SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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 under Rule 14a-12.
KANKAKEE BANCORP, 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
---------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------
[LETTERHEAD OF KANKAKEE BANCORP, INC.]
310 South Schuyler Avenue
P.O. Box 3 (815)937-4440
Kankakee, IL 60901-0003 Fax(815)937-3674
March 14, 2003
Dear Fellow Stockholder:
On behalf of the board of directors and management of Kankakee Bancorp,
Inc., we cordially invite you to attend the eleventh annual meeting of
stockholders of Kankakee Bancorp. The meeting will be held at 10:00 a.m., on
Friday, April 25, 2003, at Sully's-Sullivan's Warehouse, a banquet facility
located at 555 South West Avenue, Kankakee, Illinois 60901.
The two individuals whom your board of directors has nominated to serve as
directors are each incumbent directors. In addition to the election of the two
directors, stockholders are being asked to approve both the Kankakee Bancorp,
Inc. 2003 Stock Incentive Plan and the Kankakee Bancorp, Inc. Non-Employee
Directors' Deferred Compensation Plan. Additionally, stockholders are being
asked to ratify the appointment of McGladrey & Pullen, LLP, as auditors for
Kankakee Bancorp. Accordingly, your board of directors unanimously recommends
that you vote your shares for each of the director nominees and in favor of the
adoption of the plans as well as the ratification of our accountants.
We encourage you to attend the meeting in person. Whether or not you plan
to attend, however, please read the enclosed proxy statement and then complete,
sign and date the enclosed proxy card and return it in the accompanying postpaid
return envelope as promptly as possible. This will save us additional expense in
soliciting proxies and will ensure that your shares are represented at the
meeting.
A copy of our annual report to stockholders for the year 2002 is also
enclosed. Thank you for your attention to this important matter.
Very truly yours,
/s/ Larry D. Huffman
------------------------------------
Michael A. Griffith Larry D. Huffman
Chairman of the Board President and Chief Executive Officer
[LETTERHEAD OF KANKAKEE BANCORP, INC.]
310 South Schuyler Avenue
P.O. Box 3 (815)937-4440
Kankakee, IL 60901-0003 Fax(815)937-3674
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 25, 2003
Notice is hereby given that the annual meeting of stockholders of Kankakee
Bancorp, Inc. will be held at 10:00 a.m., local time, on Friday, April 25, 2003
at Sully's-Sullivan's Warehouse, a banquet facility located at 555 South West
Avenue, Kankakee, Illinois 60901. The annual meeting is for the purpose of
considering and acting upon:
1. the election of two directors of Kankakee Bancorp;
2. the approval of the Kankakee Bancorp, Inc. 2003 Stock Incentive Plan;
3. the approval of the Kankakee Bancorp, Inc. Non-Employee Directors'
Deferred Compensation Plan;
4. the ratification of the appointment of McGladrey & Pullen, LLP, as
auditors of Kankakee Bancorp for the fiscal year ending December 31,
2003; and
5. to act upon such other business as may properly come before the annual
meeting or any adjournments or postponements of the meeting.
We are not aware of any other business to come before the annual meeting.
Any action may be taken on any one of the foregoing proposals at the annual
meeting on the date specified above, or on any date or dates to which the annual
meeting may be adjourned or postponed. Stockholders of record at the close of
business on March 3, 2003 are the stockholders entitled to vote at the annual
meeting and any adjournments or postponements of the meeting. In the event there
are not sufficient votes for a quorum or to approve or ratify any of the
foregoing proposals at the time of the annual meeting, the meeting may be
adjourned or postponed in order to permit further solicitation of proxies by
Kankakee Bancorp.
You are requested to complete, sign and date the enclosed proxy card, which
is solicited on behalf of the board of directors, and to mail it promptly in the
enclosed postpaid return envelope.
