SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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-12
FIRST OTTAWA BANCSHARES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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April 12, 2001
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
First Ottawa Bancshares, Inc. (the "Company") to be held at the offices of the
Company, 701-705 LaSalle Street, Ottawa, Illinois, on Wednesday, May 16, 2001 at
3:00 p.m., Ottawa time (the "Annual Meeting").
The Annual Meeting will be held for the purposes of electing directors and
transacting such other business as may properly come before the meeting.
Whether or not you plan to attend the Annual Meeting, please complete, sign
and date the accompanying proxy card and return it in the enclosed prepaid
envelope. You may revoke your proxy in the manner described in the accompanying
Proxy Statement at any time before it has been voted at the Annual Meeting. If
you attend the Annual Meeting, you may vote in person even if you have
previously returned your proxy card. Your prompt cooperation will be greatly
appreciated.
The 2000 Annual Report to Stockholders of the Company, including financial
statements, is furnished herewith.
Sincerely,
/s/ Joachim J. Brown
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JOACHIM J. BROWN
CHIEF EXECUTIVE OFFICER AND PRESIDENT
FIRST OTTAWA BANCSHARES, INC.
701-705 LASALLE STREET
P.O. BOX 657
OTTAWA, ILLINOIS 61350
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 16, 2001
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of First Ottawa
Bancshares, Inc. will be held at the offices of the Company, 701-705 LaSalle
Street, Ottawa, Illinois, on Wednesday, May 16, 2001 at 3:00 p.m., Ottawa time
(the "Annual Meeting"), for the following purposes:
1. to elect directors; and
2. to transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on March 28, 2001 will be
entitled to notice of and to vote at the Annual Meeting.
By order of the Board of Directors,
/s/ Cheryl D. Gage
------------------------
CHERYL D. GAGE
SECRETARY
Ottawa, Illinois
April 12, 2001
PLEASE DATE, SIGN AND RETURN THE PROXY FOR THE COMPANY'S ANNUAL MEETING PROMPTLY
IN THE ENCLOSED, SELF-ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
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FIRST OTTAWA BANCSHARES, INC.
701-705 LASALLE STREET
P.O. BOX 657
OTTAWA, ILLINOIS 61350
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 2001
This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of First Ottawa Bancshares, Inc.
(the "Company") for use at the Annual Meeting of Stockholders to be held on May
16, 2001 (the "Annual Meeting") and at any adjournment or postponement thereof.
Only stockholders of record at the close of business on March 28, 2001 will be
entitled to notice of and to vote at the Annual Meeting. The Company had
outstanding 662,281 shares of common stock ("Common Stock") as of the close of
business on March 28, 2001. There are no other voting securities. Each
stockholder is entitled to one vote per share for all matters to come before the
Annual Meeting other than the election of directors.
At the Annual Meeting, directors are to be elected with each stockholder
being entitled to cumulate his or her votes. Under cumulative voting, each
stockholder entitled to vote is entitled to vote as many votes as equal the
number of shares of Common Stock owned and multiplied by the number of directors
to be elected. Each stockholder may cast all of such votes for a single
candidate or distribute them among the number of director positions to be filled
or among any two or more candidates as such stockholder may see fit. Except as
otherwise instructed by a stockholder, each properly executed and returned Proxy
that grants authority to vote for one or more nominees proposed by the Company
and named below will authorize the proxies to cumulate all votes which the
stockholder is entitled to cast and to allocate such votes among such nominees
as such proxies determine, in their sole and absolute discretion. If individuals
other than the nominees proposed by the Company and named below are nominated
for director of the Company, the proxies intend to distribute the number of
votes as to which they have discretionary authority with respect to cumulative
voting in such manner as will assure the election of all nominees proposed by
the Company and named below or, if they shall have insufficient votes for such
purpose, the election of as many of such nominees as is possible.
If a quorum is present at the Annual Meeting, the nine (9) nominees for
director receiving the greatest number of votes will be elected. Except as
otherwise instructed by a stockholder, each properly executed and returned Proxy
will be voted FOR the election of the nominees proposed by the Company and named
below and as recommended by the Board of Directors with respect to any other
proposal. The enclosed Proxy is solicited by the Board of Directors. If the
Proxy in such form is properly executed and returned, the shares of Common Stock
represented thereby will be voted in accordance with the instructions thereon at
the Annual Meeting. Such Proxy, if given, may be revoked by the stockholder
executing it any time prior to its being voted by giving written notice of such
revocation to the Secretary of the Company, by executing and duly delivering a
subsequent proxy, or by attending the Annual Meeting and voting in person.
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of Common Stock is necessary to
constitute a quorum. Abstentions will be treated as shares that are present and
entitled to vote for purposes of determining the presence of a quorum but as
unvoted for purposes of determining the approval of any matter submitted to the
stockholders for a vote from which such stockholder abstained. If a broker
indicates on the proxy that it does not have
-3-
discretionary authority as to certain shares to vote on a particular matter,
although counted for purposes of determining the presence of a quorum, such
shares will not be considered as present and entitled to vote with respect to
that matter.
