettig has also served on many boards
and county service organizations.
Directors Whose Terms Continue until the 1999 Annual Meeting.
Robert K. Butner became a Director of the Company in
1993. Mr. Butner is also a Director of BSA. Mr. Butner is retired
from the faculty of Ohio University where he was a Professor of
Mathematics for 39 years and Chairman of the Mathematics
Department. Upon retirement, Mr. Butner was confirmed Emeritus
Professor of Mathematics. Mr. Butner received a B.S. Degree in
1943 with Phi Beta Kappa honors and an M.S. Degree in 1949 and a
Ph.D. Degree in 1952 from the State University of Iowa. From 1943
to 1946, Dr. Butner served as an officer in the United States Navy.
Harvey J. Thatcher became a Director of the Company in
1991 and in 1998 retired as President of Thatcher Insurance Agency,
Inc. Since 1976, Mr. thatcher has also been President of Thatcher
Lands, Inc., Van Wert, Ohio, which he founded in 1976. Since 1987,
Mr. Thatcher has also been a director of German Mutual Insurance
Company, Director of Tri-State Venture Group, and Director of BSA.
Sandra L. Quinn is a Director of the Company and Vice
President & Corporate Secretary. She is also Vice President and
Corporate Secretary of the Company's subsidiaries and of BSA. She
has been a Director of the Company and of BSA since 1993.
Effective October 1995, Ms. Quinn was designated Principal of
Buckeye Bancstocks, Inc., an intrastate broker-dealer and
subsidiary of The Banc Stock Group. Ms. Quinn has a Series 62, 63,
and 65 securities licenses and is a member of the American Society
of Corporate Secretaries. Ms. Quinn graduated valedictorian from
Bradford Business School. She began her employment with the
Company in May 1991.
Directors Whose Terms Continue until the 2000 Annual Meeting.
Larry A. Beres became a Director of the Company in 1995.
He is Chief Operating Officer of Electra Form, Inc. the country's
largest manufacturer of tooling for the plastics beverage bottle
industry and President of Formex, Division of Electra Form, a
supplier of machine systems to the plastics industry. He has been
associated with these companies for more than five years. He is a
member of the Society of Plastics Engineers and Who's Who in
American Business and Industry. Mr. Beres graduated from Kent
State University with a Bachelor of Science Degree in Chemistry and
attended the K.S.U. MBA Program.
Michael E. Guirlinger was elected President, Chief
Executive Officer and Treasurer by the Board of Directors effective
May 18, 1995. Mr. Guirlinger is a member of the Board of Directors
for the Company and BSA.
Mr. Guirlinger had been Vice President and Chief
Operating Officer of the Company since December 1992 and a Director
since June 1993. Since 1995, Mr. Guirlinger has also been
President and CEO of BSA and was Vice President from 1992 to 1995.
He is also President and Treasurer of Buckeye Bancstocks and
Heartland Advisory Group, Inc., a registered investment advisor,
and Vice President and Treasurer of Banc Stock Financial Services,
Inc., ("BSFS"), an interstate broker-dealer and subsidiary of The
Banc Stock Group, Inc. From 1991 to December 1992, Mr. Guirlinger
was Director of Development for Foxgate Farms, Inc., a residential
home builder. In that same period, Mr. Guirlinger was also Vice
President of Northwest Passage Trading Co., a national and
international trading company. Mr. Guirlinger received a B.A.
Degree from Aquinas College in 1970 and an M.B.A. Degree from the
Ohio State University in 1986. Mr. Guirlinger has Series 7, 24, &
63 securities licenses.
Dr. James G. Mathias became a Director of the Company in
1993. Dr. Mathias is also a Director of BSA. Since 1988, Dr.
Mathias has been a veterinarian practicing in Tipp City, Ohio,
where he is the owner of the Tipp City Veterinary Hospital and
Wellness Center. Dr. Mathias attended the University of Texas and
completed his education at the Ohio State University, graduating
from the College of Veterinary Medicine in 1978. He was a member
of the Honor Society of Phi Zeta, A Veterinary Honor Society. Dr.