By Order of the Board of Directors
/s/ Michael A. Stanfa
----------------------------------
Michael A. Stanfa
Secretary
Kankakee, Illinois
March 14, 2003
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE US THE EXPENSE OF FURTHER
REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A PRE-ADDRESSED ENVELOPE
IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE
UNITED STATES.
KANKAKEE BANCORP, INC.
------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
April 25, 2003
------------------------------
This proxy statement is being furnished to stockholders in connection with
the solicitation by our board of directors of proxies to be used at the annual
meeting to be held at Sully's-Sullivan Warehouse, a banquet facility located at
555 South West Avenue, Kankakee, Illinois, on Friday, April 25, 2003 at 10:00
a.m., or at any adjournments or postponements of the meeting. The accompanying
notice of meeting, proxy card and this proxy statement are first being mailed to
stockholders on or about March 14, 2003. Effective December 1, 2002, we changed
the name of our wholly owned bank subsidiary from Kankakee Federal Savings Bank
to KFS Bank, F.S.B. Certain of the information provided in this proxy statement
relates to KFS Bank and our other wholly owned subsidiaries.
The following is information regarding the meeting and the voting process,
presented in a question and answer format.
Why am I receiving this proxy statement and proxy card?
You are receiving a proxy statement and proxy card from us because on March
3, 2003, the record date for the annual meeting, you owned shares of Kankakee
Bancorp's common stock. This proxy statement describes the matters that will be
presented for consideration by the stockholders at the annual meeting. It also
gives you information concerning the matters to assist you in making an informed
decision.
When you sign the enclosed proxy card, you appoint the proxy holder as your
representative at the meeting. The proxy holder will vote your shares as you
have instructed in the proxy card, thereby ensuring that your shares will be
voted whether or not you attend the meeting. Even if you plan to attend the
meeting, you should complete, sign and return your proxy card in advance of the
meeting just in case your plans change.
If you have signed and returned the proxy card and an issue comes up for a
vote at the meeting that is not identified on the form, the proxy holder will
vote your shares, pursuant to your proxy, in accordance with his or her
judgment.
What matters will be voted on at the meeting?
You are being asked to vote on the election of two directors of Kankakee
Bancorp for a term expiring in 2006 as well as the approval of the Kankakee
Bancorp, Inc. 2003 Stock Incentive Plan and the Kankakee Bancorp, Inc.
Non-Employee Directors' Deferred Compensation Plan. Additionally, you are being
asked to ratify McGladrey & Pullen, LLP to serve as our independent auditors for
the 2003 fiscal year. These matters are more fully described in this proxy
statement.
How do I vote?
You may vote either by mail or in person at the meeting. To vote by mail,
complete and sign the enclosed proxy card and mail it in the enclosed
pre-addressed envelope. No postage is required if mailed in the United States.
If you mark your proxy card to indicate how you want your shares voted, your
shares will be voted as you instruct.
If you sign and return your proxy card but do not mark the form to provide
voting instructions, the shares represented by your proxy card will be voted
"for" both nominees named in this proxy statement, "for" the adoption of the
plans and "for" the ratification of our auditors.
If you want to vote in person, please come to the meeting. We will
distribute written ballots to anyone who wants to vote at the meeting. Please
note, however, that if your shares are held in the name of your broker (or in
what is usually referred to as "street name"), you will need to arrange to
obtain a legal proxy from your broker in order to vote in person at the meeting.
Even if you plan to attend the meeting, you should complete, sign and return
your proxy card in advance of the meeting just in case your plans change.
What does it mean if I receive more than one proxy card from us?
It means that you have multiple holdings reflected in our stock transfer
records and/or in accounts with stockbrokers. Please sign and return all proxy
cards to ensure that all your shares are voted.
If I hold shares in the name of a broker, who votes my shares?
If you received this proxy statement from your broker, your broker should
have given you instructions for directing how your broker should vote your
shares. It will then be your broker's responsibility to vote your shares for you
in the manner you direct. Please complete, execute and return the proxy card in
the envelope provided by your broker.