In case the nominees named herein for election as directors are not
available when the election occurs, proxies in the accompanying form may be
voted for a substitute. The Company expects the nominees to be available and
knows of no matters to be brought before the meeting other than those referred
to in the accompanying Notice of Annual Meeting. If, however, any other matters
properly come before the meeting, it is intended that proxies in the
accompanying form will be voted thereon in accordance with the judgment of the
persons voting such proxies.
In addition to the use of the mails, proxies may be solicited by directors,
officers, or regular employees of the Company in person, by telegraph, by
telephone or by other means. The cost of the proxy solicitation will be paid by
the Company.
This Proxy Statement and the form of proxy for use at the Annual Meeting
are first being mailed to stockholders of the Company on or about April 12,
2001.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as shown in the table below, to the knowledge of the Company, no
stockholder owns more than 5% of the Company's Common Stock. The following table
shows the number of shares of Common Stock of the Company beneficially owned as
of March 28, 2001 by all directors, all nominees, each named executive officer
and all directors, nominees and executive officers as a group:
AMOUNT AND NATURE
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(2) PERCENT OF CLASS(3)
- ------------------------------------ -------------------------------- --------------------------------
DIRECTORS, NOMINEES AND EXECUTIVE
OFFICERS
Bradley J. Armstrong 1,040 (4) *
Joachim J. Brown 4,000 *
John L. Cantlin 1,222 *
Patty P. Godfrey 20,957 (5) 3.2%
Thomas E. Haeberle 27,526 (6) 4.2%
Donald J. Harris 1,310 (7) *
Erika S. Kuiper(1) 51,211 7.7%
Thomas P. Rooney 2,200 *
William J. Walsh 15,500 2.3%
DIRECTORS, NOMINEES AND EXECUTIVE 128,950 19.5%
OFFICERS AS A GROUP
(13 persons)
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* Less than one percent.
(1) The mailing address for Erika S. Kuiper is c/o First Ottawa Bancshares,
Inc., 701-705 LaSalle Street, Ottawa, Illinois 61350.
(2) Except as otherwise indicated in the notes to this table, each person named
in the table has sole voting and investment power over the number of shares
of Common Stock listed opposite his or her name.
(3) Based upon 662,281 shares of Common Stock of the Company issued and
outstanding at March 28, 2001.
(4) Includes 40 shares held in a custodial capacity for the benefit of a minor
child.
(5) Includes 13,857 shares held by her spouse, 100 shares held jointly with her
spouse and 600 shares held jointly with her children.
(6) Includes 26,295 shares held in trusts for which Mr. Haeberle has sole
voting power.
(7) Includes 1,275 shares held jointly with his spouse.
ELECTION OF DIRECTORS
The by-laws of the Company provide for a Board of Directors consisting of
nine (9) directors. The Company's by-laws further provide that all directors
hold office for one-year terms. Therefore, the term of office of all of the
Company's directors will expire at the Annual Meeting. The Board has selected
Bradley J. Armstrong, Joachim J. Brown, John L. Cantlin, Patty P. Godfrey,
Thomas E. Haeberle, Donald J. Harris, Erika S. Kuiper, Thomas P. Rooney and
William J. Walsh for nomination for re-election as directors to serve until the
2002 annual meeting of stockholders and until their respective successor is
elected and qualified.
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INFORMATION REGARDING NOMINEES AND EXECUTIVE OFFICERS
The following information is furnished with respect to each person who has
been nominated for election as a director and each person who is an executive
officer of the Company or of its wholly-owned subsidiary, The First National
Bank of Ottawa:
NOMINEES
NAME AGE
---- ---
Bradley J. Armstrong 39
Joachim J. Brown 52
John L. Cantlin 52
Patty P. Godfrey 63
Thomas E. Haeberle 49
Donald J. Harris 47
Erika S. Kuiper 54
Thomas P. Rooney 48
William J. Walsh 62
EXECUTIVE OFFICERS
NAME AGE POSITION
---- --- --------
Joachim J. Brown 52 President/Chief Executive Officer
Mark D. Dunavan 45 Vice President and Trust Officer
Cheryl D. Gage 44 Secretary
Donald J. Harris 47 Executive Vice President & Chief Operating Officer
Marshall A. Martyn 46 Senior Vice President/Loans
James J. Sabino 51 Executive Vice President/Chief Lending Officer
William J. Walsh 62 Chairman of the Board
NOMINEES
BRADLEY J. ARMSTRONG has been President of Armstrong & Associates, Inc., a
registered investment advisory firm, since 1989. He has been a director of the
Company since May, 1999.