Mathias is also founder and president of the Dayton North Womens'
Center and is a speaker on Ratite Medicine. In 1998, Dr. Mathias
joined the Advisory Board of the Iams Company. In 1998, Dr.
Mathias stepped down from the Chairmanship of Ginghamsburg United
Methodist Church after four years to serve in other capacities.
Committees and Meetings
The Board of Directors held a total of four meetings
during the fiscal year ended February 28, 1998. The Board of
Directors, at its meeting on May 18, 1995, established an Audit
Committee and Executive Committee.
The function of the Audit Committee is to recommend to
the Board of Directors the selection of the Independent Public
Accountants to be employed by the Company and to review generally
the scope of the auditor results thereof. The Audit Committee also
reviews generally the Company's internal accounting controls,
conducts internal financial investigations and review the auditor's
compliance with the Company's policy on non-audit services provided
by the independent
auditors. The members of the Audit Committee are: James G.
Mathias, Harvey Thatcher, and Michael E. Guirlinger. In addition,
the Audit Committee consults with Jeffrey C. Barton, Vice President
and Chief Financial Officer of the Company. The Audit Committee
did not hold any meetings during the fiscal year ended February 28,
1998.
The Executive Committee is authorized, when it is
impractical or not in the best interest of the Company to wait
until a Board of Directors meeting for approval, to take any and
all action or incur any obligations which could be taken or
incurred by the full Board of Directors. The members of the
Executive Committee are: Michael E. Guirlinger, Harvey Thatcher, L.
Jean Thiergartner, Robert K. Butner and Dr. James G. Mathias. The
Executive Committee held a total of two meetings during the fiscal
year ended February 28, 1998.
Executive Officers
The following table provides information regarding each
executive officer of the Company for the year ended February 28,
1998.
Age Position
Michael E. Guirlinger 50 President, CEO and Treasurer
Edward E. Schmidt 51 Executive Vice President
Sandra L. Quinn 32 Vice President and Secretary
Jeffrey C. Barton 51 Vice President and Chief Financial
Officer
Mark A. Davis 46 Vice President and Director of Research
Harry J. Ryan 53 Vice President and Director of
Marketing
Officers serve at the pleasure of the Board of Directors.
Summary Compensation Table
{Annual Compensation} {Long-termCompensation}
Name of Principal Awards Awards LTIP All
and Position Year Salary Bonus Other* Stock Options(A) Payouts Other
Michael E. Guirlinger, 1997 80,455 36,861 35,202 45,000
President shares
Mark A. Davis, Vice 1997 61,923 58,890 61,066 30,000
President shares
Edward E. Schmidt, 1997 62,019 3,140 15,000 94,102(A)
Executive VP shares
* Commissions
(A) During the fiscal year ended February 28, 1998, Mr. Guirlinger
was awarded 22,500 stock options which vested immediately and
22,500 stock options which vest over five years, at an exercise
price of $2.125. These stock options expire on March 7, 2007. Mr.
Davis was awarded 15,000 stock options which vested immediately and
15,000 stock options which vest over five years, at an exercise
price of $2.125. Mr. Schmidt was awarded 7,500 stock options which
vested immediately and 7,500 stock options which vest over five
years, at an exercise price of $2.375. Mr. Schmidt exercised 7,500
of his options resulting in compensation of the difference between
the exercise price and fair market value at date of exercise of
$94,102. At February 28, 1998, Mr. Guirlinger has 127,700 stock
options which are exercisable and 42,300 stock options which vest
over five years. Mr. Davis has 95,200 stock options which are
exercisable and 34,800 stock options which vest over five years.
Mr. Schmidt has 7,500 stock options which vest over five years.
No other officer of the Company received in excess of $100,000
compensation.
Director Compensation
Each director who is not an employee of the Company in entitled to
receive a fee of $500 plus travel expenses for each directors'
meeting attended. On March 7, 1998, the Company issued Warrants to
certain outside Directors and to Jeffrey C. Barton, its Chief
Financial Officer. The following outside Directors (i.e., Larry
Beres, Robert K. Butner, James G. Mathias, Harvey J. Thatcher , J.