Under the rules of various national and regional securities exchanges,
brokers may generally vote on routine matters, such as the election of directors
and the ratification of independent auditors, but cannot vote on non-routine
matters, such as the adoption or amendment of a stock option plan, unless they
have received voting instructions from the person for whom they are holding
shares. If your broker does not receive instructions from you on how to vote
particular shares on a non-routine matter and your broker does not have
discretionary authority to vote on these matters, the broker will return the
proxy form to us, indicating that he or she does not have the authority to vote
on these matters. This is generally referred to as a "broker non-vote" and will
affect the outcome of the voting as described below, under "How many votes are
needed for approval of each proposal?" Therefore, we encourage you to provide
directions to your broker as to how you want your shares voted on all matters to
be brought before the meeting. You should do this by carefully following the
instructions your broker gives you concerning its procedures. This ensures that
your shares will be voted at the meeting.
What if I change my mind after I return my proxy?
If you hold your shares in your own name, you may revoke your proxy and
change your vote at any time before the polls close at the meeting. You may do
this by:
. signing another proxy with a later date and returning that proxy to
our proxy solicitor;
. sending notice to us that you are revoking your proxy; or
. voting in person at the meeting.
If you hold your shares in the name of your broker and desire to revoke
your proxy, you will need to contact your broker to revoke your proxy.
How many votes do we need to hold the annual meeting?
A majority of the shares that are outstanding and entitled to vote as of
the record date must be present in person or by proxy at the meeting in order to
hold the meeting and conduct business.
2
Shares are counted as present at the meeting if the stockholder either:
. is present and votes in person at the meeting; or
. has properly submitted a signed proxy card.
On March 3, 2003, the record date, there were 972,611 shares of common
stock issued and outstanding. Therefore, at least 486,306 shares need to be
present at the annual meeting in order to hold the meeting and conduct business.
What happens if a nominee is unable to stand for re-election?
The board may, by resolution, provide for a lesser number of directors or
designate a substitute nominee. In the latter case, shares represented by
proxies may be voted for a substitute nominee. You cannot vote for more than two
nominees. The board has no reason to believe either nominee will be unable to
stand for re-election or serve for his term if re-elected.
What options do I have in voting on each of the proposals?
You may vote "for" or "withhold authority to vote for" each nominee for
director. You may vote "for," "against" or "abstain" on any other proposal that
may properly be brought before the meeting. Abstentions will be considered in
determining the presence of a quorum but will not affect the vote required for
election of directors, approval of the plans or the ratification of our
auditors.
How many votes may I cast?
Generally, you are entitled to cast one vote for each share of stock you
owned on the record date. The proxy card included with this proxy statement
indicates the number of shares owned by an account attributable to you.
How many votes are needed for each proposal?
The two individuals receiving the highest number of votes cast "for" their
election will be elected as directors of Kankakee Bancorp.
The approval of the stock incentive plan, the approval of the directors'
deferred compensation plan, the ratification of our auditors and all other
matters, must receive the affirmative vote of a majority of the shares present
in person or by proxy at the meeting and entitled to vote. Broker non-votes will
not be counted as entitled to vote, but will count for purposes of determining
whether or not a quorum is present.
Where do I find the voting results of the meeting?
We will announce the results of the voting as soon as possible after the
meeting. We will also disclose the voting results in our Form 10-Q for the
quarter ended June 30, 2003.
Who bears the cost of soliciting proxies?
We will bear the cost of soliciting proxies. We have retained Morrow &
Company to assist, as necessary, in the solicitation of proxies, for a fee
estimated to be approximately $3,500 plus reasonable out-of-pocket expenses. In
addition to solicitations by mail, officers, directors or employees of Kankakee
Bancorp or KFS Bank may solicit proxies in person or by telephone. These persons
will not receive any special or additional compensation for soliciting proxies.