JOACHIM J. BROWN has been President/Chief Executive Officer of the Company and
the Bank since November 1, 1999. Prior to joining the Company, he was President
and Chief Executive Officer of First National Bank of LaGrange and President and
Chief Operating Officer of FNBC of LaGrange, Inc. from 1985 to 1999. He has been
a director of the Company since November, 1999.
JOHN L. CANTLIN has been the owner of John L. Cantlin & Associates, a law firm
with offices in Ottawa and Earlville, since 1977. He has been a director of the
Company since February, 1999.
PATTY P. GODFREY has been a real estate broker with Coldwell Banker/Haeberle and
Associates, Inc. since 1979. She has been a director of the Company since May,
2000.
THOMAS E. HAEBERLE has been the President of Coldwell Banker/Haeberle and
Associates, Inc. since 1979. He has been a director of the Company since 1997.
DONALD J. HARRIS has been Executive Vice President and Chief Operating Officer
of the Company and the Bank since November 1, 1999. From July 1, 1994 to October
31, 1999 he was Executive Vice President, Cashier and Trust Officer of the
Company and the Bank. From August 11, 1999 to October 31, 1999 he served as
Interim Chief Executive Officer of the Company and the Bank. From 1988 to July
1, 1994 he was Vice President and Trust Officer of the Bank. He has been a
director of the Company since May, 2000 and has been employed by the Company
since 1979.
-6-
ERIKA S. KUIPER is the beneficial owner of Strawn Centennial Farms, Ottawa,
Illinois. From 1985 to June 1991 she was the owner of Erika S. Kuiper, CFP(TM),
EA, an accounting/taxation firm. She has been a director of the Company since
1991.
THOMAS P. ROONEY is an Oral and Maxillofacial Surgeon with offices in Ottawa,
Peru and Morris who is on the staff of five area hospitals from Morris to
Princeton. He has been a director of the Company since May, 1999.
WILLIAM J. WALSH has been Chairman of the Board since July, 1999 and is the
President of the Bill Walsh Automotive Group, the parent company for various
automobile dealerships and leasing companies. He has been a director of the
Company since 1977.
EXECUTIVE OFFICERS
MARK D. DUNAVAN is a Vice President and Trust Officer of the Bank. He has been
employed by the Bank since 1978.
CHERYL D. GAGE is the Secretary of the Company and the Bank. She has been
employed by the Company since 1975.
MARSHALL A. MARTYN is the Senior Vice President/Loans of the Bank. He has been
employed by the Bank since 1987.
JAMES J. SABINO is the Executive Vice President/Chief Lending Officer of the
Company and the Bank. He has been employed by the Company since January, 2000.
Prior to joining the Company, he was Regional Vice President and Sales Manager
for First Midwest Bank since 1990.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Each of the Company's directors is elected at the Annual Meeting and serves
until the next Annual Meeting and until his or her successor has been duly
elected and qualified. The Board of Directors of the Company also serves as the
Board of Directors of the Bank. Each director received $1,000 per regular
meeting attended for his or her services as a director of the Company during
2000. In addition, Directors participate in the Director Supplemental Retirement
Plan which is described below. The Company does not compensate directors for
their attendance at special meetings. The Board of Directors of the Company held
13 regular meetings during 2000. The Board has three standing committees: an
Audit Committee, a Nominating Committee and a Compensation Committee. Each of
the directors participated in at least 75% of the meetings of the Board and of
the committees of which he or she is a member.
AUDIT COMMITTEE. The Audit Committee is responsible for recommending the
appointment of the Company's outside public accountants and meeting with such
accountants with respect to the scope and review of the annual audit. Additional
responsibilities of the Audit Committee are to ensure that the Board of
Directors receives objective information regarding policies, procedures and
activities of the Company with respect to auditing, accounting, internal
accounting controls, financial reporting, regulatory matters and such other
activities of the Company as may be directed by the Board of Directors. The
Audit Committee currently consists of Directors Kuiper, Godfrey, Walsh and
Haeberle. The Audit Committee met eleven (11) times during the year ended
December 31, 2000.
-7-
COMPENSATION COMMITTEE. The Compensation Committee advises the Board of
Directors on matters of management, organization and succession, recommends
persons for appointments to key employee positions and makes recommendations to
the Board of Directors regarding compensation for officers and key employees.
The Compensation Committee currently consists of the entire Board. The
Compensation Committee met once during the year ended December 31, 2000.
NOMINATING COMMITTEE. The Nominating Committee recommends persons for
election as directors of the Company and makes recommendations to the Board of
Directors regarding the structure and membership of the various committees of
the Board of Directors, including the Nominating Committee itself. The
Nominating Committee will consider nominees recommended by stockholders if such
recommendations comply with the Company's By-laws. The Nominating Committee
currently consists of the entire Board. The Nominating Committee met once during
the year ended December 31, 2000.
DIRECTOR RETIREMENT PLAN. The Bank adopted a retirement plan (the "Director
Supplemental Retirement Plan") which became effective as of August 25, 2000.