David Smith, and L. Jean Thiergartner) each received, as of March
7, 1998, Warrants to purchase 10,000 shares of the Company's Class
A Common Stock. In addition, Jeffrey C. Barton, the Chief
Financial Officer of the Company, received Warrants to purchase
5,000 shares of Class A Common Stock. The Warrants have an
exercise price of $2.125 per share and expire at 5:00 P.M. on
March 7, 2007.
Stock Options
The following table sets forth certain information
regarding stock options granted to the executive officers named in
the Summary Compensation Table during the Company's fiscal year
ended February 28, 1998.
Individual Grants Grant Date Value
% of
Number of Total
Securities Options Grant
Underlying Granted to Exercise Date
Options Employees Price Per Expiration Present
Name Granted in Fiscal Yr. Share Date Value$
Michael E.
Guirlinger 45,000 35% $2.125 03/07/07 $73,850
Edward E.
Schmidt 15,000 12% $2.375 05/04/07 $27,411
Incentive Compensation Plan. In June 1993, the Company
adopted The Banc Stock Group Incentive Compensation Plan, the
purpose of which was to create a compensation program which will:
i) retain talented and necessary personnel; ii) attract talented
and promising personnel; and iii) motivate superior performance.
Full-time employees with a minimum of one year of continuous
service are eligible for consideration to participate in the
Incentive Compensation Plan. The Incentive Compensation Plan
provides that a Bonus Fund will be established in an amount equal
to twenty percent (20%) of the total of the pre-tax profits of the
Company after a fifteen percent (15%) pre-tax return on equity has
been achieved for the year. The Bonus Fund will be calculated each
fiscal quarter so that the pre-tax return on equity of the Company
must equal 15% or more annually (on a cumulative basis) for the
period from the end of the last fiscal quarter, in which bonuses
were paid, to the current fiscal quarter. The allocation of the
Bonus Fund is to be made by the President of the Company who has
full discretion as to allocations; except that he cannot make
allocations to himself without prior approval of the Board of
Directors. For purposes of allocating the Bonus Fund, the
employees of the Company will be placed in one of three groups: the
executive group, the sales group and the staff group. The Company
incurred expense of $600,000 under the Plan for the year ended
February 28, 1998.
2. Amendment to the 1993 Non-Qualified and Incentive Stock Option
Plan
1993 Non-Qualified and Incentive Stock Option Plan. In
November 1993, the Company adopted The Banc Stock Group 1993 Non-
Qualified and Incentive Stock Option Plan. (A copy of the Plan is
attached as "Exhibit A"). The Plan authorizes the grant of options
to purchase an aggregate of 1,000,000 shares of the Company's Class
A Common Stock. The Plan provides that the Board of Directors, or
a committee appointed by the Board, may grant options and otherwise
administer the Option Plan. The exercise price of each incentive
stock option or non-qualified stock option must be at least 100% of
the fair market value of the Class A Shares at the date of grant,
and no such option may be exercisable for more than 10 years after
the date of grant. However, the exercise price of each incentive
stock option granted to any shareholder possessing more then 10% of
the combined voting power of all classes of capital stock of the
Company on the date of grant must not be less than 110% of the fair
market value on that date, and no such option may be exercisable
more than 5 years after the date of grant.
On May 21, 1998, the Board of Directors of the Company
unanimously voted to amend the 1993 Non-Qualified and Incentive
Stock Option Plan to increase the total number of shares subject to
the Plan from One Million (1,000,000) to Two Million Five Hundred
Thousand (2,500,000). Management of the Company and the Board of
Directors believe that this is necessary in order to have shares
available in the plan to offer officers, key employees, as well as
new employees. The Option Plan is intended to encourage ownership
of the Company's Common Stock by officers and other key employees
of the Company, to encourage their continued employment with the
Company and provide them with additional incentives to promote the
success of the Company. The Board of Directors recommend that you
vote in favor of this Amendment.