We may reimburse brokerage houses and other custodians, nominees and fiduciaries
for their reasonable out-of-pocket expenses for forwarding proxy and
solicitation materials to stockholders.
3
VOTING SECURITIES AND PRINCIPAL HOLDERS
The following table sets forth information as of March 3, 2003, regarding
share ownership of:
. those persons or entities known by us to beneficially own more than
five percent of our common stock;
. each director and each executive officer named in the summary
compensation table; and
. all directors and officers as a group.
The nature of beneficial ownership for shares listed in this table is sole
voting and investment power, except as set forth in the footnotes to the table.
BENEFICIAL OWNER SHARES BENEFICIALLY OWNED/(1)/ PERCENT OF CLASS
---------------- ------------------------------ ----------------
5% STOCKHOLDERS
Jeffrey L. Gendell/(2)/................................ 114,600 11.78%
237 Park Avenue, 9th Floor
New York, New York 10017
Private Capital Management, L.P./(3)/.................. 111,719 11.49%
8889 Pelican Bay Blvd., Suite 500
Naples, Florida 34108
DIRECTORS
Brenda L. Baird/(4)/................................... 2,900 *
William Cheffer/(5)/................................... 23,000 2.36%
Michael A. Griffith/(6)/............................... 4,500 *
Charles C. Huber/(7)/.................................. 22,170 2.28%
Larry D. Huffman/(8)/.................................. 13,499 1.39%
Mark L. Smith/(9)/..................................... 3,200 *
Wesley E. Walker/(10)/................................. 11,443 1.18%
NAMED EXECUTIVE OFFICERS
Carol S. Hoekstra/(11)/................................ 6,023 *
Ronald J. Walters/(12)/................................ 7,227 *
Michael A. Stanfa/(13)/................................ 14,132 1.45%
Directors and executive officers of
Kankakee Bancorp as a group (11 persons)/(14)/........ 111,169 11.37%
----------
* Less than 1.0%
/(1)/ Amounts reported include shares held directly, including shares subject
to options granted under our stock option plan which are presently
exercisable, as well as shares which are held in retirement accounts and
shares held by members of the named individuals' families or held by
trusts of which the named individual is a trustee or substantial
beneficiary, with respect to which shares the respective director may be
deemed to have sole or shared voting and/or investment power. Inclusion
of shares shall not constitute an admission of beneficial ownership or
voting or investment power over included shares. The nature of
beneficial ownership for shares listed in this table is sole voting and
investment power, except as set forth in the following footnotes.
4
/(2)/ This information is as reported to the Securities and Exchange
Commission on a Schedule 13D/A filed on December 9, 2002. Mr. Gendell
reported holding such shares individually and as the managing member of
Tontine Management, L.L.C. and as the general partner of Tontine
Financial Partners, L.P. As a result of our first quarter stock
repurchase program, on March 10, 2003, we repurchased 21,500 shares from
Tontine Management, L.L.C. reducing its ownership of our common stock to
below 10%.
/(3)/ This information is as reported to the Securities and Exchange
Commission on a Schedule 13G/A filed on February 14, 2003. Private
Capital Management, L.P. has shared power to vote the shares and to
dispose of the shares. As a result of our first quarter stock repurchase
program, on March 10, 2003, we repurchased 18,500 shares from Private
Capital Management, L.P. reducing its ownership of our common stock to
below 10%.
/(4)/ The amount reported includes 2,250 shares subject to options, which are
presently exercisable, with respect to which Ms. Baird has no voting and
sole investment power.
/(5)/ The amount reported includes 14,000 shares held by Mr. Cheffer's spouse,
with respect to which shares Mr. Cheffer has no voting or investment
power.
/(6)/ The amount reported includes 2,500 shares subject to options, which are
presently exercisable, with respect to which Mr. Griffith has no voting
and sole investment power.
/(7)/ Mr. Huber is currently a director whose term expires at the annual
meeting. Mr. Huber is not seeking re-election. The amount reported
includes 300 shares held in the Huber Family Trust, in which Mr. Huber
is trustee and has sole voting and investment power.