Each of the Directors of the Company is also a Director of the Bank and is
therefore a participant in the Director Supplemental Retirement Plan. Under the
Director Supplemental Retirement Plan, a participant receives a retirement
benefit based on the earnings on a specific life insurance policy. Any earnings
in excess of the opportunity costs are accrued to a liability reserve account
for the benefit of the director. The life insurance liability reserve account is
distributed to the director over a period of ten years at retirement or early
retirement. In addition, annual earnings in excess of the opportunity costs are
distributed annually after retirement for the life of the director.
Under the Director Supplemental Retirement Plan, each director may also
elect to defer a portion or all of his or her current director fees. The Bank
will establish a liability reserve account for each director that elects to
defer fees and credit that account in an amount equal to those deferrals. The
liability reserve account will be credited with interest at a rate equal to 130%
of the five year treasury bill. The deferred fees liability reserve account no
longer accrues interest after a director retires or terminates service. At
retirement, early retirement or termination of service, the deferred fees
liability reserve account is distributed to the director according to the
payment scheduled elected by the director.
The Bank's obligations under the life insurance benefit portion of the plan
are unfunded; however, the Bank has purchased life insurance policies on each
insurable participant. The policies are actuarially designed to offset all of
the plan's costs during the life of the participant and to provide a complete
recovery of all plan costs at his or her death. The Bank is the sole owner of
all policies.
The life insurance benefit for each insurable director is being provided by
an Endorsement Split Dollar Plan. The Bank endorses a specified percentage of
the net-at-risk life insurance portion of a policy (total death benefit less
cash value of policy) on the life of each participant for payment to the
designated beneficiary of that director. The Bank owns the policy and its entire
surrender value.
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REPORT OF THE AUDIT COMMITTEE
The Audit Committee acts under a written charter which was adopted by the
Board of Directors in fiscal 2000. Each of the members of the Audit Committee is
independent as defined by our standards as set forth in the Audit Committee
Charter and the Nasdaq listing standards. A copy of the Audit Committee Charter
is attached to this Proxy Statement as Appendix A.
For the fiscal year ended December 31, 2000, the Audit Committee (i)
reviewed and discussed the Company's audited financial statements with
management, (ii) discussed with the Company's outside auditor, Crowe, Chizek and
Company LLP ("Crowe Chizek") all matters required to be discussed under
Statement on Auditing Standards No. 61, and (iii) received from Crowe Chizek
disclosures regarding Crowe Chizek's independence as required by Independence
Standards Board Standard No. 1 and discussed with Crowe Chizek its independence.
Based on the foregoing review and discussions, the Audit Committee recommended
to the Board of Directors that the audited financial statements be included in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2000.
AUDIT COMMITTEE FEE DISCLOSURES
Set forth below is a discussion of the fees billed to us by Crowe Chizek
during fiscal 2000:
AUDIT FEES
The aggregate fees and expenses billed to us by Crowe Chizek in connection
with our fiscal 2000 audit of our annual financial statements and the review of
our financial statements included in our quarterly reports on Form 10-Q for the
year 2000 totaled $40,675.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
No fees were incurred during fiscal 2000 for information technology
services.
ALL OTHER FEES
The aggregate fees and expenses billed to us by Crowe Chizek for all other
non-audit services rendered to the Company for the year ended December 31, 2000,
totaled $55,844.
AUDIT COMMITTEE INDEPENDENCE
The Audit Committee has considered the role of Crowe Chizek in providing us
with non-audit services, such as information technology services and non-audit
services, and has concluded that such services are compatible with Crowe
Chizek's independence from management and from us.
Audit Committee:
Erika S. Kuiper, Patty P. Godfrey, William J. Walsh and Thomas E. Haeberle
The material in this report is not "soliciting material," is not deemed
filed with the Securities and Exchange Commission and is not to be incorporated
by reference in any filing of the Company under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.
-9-
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate remuneration for the years ended
December 31, 2000, 1999 and 1998 for services in all capacities for the Company
and the Bank by the individuals who served as chief executive officer in the
last fiscal year and each other executive officer of the Company or the Bank who
received compensation above $100,000 during the last fiscal year (the "Named
Executive Officers").
ANNUAL COMPENSATION
------------------------------------------------------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER ANNUAL
COMPENSATION
Joachim J. Brown, Chief Executive 2000 $180,000.00(2) - $7,200.00(3)
Officer and President(1) 1999 $27,833.36 - $1,200.00(3)
Donald J. Harris, Executive Vice 2000 $104,814.00 $ 3,750.00 $8,000.00(4)
President & Chief Operating Officer 1999 $91,686.26 $15,609.00 -
1998 $81,384.13 $14,485.00 -
James J. Sabino, Executive Vice 2000 $121,606.00 $ 3,750.00 $4,800.00(3)
President & Chief Lending Officer
- --------------------------------------------------------------
(1) The Board of Directors appointed Joachim J. Brown as Chief Executive
Officer and President of the Company on November 1, 1999.