Effective September 28, 1995, the following options and warrants
were granted under this plan with a ten-year term and exercise
price of $2.875.
(a) 154,000 non-qualified stock options granted to employees with
immediate vesting.
(b) 55,000 non-qualified stock options granted to brokers with
immediate vesting.
(c) 145,000 qualified stock options granted to brokers, vesting
over five years.
(d) 121,000 qualified stock options granted to employees, vesting
over five years.
(e) 105,000 warrants granted to directors and an officer with
immediate vesting.
Effective February 29, 1996, 25,000 options were granted under this
plan to the President of the Company with a ten year term and
exercise price of $2.875.
Effective March 4, 1997, 3,500 qualified options vesting over five
years and 3,500 non-qualified options were granted under this plan
to a new broker with ten year terms and exercise prices of $2.125.
Effective March 7, 1997, the following options and warrants were
granted under this plan with a ten year term and exercise price of
$2.125.
(a) 61,000 non-qualified stock options granted to employees with
immediate vesting.
(b) 47,500 non-qualified stock options granted to brokers with
immediate vesting.
(c) 47,500 qualified stock options granted to brokers, vesting
over five years.
(d) 61,000 qualified stock options granted to employees, vesting
over five years.
(e) 65,000 warrants granted to directors and an officer with
immediate vesting.
Effective May 4, 1997, 7,500 qualified options vesting over five
years and 7,500 non-qualified options were granted under this plan
to a new employee with ten year terms and exercise prices of
$2.375.
Effective January 12, 1998, 5,000 qualified options vesting over
five years and 5,000 non-qualified options were granted under this
plan to a new broker with ten year terms and exercise prices of
$13.37.
Effective March 2, 1998, 1,500 qualified options vesting over five
years and 1,500 non-qualified options were granted under this plan
to new employees with ten-year terms and exercise prices of
$16.875.
Effective May 12, 1998, the following options and warrants were
granted under this plan with ten-year terms and exercise prices of
$14.75:
(a) 104,005 non-qualified stock options granted to employees with
immediate vesting.
(b) 26,000 non-qualified stock options granted to brokers with
immediate vesting.
(c) 55,889 non-qualified stock options granted to employees,
vesting over five years.
(d) 48,116 qualified stock options granted to employees, vesting
over five years.
(e) 24,500 qualified stock options granted to brokers, vesting
over five years.
(f) 70,000 warrants granted to directors and an officer with
immediate vesting.
3. Relationship with Independent Public Accountants
Price Waterhouse LLP has served as the independent public
accountants for the Company since December 1994. Price Waterhouse
LLP has been selected by the Board of Directors to serve in that
capacity for the 1999 fiscal year. During the 1998 fiscal year,
Price Waterhouse LLP performed an audit and tax services for the
Company which included an examination of the Company's annual
consolidated financial statements.
A representative of Price Waterhouse LLP will be present
at the Annual Meeting and will have an opportunity to make a
statement if he desires to do so. The representative will be
available to respond to appropriate questions from shareholders.
4. Shareholder Proposals
All shareholder proposals which are intended to be
presented at the 1999 Annual Meeting of stockholders of the Company
must be received by the Company no later than April 8, 1999, for
inclusion in the Board of Directors' Proxy Statement and form of
Proxy related to the meeting.
5. Other Business
The Board of Directors knows of no other business to be
acted upon at the meeting. However, if any other business properly
comes before the meeting, it is the intention of the persons named
in the enclosed Proxy to vote on such matters in accordance with
their best judgment.
The prompt return of the Proxy will be appreciated and
helpful in obtaining the necessary vote. Therefore, whether or not
you expect to attend the meeting, please sign the Proxy and return
in the enclosed envelope.