(2) Inclusive of director's fees paid to Joachim J. Brown for serving on the
Company's and the Bank's Boards of Directors.
(3) Automobile allowance.
(4) Director's fees paid to Donald J. Harris for serving on the Company's and
the Bank's Boards of Directors.
EMPLOYMENT CONTRACTS
Joachim J. Brown has a three-year employment agreement. Under the terms of
the agreement, Mr. Brown serves as Chief Executive Officer and President of the
Company and the Bank. The agreement specifies a minimum annual salary of
$180,000 and provides for increases based on base salary levels at competitive
financial institutions. The agreement also provides that Mr. Brown is entitled
to participate in a stock appreciation rights plan to be established by the
Company and in any employee stock option plan established by the Company. Mr.
Brown's annual salary is inclusive of director's fees for serving on the
Company's and the Bank's Boards of Directors.
The Company may terminate the agreement at any time for "cause" without
incurring any additional obligations. The agreement provides severance benefits
in the event Mr. Brown is (i) terminated without cause or (ii) resigns or is
terminated following a change of control. The severance benefits are equal to
the salary and benefits Mr. Brown would have received through the end of the
term of the agreement.
Donald J. Harris is a party to a severance agreement with the Company.
Pursuant to this agreement, if a change in control (as defined in the
agreements) occurs and if, within two (2) years of that change of control, Mr.
Harris resigns for good reason (as defined in the agreement), then Mr. Harris is
entitled to his base annual salary and health and life insurance benefits from
the Company for the period from the date of his resignation until the end of the
two (2) year period following the change of control.
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EMPLOYEE BONUS PLAN
In January, 2000, the Bank established an annual cash bonus plan (the
"Bonus Plan") for all employees of the Bank other than the President and the
Executive Vice Presidents. Pursuant to the Bonus Plan, an account tracks a
hypothetical quantity of 75,000 shares of the common stock of the Bank. A bonus
pool is determined based on the change in book value, subject to certain
adjustments, of the hypothetical quantity of stock during each calendar year.
The Bank will pay 50% of the bonus pool to employees pro rata based on salary.
The Bank will pay the other 50% of the bonus pools to employees at the
discretion of the supervisors. In May, 2000, the Bank established a similar
bonus plan for the President and Executive Vice Presidents (the "Executive
Officer Bonus Plan"). The Executive Officer Bonus Plan provides for similar
tracking of a hypothetical quantity of 75,000 shares of common stock of the
Bank. The Bank will pay 50% of the change in book value of these shares to the
President and 25% each to the two Executive Vice Presidents. For the year 2000,
Mr. Harris and Mr. Sabino each earned $3,750.00 under the Executive Officer
Bonus Plan and the $7,500.00 bonus otherwise payable to Mr. Brown was, at his
direction, paid to other employees of the Bank.
PENSION PLAN TABLE
Pension Plan Table(1)
- ---------------------------------------------------------------------------------------------------------------------
Remuneration Considered Years of service
(Average Salary) Salary(2)
------------------------------------------------------------------------------
15 20 25 30 35
- --------------------- ---------------- --------------- --------------- -------------- --------------- ---------------
$125,000 $125,500 $32,228 $42,970 $45,900 $64,455 $64,455
150,000 150,000 38,790 51,720 55,275 77,580 77,580
175,000 160,000 41,415 55,220 59,025 82,830 82,830
200,000 160,000 41,415 55,220 59,025 82,830 82,830
225,000 160,000 41,415 55,220 59,025 82,830 82,830
250,000 160,000 41,415 55,220 59,025 82,830 82,830
300,000 160,000 41,415 55,220 59,025 82,830 82,830
400,000 160,000 41,415 55,220 59,025 82,830 82,830
450,000 160,000 41,415 55,220 59,025 82,830 82,830
500,000 160,000 41,415 55,220 59,025 82,830 82,830
- --------------------------------------------------------------
(1) The above table shows the estimated annual straight-life with ten-year
certain annuity benefit payable under the qualified retirement program to
employees with the specified remuneration (average salary during the five
consecutive years that compensation was the highest within the last ten
years(3)) and specified years of service(4) upon retirement at age 65. The
compensation used to calculate the Average Salary and the number of years
of credited service for each executive officer are as follows: Donald J.
Harris, $93,000, 20 years.
(2) Internal Revenue Code Section 401(a)(17) limits the annual compensation
which can be recognized in a qualified pension plan. The limit for 1999 is
$160,000. The 1999 limit is used because the plan was frozen effective
December 31, 1999.
(3) Compensation after 1999 is not considered because the plan was frozen
effective December 31, 1999.
(4) Credited service after 1999 is not considered because the plan was frozen
effective December 31, 1999.
-11-
BOARD OF DIRECTORS' REPORT ON COMPENSATION
Compensation decisions during the fiscal year ended December 31, 2000 were
made by the Board of Directors, which included Joachim J. Brown, Chief Executive
Officer and President of the Company and the Bank and Donald J. Harris,
Executive Vice President & Chief Operating Officer of the Company and the Bank.
Mr. Brown did not participate in board deliberations or voting concerning his
compensation, which has been established by his employment agreement. Mr. Harris
did not participate in board deliberations or voting concerning his
compensation.
The decisions made by the Board of Directors as to executive compensation
are subjective in nature, and not subject to specific criteria. Set forth below
are certain considerations taken into account in determining compensation for
the chief executive officer and the other executive officers.
Base Salaries - In determining the base salaries for the chief executive
officer and other executive officers, the board reviews salaries to ensure that
the Bank's base salary levels are competitive with financial institutions
similar in size, geographic market and business profile in order for the Bank to
attract and retain persons of high quality. In approving 2000 base salaries, the
board reviewed an Illinois Bankers' Association Annual Compensation Survey.
Pursuant to his employment agreement, Joachim J. Brown was paid a base salary of
$180,000 in 2000.
Bonuses - The Executive Officer Bonus Plan is described above. As noted
above and consistent with the Executive Officer Bonus Plan, Mr. Harris and Mr.
Sabino were each granted a bonus of $3,750.000 and the $7,500.00 bonus otherwise
payable to Mr. Brown was, at his direction, paid to other employees of the Bank.
This report is submitted on behalf of the Board of Directors: Bradley J.
Armstrong, Joachim J. Brown, John L. Cantlin, Patty P. Godfrey, Thomas E.
Haeberle, Donald J. Harris, Erika S. Kuiper, Thomas P. Rooney and William J.
Walsh.
The material in this report is not "soliciting material," is not deemed
filed with the Securities and Exchange Commission and is not to be incorporated
by reference in any filing of the Company under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.
PERFORMANCE GRAPH
A graph comparing the yearly cumulative total return for the Common Stock
of the Company to the yearly cumulative total returns for the S&P 500 Composite
Index and a peer index is not included herein because the Common Stock of the
Company is not traded on any national or regional securities exchange and there
is no established public trading market for it.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Several of the Company's directors, officers and employees and their
affiliates, including corporations or firms of which they are officers or in
which they or members of their families have an ownership interest, are
customers of the Company and have had transactions in the ordinary course of
business of the Company, including borrowings of material amounts. Such loans,
in the opinion of management of the Company, were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
the loan was originated for comparable transactions with non-affiliated persons
and do not involve more than the normal risk of collectibility or present any
other unfavorable features. As of March 28, 2001, the Company had an aggregate
of approximately $1,808,724 of outstanding loans to its directors and executive
officers and their affiliates.
-12-
John L. Cantlin, a director of the Company, is the owner of the law firm of
John L. Cantlin & Associates, Ottawa, Illinois, which is one of several law
firms which the Company routinely retains for various legal matters involving
the Company, such as foreclosures and collections.
On January 21, 2000, the Company repurchased 2,014 shares of Common Stock
of the Company from Thomas E. Haeberle and 9,705 shares of Common Stock of the
Company from trusts in which Mr. Haeberle has beneficial interests at $57.00 per
share pursuant to the Company's tender offer dated December 6, 1999 as more
fully described in Note 12 to the Consolidated Financial Statements of the
Company included in the 1999 Annual Report to Stockholders.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who beneficially own more than
ten percent of the Common Stock of the Company, to file an initial report of
their ownership of the Company's securities on Form 3 and to file reports of
changes in their ownership of the Company's securities on Form 4 or Form 5.
These filings must be made with the Securities and Exchange Commission.
Officers, directors and greater than ten percent stockholders are required by
federal securities regulations to furnish the Company with copies of all Section
16(a) forms they file. All Section 16(a) forms required to be filed were timely
filed, except Erika S. Kuiper filed one late Form 5.
AUDITORS
Representatives of Crowe, Chizek and Company LLP, the Company's independent
auditors, are not expected to be present at the Annual Meeting.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder intends to present at the annual meeting
of stockholders in 2002 must be received by the Bank by December 13, 2001 in
order to be eligible for inclusion in the proxy statement and proxy form
relating to such meeting.
IMPORTANT
All stockholders are cordially invited to attend the Annual Meeting in
person.
If you cannot be present at the Annual Meeting, please sign and date the
enclosed Proxy and mail it PROMPTLY in the enclosed self-addressed envelope. No
postage need be affixed if mailed in the United States.
-13-
(front)
PLEASE SIGN AND RETURN IMMEDIATELY
FIRST OTTAWA BANCSHARES, INC.