By Order of the Board of Directors
Sandra L. Quinn
Secretary
EXHIBIT A
1993 NON-QUALIFIED AND
INCENTIVE STOCK OPTION PLAN
1. Purpose of the Plan. This 1993 Non-Qualified and
Incentive Stock Option Plan
of The Heartland Group of Companies, Inc. adopted as of November 5,
1993, is intended to encourage officers and key employees of the
Company to acquire or increase their ownership of common stock of
the Company on reasonable terms. The opportunity so provided is
intended to foster in participants a strong incentive to put forth
maximum effort for the continued success and growth of the Company
and its Subsidiaries, to aid in retaining individuals who put forth
such efforts, and to assist in attracting the best available
individuals to the Company and its Subsidiaries in the future.
2. Definitions. When used herein, the following terms shall
have the meaning set forth
below:
2.1 "Affiliate" means, with respect to any specified person
or entity, a person or entity
that directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, the
person or entity specified.
2.2 "Award Agreement" means a written agreement in such form
as may be, from time
to time, hereafter approved by the Committee, which shall be duly
executed by the Company and which shall set forth the terms and
conditions of an Option under the Plan.
2.3. "Board" means the Board of Directors of the Heartland
Group of companies, Inc. (Or
its successors).
2.4. "Code" unless otherwise provided means the Internal
Revenue Code of 1986, as in
effect at the time of reference, or any successor revenue code
which may hereafter be adopted in lieu thereof, and reference to
any specific provisions of the Code shall refer to the
corresponding provisions of the Code as it may hereafter be amended
or replaced.
2.5. "Committee" means the Stock Option Committee of the Board
or any other
committee appointed by the Board whose members meet the
requirements for eligibility to serve set forth in Section 4 which
is invested by the Board with responsibility for the administration
of the Plan.
2.6. "Company" means The Heartland Group of Companies, Inc.
(Or its successor).
2.7. "Employee" means an officer (including an officer who is
a member of the Board)
or other key employee of the Company or any of its Subsidiaries.
2.8. "Fair Market Value" means, with respect to the Company's
Shares, the fair market
value determined by the Committee in its discretion, except as
hereinafter set forth. In the event that Shares are then being
traded on a national securities exchange, the Fair Market Value
shall be deemed to be the mean between the high and low prices of
the Shares on such securities exchange
on the day on which the Option shall be granted, and if the Shares
are then being traded on such an exchange, but there are no sales
on such day, such Fair Market Value shall be deemed to be the mean
between the bid and asked prices for the Shares on such date, and
if the Shares are not then traded on such an exchange, but are then
traded on the over-the-counter market, then such Fair Market Value
shall be deemed to be the mean between the high and low bid and
asked prices for the Shares on the over-the counter market on the
day on which the Option shall be granted (or the next preceding day
on which sales occurred if there were no sales on the date of
grant).
2.9. "Incentive Stock Option" means an Option meeting the
requirements and containing
the limitations and restrictions set forth in Section 422A of the
Code; "incentive stock option" means any option meeting the
requirements and containing the limitations set forth in Section
422A of the Code.
2.10. "Non-Qualified Stock Option" means an Option other
than an Incentive Stock
Option.
2.11. "Option" means the right to purchase, at a price
and for a term fixed by the
Committee in accordance with the Plan, and subject to such other
limitations and restrictions as the Plan and the Committee impose,
the number of Shares specified by the Committee.
2.12. "Parent" means any corporation, other than the
Company, in an unbroken chain of
corporations ending with the Company if, at the time of the
granting of the Option, each of the corporations other than the
Company owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the
other corporations of the chain.
2.13. "Plan" means the Company's 1993 Non-Qualified and
Incentive Stock Option Plan.
2.14. "Shares" means the Company's no par value Class A
Common Shares or, if by reason
of the adjustment provisions hereof any rights under any Option
under the Plan pertain to any other security, such other security.
2.15. "Subsidiary" means any corporation other than the
Company in an unbroken chain
of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain
owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
2.16. "Successor" means the legal representative of the
estate of a deceased Employee or
the person or persons who shall acquire the right to exercise an
Option by bequest or inheritance or by reason of the death of an
Employee.
2.17. "Term" means the period during which a particular
Option may be exercised.