PROXY FOR 2001 ANNUAL MEETING
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned stockholder of First
Ottawa Bancshares, Inc., Ottawa, Illinois, do hereby constitute and appoint
William J. Walsh and Thomas E. Haeberle, or either of them, my true and lawful
attorney with full power of substitution for me and in my name, place and stead
to vote all the capital stock of said Company standing in my name on its books
on March 28, 2001 at the annual meeting of its stockholders to be held at the
office of the Company, 701-705 LaSalle Street, Ottawa, Illinois, on May 16, 2001
at 3:00 p.m., or at any adjournment thereof, with all the power the undersigned
would possess if personally present, as follows:
Votes MUST be indicated (X) in Black or Blue Ink.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1.
1. Election of 9 Directors:
Nominees: Bradley J. Armstrong, Joachim J. Brown, John L. Cantlin,
Patty P. Godfrey, Thomas E. Haeberle, Donald J. Harris,
Erika S. Kuiper, Thomas P. Rooney and William J. Walsh
FOR WITHHOLD FOR ALL EXCEPT
[ ] [ ] [ ]
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "For All Except" box and write that nominee's name in the space
provided below.)
Exceptions: _______________________________________________________________
2. Any other business which may properly be brought before the meeting or any
adjournment thereof.
(Continued - To be Dated and Signed on Other Side)
-14-
(back)
This Proxy when properly executed, will be voted as instructed herein by
the undersigned stockholder. If no instructions are given, this Proxy will be
voted FOR Item 1. If any other business is properly brought at said meeting,
this Proxy shall be voted in accordance with the judgment of the person holding
such proxy.
This Proxy is solicited on behalf of the Board of Directors of First Ottawa
Bancshares, Inc. This Proxy may be revoked prior to its exercise.
The undersigned hereby revokes any proxy or
proxies heretofore given to vote such shares
at said meeting or at any adjournment thereof.
Date: ___________________________, 2001
____________________________________________
Signature
____________________________________________
Signature, if held jointly
(Please sign exactly as name appears hereon.
Joint owners should each sign personally. When
signing as attorney, executor, administrator,
trustee, guardian, etc., give full title as
such. Corporation proxies should be signed by
an authorized officer.)
MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
Note: If authority is granted to vote for one or more nominees for Director,
unless otherwise specified below, this proxy will authorize the proxies to
cumulate all votes represented hereby and to allocate such votes among such
nominees as the proxies shall determine, in their sole and absolute discretion,
in order to maximize the number of such nominees elected. To specify a different
manner of cumulative voting, write "Cumulate For", the name(s) of the nominee(s)
and the number of votes in the space that follows. See the accompanying proxy
statement for further information.
-15-
APPENDIX A
FIRST OTTAWA BANCSHARES, INC.
AUDIT COMMITTEE CHARTER
The audit committee is appointed by the board of directors to assist the
board of directors in undertaking and fulfilling its responsibilities in
monitoring:
- - the integrity of the financial statements of the Company;
- - the compliance by the Company with legal and regulatory requirements; and
- - the independence and performance of the Company's outside auditors.
The members of the audit committee shall meet the independence requirements
set forth in Rule 4200(a)(15) of the NASD's listing standards* or any successor
or replacement rule. Each member of the audit committee shall be able to read
and understand fundamental financial statements, including the Company's balance
sheet, statement of operations and statement of cash flows, or will become able
to do so within a reasonable period of time after his or her appointment to the
audit committee. In addition, at least one member of the audit committee must
have past employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or background
which results in such audit committee member's financial sophistication,
including being or having been a chief executive officer, chief financial
officer or other senior officer with financial oversight responsibilities.
The number of members of the audit committee shall be determined by the
board of directors, but in no event shall consist of less than three
individuals. The members of the audit committee shall be appointed by the board
of directors and shall serve terms of such length as the board of directors may
determine.
The audit committee shall have the authority to retain special legal,
accounting or other consultants to advise the committee. The audit committee
shall have the power to conduct or authorize investigations into any matters
within the committee's scope of responsibilities. The audit committee may
request any officer or employee of the Company or the Company's outside counsel
or outside auditor to attend a meeting of the committee or to meet with any
members of, or consultants to, the committee and provide pertinent information
as necessary.
The audit committee shall meet at such times and from time to time as it
deems appropriate. The audit committee shall report regularly to the board of
directors with such recommendations as the audit committee may deem appropriate.
On behalf of the board of directors, the audit committee shall:
1. Review and reassess the adequacy of this audit committee charter
annually and recommend any proposed changes to the board of directors
for approval.
2. Review with management and the outside auditor the Company's annual audited
financial statements and the outside auditor's report thereon, including
major issues regarding accounting principles and auditing standards and
practices as well as the adequacy of internal controls that could
significantly affect the Company's financial statements.
3. Review an analysis prepared by management and the outside auditor of
significant financial reporting issues and judgments made in connection
with the preparation of the Company's financial statements.
4. Review with management and the outside auditor the Company's quarterly
financial statements prior to the release of quarterly earnings or filing
of such statements with the Securities and Exchange Commission.
5. Meet periodically with management and the outside auditor to review the
Company's major financial risk exposures and the steps management has taken
to monitor and control such exposures.
6. Review major changes to the Company's accounting and auditing principles
and practices as suggested by the outside auditor or management.
7. Select and recommend to the board of directors the appointment of the
outside auditor, which firm is ultimately accountable to the audit
committee and the board of directors.
8. Approve the fees to be paid to the outside auditor.
9. Ensure its receipt of periodic reports and statements from the outside
auditor regarding the auditor's objectivity and independence, including,
without limitation, a formal written statement delineating all
relationships between the outside auditor and the Company consistent with
Independent Standards Board Standard 1, discuss such reports and statements
with the outside auditor, and if so determined by the audit committee,
recommend that the board of directors take appropriate action to oversee
the independence of the outside auditor.
10. Evaluate the performance of the outside auditor and, if so determined by
the audit committee, recommend that the board of directors replace the
outside auditor.
11. Review policies and procedures with respect to management expense accounts
and perquisites, including their use of corporate assets, and consider the
results of any review of these areas by the outside auditor.
12. Meet with the outside auditor prior to the annual audit to review the
scope, planning and staffing of the audit.
13. Obtain from the outside auditor assurance that Section 10A of the Private
Securities Litigation Reform Act of 1995 has not been implicated.
14. Discuss with the outside auditor the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communications with Audit
Committees) relating to the conduct of the annual audit.
A-2
15. Review with the outside auditor any problems or difficulties the outside
auditor may have encountered and any management letter provided by the
outside auditor and the Company's response to that letter. Such review
should include any difficulties encountered in the course of the audit
work, including any restrictions encountered by the outside auditor on the
scope of its auditing procedures or its access to required information.
16. Prepare the report of the audit committee required by the rules of the
Securities and Exchange Commission to be included in the Company's annual
proxy statement.
17. Advise the board of directors with respect to the Company's policies and
procedures regarding compliance with applicable laws and regulations.
18. Review with the Company's outside counsel legal and regulatory matters, if
any, that may have a material impact on the Company's financial statements,
the Company's compliance policies and any material reports or inquiries
received from regulators or governmental agencies.
19. Meet at least annually with the Company's chief financial officer and the
outside auditor in separate executive sessions.
The audit committee shall also undertake such additional activities within
the scope of its primary function as the audit committee may from time to time
determine or as may otherwise be required by law, the Company's by-laws or
certificate of incorporation or the board of directors. The duties and
responsibilities of a member of the audit committee are in addition to those
duties set out for a member of the board of directors of the Company. While the
audit committee has the responsibilities and powers set forth in this audit
committee charter, it is not the duty of the audit committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are prepared in accordance with generally accepted accounting
principles. This is the responsibility of the Company's management. Nor is it
the duty of the audit committee to conduct investigations, to resolve
disagreements, if any, between management and the outside auditor or to assure
compliance with laws and regulations.
The Company shall indemnify, in accordance with and to the fullest extent
now or hereafter permitted by law, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceedings, whether civil, criminal, administrative or investigative
(including, without limitation, an action by or in the right of the Company), by
reason of his or her acting as a member of the audit committee against any
liability or expense actually or reasonably incurred by such person in respect
thereof. This indemnity shall be in addition to any rights of indemnity
otherwise available to any such member.
The material in this audit committee charter is not soliciting material, is
not deemed filed with the Securities and Exchange Commission and is not
incorporated by reference in any filing of the Company under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether
made before or after the date this charter is first included in the Company's
annual proxy statement filed with the Securities and Exchange Commission and
irrespective of any general incorporation language contained in such filing.
A-3
- -------------------------------
* Under Rule 4200(a)(15) of the NASD's listing standards, (i) an "independent
director" means a person other than an officer or employee of the company
or its subsidiaries or any other individual having a relationship which, in
the opinion of the company's board of directors, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director and (ii) the following persons shall not be considered
independent:
(A) a director who is employed by the corporation or any of its affiliates for
the current year or any of the past three years;
(B) a director who accepts any compensation from the corporation or any of its
affiliates in excess of $60,000 during the previous fiscal year, other than
compensation for board service, benefits under a tax-qualified retirement
plan or non-discretionary compensation;
(C) a director who is a member of the immediate family of an individual who is,
or has been in any of the past three years, employed by the corporation or
any of its affiliates as an executive officer (immediate family includes a
person's spouse, parents, children, siblings, mother-in-law, father-in-law,
brother-in-law, sister-in-law, son-in-law, daughter-in-law, and anyone who
resides in such person's home);
(D) a director who is a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which the
corporation made, or from which the corporation received, payments (other
than those arising solely from investments in the corporation's securities)
that exceed 5% of the corporation's or business organization's consolidated
gross revenues for that year, or $200,000, whichever is more, in any of the
past three years;
(E) a director who is employed as an executive of another entity where any of
the company's executives serve on that entity's compensation committee.
A-4