3. Stock Subject to the Plan. There will be reserved for
use, upon the exercise of
Options to be granted from time to time under the Plan, an
aggregate of Two Million Five Hundred (2,500,000) Shares, which
Shares may be in whole or in part, as the Board shall from time to
time determine, authorized but unissued Shares, or issued Shares
which shall have been reacquired by the Company. Any Shares
subject to issuance upon exercise of Options but which are not
issued because of a surrender, lapse, expiration or termination of
any such Option prior to issuance of the Shares shall once again be
available for issuance in satisfaction of Options.
4. Administration of the Plan. The Board may, in its
discretion, appoint a Committee,
which shall consist of not less than three (3) persons, not less
than two (2) of whom shall be members of the Board. In the event
no Committee is appointed, the Board shall take all actions under
the Plan and any reference in the Plan to the Committee shall be
deemed to be a reference to the Board where appropriate. Subject
to the provisions of the Plan, the Committee shall have full
authority, in its discretion, to determine the Employees to whom
Options shall be granted, the number of Shares to be covered by
each of the Options, and the provisions of any previously granted
options under this Plan or any other plans of the Company as a
condition to the granting of an Option; to interpret the Plan; and
to prescribe, amend, and rescind rules and regulations relating to
it, and generally to interpret and determine any and all matters
whatsoever relating to the administration of the Plan and the
granting of Options hereunder. The Board may, from time to time,
appoint members to the Committee in substitution for or in addition
to members previously appointed and may fill vacancies, however,
caused, in the Committee. The Committee shall select one of its
members as its chairman and shall hold its meetings at such times
and places as it shall deem advisable. A majority of its members
shall constitute a quorum. Any action of the committee may be
taken by a written instrument signed by all of the members, and any
action so taken shall be fully as effective as if it has been taken
by a vote of a majority of the members at a meeting duly called and
held. The committee shall make such rules and regulations for the
conduct of its business as it shall deem advisable and shall
appoint a Secretary who shall keep minutes of its meetings and
records of all action taken in writing without a meeting. No
member of the Committee shall be liable, in the absence of bad
faith, for any act or omission with respect to his service on the
Committee.
5. Employees to Whom Options May Be Granted. Options may be
granted in each
calendar year or portion thereof while the Plan is in effect to
such of the Employees as the Committee, in its discretion, shall
determine.
In determining the Employees to whom Options shall be
granted and the number of Shares to be subject to purchase under
such Options, the Committee shall take into account the duties of
the respective Employees, their present and potential contributions
to the success of the Company, and such other factors as the
Committee shall deem relevant in connection with accomplishing the
purposes of the Plan.
6. Stock Options.
6.1. Types of Options. Options granted under this Plan may be
(i) Incentive Stock
Options, (ii) Non-Qualified Stock Options, or (iii) a combination
of the foregoing. The Award Agreement shall designate whether an
option is an Incentive Stock Option or a Non-Qualified Stock
Option.
6.2. Option Price. The option price per share of any Option
granted under the Plan shall
not be less than the Fair Market Value of the Shares covered by the
Option on the date the Option is granted.
Notwithstanding anything herein to the contrary, in the event
an Incentive Stock Option is granted to an Employee who, at the
time such Incentive Stock Option is granted, owns, as defined in
Section 425 of the Code, stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock
of:
(i) the Corporation; or
(ii) if applicable, a Subsidiary; or
(iii) if applicable, the Parent,
then the option price per share of any Incentive Stock Option
granted to such Employee shall not be less than one hundred ten
percent (110%) of the Fair Market Value of the Shares covered by
the Option on the date the Option is granted.
6.3. Term of Options. Options granted hereunder shall be
exercisable for a Term of not
more than ten (10) years from the date of grant hereof, but shall
be subject to earlier termination as hereinafter provided. Each
Award Agreement issued hereunder shall specify the Term of the
Option, which Term shall be determined by the Committee in
accordance with its discretionary authority hereunder.
Notwithstanding anything herein to the contrary, in the event
any Incentive Stock Option is granted to any Employee who, at the
time such Incentive Stock Option is granted, owns, as defined in
Section 425 of the Code, stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock
of:
(i) the Corporation; or
(ii) if applicable, a Subsidiary; or
(iii) if applicable, the Parent,
then such Incentive Stock Option shall not be exercisable more than
five (5) years from the date of grant thereof, but shall be subject
to earlier termination as hereinafter provided.
7. Limit on Fair Market Value. In any calendar year, no
Employee may be granted an
Incentive Stock Option hereunder to the extent that the aggregate
Fair Market Value (determined at the time the Option is granted) of
the stock with respect to which incentive stock options are
exercisable for the first time by such Employee during any calendar
year (under all such plans of the Employee's employer corporation,
and, if any, its Parent and Subsidiary Corporations) exceeds the
sum of One Hundred Thousand Dollars ($100,000). For purposes of
the preceding sentence, options shall be taken into account in the
order in which they were granted. Any Option granted under the
Plan wich is intended to be an Incentive Stock Option, but which
exceeds the limitations set forth in this Section 7, shall be a
Non-Qualified Stock Option.
8. Date of Grant. The date of grant of an Option granted
hereunder shall be the date on
which the Committee acts in granting the Option.
9. Exercise of Rights Under Options. An Employee entitled
to exercise an Option may
do so by delivery of a written notice to that effect specifying the
number os Shares with respect to which the Option is being
exercised and any other information the Committee may prescribe.
The notice shall be accompanied by payment in full of the purchase
price of any Shares to be purchased, which payment may be made (i)
in cash or, (ii) with the Committee's approval, in common stock of
the Company valued at Fair Market Value at the time of exercise,
(iii) or, with the Committee's approval and to the extent permitted
by applicable state law, by a promissory note bearing interest at
no less than the minimum rate necessary to avoid imputed interest
under the Code, or (iv) a combination thereof. No Shares shall be
issued upon exercise of an Option until full payment has been made
therefor. All notices or requests provided for herein shall be
delivered to the President of the Company.
10. Option Provisions and Conditions. Each Award Agreement
shall contain such other
provisions and conditions not inconsistent herewith as shall be
approved by the Board or by the Committee.
11. Rights of Option Holder. The holder of an Option shall
not have any of the rights of
a stockholder with respect to the Shares subject to purchase under
his Option, except to the extent that one or more certificates for
such Shares shall be delivered to him upon the due exercise of the
Option.
12. Non-Transferability of Options. An Option shall not be
transferable, other than by
will or the laws of descent and distribution, and an Option may be
exercised, during the lifetime of the holder of the Option, only by
him.
13. Adjustments Upon Changes in Capitalization. In the event
of changes in all of the
outstanding Shares by reason of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations, or
exchanges of shares, separations, reorganizations or liquidations,
the number and class of Shares available under the Plan in the
aggregate, the number and class of Shares subject to Options
theretofore granted, applicable purchase prices and all other
applicable provisions, shall, subject to the provisions of the
Plan, be equitably adjusted by the Committee. The foregoing
adjustment and the manner of application of the foregoing
provisions shall be determined by the Committee in its sole
discretion. Any such adjustment may provide for the elimination of
any fractional Share which might otherwise become subject to an
Option.
14. Unusual Corporate Events. Notwithstanding anything to
the contrary, in the case of
an unusual corporate event such as liquidation, merger,
reorganization (other than a reorganization as defined by Section
368(a)(1)(F) of the Code), or other business combination,
acquisition or change in the control of the Company through a
tender offer or otherwise, the Board may, in its sole discretion,
determine, on a case by case basis, that each Option granted under
the Plan shall terminate ninety (90) days after the occurrence of
such unusual corporate event, but, in the event of any such
termination the Option holder shall have the right, commencing at
least five (5) days prior to such unusual corporate event and
subject to any other limitation on the exercise of such Option in
effect on the date of exercise to immediately exercise any Options
in full, without regard to any vesting limitations, to the extent
they shall not have been exercised.
15. Form of Options. An Option shall be granted hereunder
only by action by the Board
of the Committee in granting an Option. Whenever the Committee
shall designate an Employee for the receipt of an Option, the
Secretary or the President of the Company, or such other person as
the Committee shall appoint, shall forthwith send notice thereof to
the Employee, in such form as the Committee shall approve, stating
the number of Shares subject to the Option, its Term, and the other
terms and conditions thereof. The notice shall be accompanied by
a written Award Agreement in such form as may from time to time
hereafter be approved by the Committee, which shall have been duly
executed by or on behalf of the Company. If the surrender of
previously issued Options is made a condition of the grant, the
notice shall set for the pertinent details of such conditions and
the written Award Agreement executed by or on behalf of the Company
shall be delivered to the Employee on the day such surrender is
made, but it shall be dated, as are all Award Agreements, as of the
date on which the Committee designated the Employee to receive an
Option hereunder. Execution by the Employee to whom such Option is
granted of said Award Agreement in accordance with the provisions
set forth in this Plan shall be a condition precedent to the
exercise of any Option.
16. Taxes. The company shall have the right to deduct from
any amounts due to the
Employee pursuant to the exercise of an Option any taxes required
by law to be withheld. Furthermore, the Company may elect to
deduct such taxes from any other amounts payable then or any time
thereafter in cash to the Employee. The Company shall also have
the right to require a person entitled to receive Shares pursuant
to the exercise of an Option under the Plan to pay the Company the
amount of any taxes which the Company is or will be required to
withhold with respect to such Shares before the certificate for
such Shares is delivered pursuant to the Option. If the Employee
disposes of Shares acquired pursuant to an Incentive Stock Option
in any transaction considered to be a disqualifying transaction
under Section 421 and 422A of the Code, the Company shall have the
right to deduct any taxes required by law to be withheld on account
of such disqualifying disposition from any for any reason otherwise
payable to the Employee in cash by the Company.
17. Termination of Plan. The Plan shall terminate on
November 1, 2003, and an Option
shall not be granted under the Plan after that date. Any Options
outstanding at the time of termination of the Plan shall continue
in full force and effect according to the terms and conditions of
the Award Agreements pursuant to which the Options were granted
under this Plan.
18. Amendment of the Plan. The Plan may be amended at any
time and from time to
time by the Board, but no amendment without the approval of the
stockholders of the Company shall:
(a) increase the maximum number of Shares as to which Options
may be granted uner the Plan;
(b) expand or change the class of persons eligible to receive
options;
(c) permit the purchase price of Shares subject to an
Incentive Stock Option granted under the Plan to be less
than the Fair Market Value of such Shares at the time the
Incentive Stock Option is granted;
(d) extend the term of the Plan; or
(e) materially increase the benefits to the Employees under
the Plan.
No amendment of the Plan or any Option granted under the Plan
shall alter or impair any of the rights or obligations of any
person, without his consent, under any Option theretofore granted
under the Plan.
19. Delivery of Shares on Exercise. Delivery of certificates
for Shares pursuant to an
Option exercise shall be postponed by the Company for such period
as may be required for it to comply with any applicable
requirements of any federal, state or local law or regulation or
any administrative or quasi-administrative requirement applicable
to the sale, issuance, distribution or delivery of such shares.
20. Fees and Costs. The Company shall pay all original issue
taxes, if any, on the
exercise of any Option granted under the Plan and all other fees
and expenses necessarily incurred by the Company in connection
therewith.
21. Effectiveness of the Plan. This 1993 Non-Qualified and
Incentive Stock Option Plan
of the Heartland Group of Companies, Inc. shall become effective
when approved by the shareholders. The Plan was approved by the
Board as of November 5, 1993.
22. Other Provisions. As used in the Plan, and in Award
Agreements and other
documents prepared in implementation of the Plan, references to the
masculine pronoun shall be deemed to refer to the feminine or
neuter, and references in the singular or the plural shall refer to
the plural or the singular, as the identity of the person or
persons or entity or entities being referred to may require. The
captions used in the Plan and in such Award Agreements and other
documents prepared in implementation of the Plan are for
convenience only and shall not affect the meaning of any provision
hereof or thereof.