/(8)/ The amount reported includes 13,400 shares held jointly with his spouse,
with respect to which Mr. Huffman shares voting and investment power.
The amount reported also includes 99 shares allocated to Mr. Huffman
under our employee stock ownership plan, with respect to which shares
Mr. Huffman has sole voting and no investment power.
/(9)/ The amount reported includes 200 shares owned by Mr. Smith's spouse,
over which he has no voting or investment power and 555 shares with
respect to which he has shared voting and investment power.
/(10)/ The amount reported includes 2,025 shares held jointly with his spouse,
with respect to which Mr. Walker shares voting and investment power.
/(11)/ The amount reported includes 91 shares owned directly by Ms. Hoekstra's
spouse, over which she has no voting or investment power, 582 shares
held in the 401(k) plan for the benefit of Ms. Hoekstra and over which
Ms. Hoekstra has sole voting and investment power and 630 shares held in
the 401(k) plan for the benefit of Ms. Hoekstra's spouse over which Ms.
Hoekstra has no voting or investment power. The amount reported also
includes 2,058 shares allocated to Ms. Hoekstra under our employee stock
ownership plan, with respect to which shares Ms. Hoekstra has sole
voting power and no investment power, and 2,371 shares allocated to Ms.
Hoekstra's spouse under our employee stock ownership plan, with respect
to which shares Ms. Hoekstra has no voting or investment power.
/(12)/ The amount reported includes 2,685 shares held in the 401(k) plan for
the benefit of Mr. Walters, over which shares he has shared voting and
sole investment power. The amount reported also includes 4,350 shares
allocated to Mr. Walters under our employee stock ownership plan, with
respect to which shares Mr. Walters has sole voting and no investment
power, and 192 shares held by Mr. Walters' spouse, with respect to which
shares Mr. Walters has no voting or investment power.
/(13)/ The amount reported includes 2,942 shares held in the 401(k) plan for
the benefit of Mr. Stanfa, over which shares Mr. Stanfa has shared
voting and sole investment power. The amount reported also includes
3,846 shares allocated to Mr. Stanfa under our employee stock ownership
plan, with respect to which shares Mr. Stanfa has sole voting and no
investment power.
/(14)/ This amount includes shares held directly, including 4,750 shares
subject to options which are deemed to be exercisable, as well as shares
allocated to participant accounts under our employee stock ownership
plan, shares held in retirement accounts and shares held by certain
members of the named individuals' families or held by trusts of which
the named individual is a trustee or substantial beneficiary, with
respect to which
5
shares the respective directors and officers may be deemed to have sole
or shared voting and investment power.
ELECTION OF DIRECTORS
GENERAL
Our board of directors currently consists of seven members. Mr. Charles
Huber, a current director whose term will expire at the annual meeting, is not
seeking re-election. The board is divided into three classes, each of which
contains approximately one-third of the board. One class of directors is elected
annually. Our directors are generally elected to serve for a three-year period
or until their respective successors are elected and qualified.
The table below sets forth information regarding the nominees for directors
and the individuals who will continue as directors, including each director's
term of office. It is intended that the proxies solicited on behalf of the board
of directors (other than proxies in which the vote is withheld as to a nominee)
will be voted at the annual meeting FOR the election of the nominees identified
below. If a nominee is unable to serve, the shares represented by all valid
proxies will be voted for the election of a substitute nominee recommended by
the board of directors. At this time, we do not know of any reason why any
nominee may refuse or be unable to serve as a director, if re-elected. Except as
disclosed in this proxy statement, there are no arrangements or understandings
between the nominees and any other person pursuant to which a nominee was
selected.
The board of directors unanimously recommends that stockholders vote FOR
each of the nominees for director.
NOMINEES
TERM
POSITION(S) HELD DIRECTOR TO
NAME AGE IN KANKAKEE BANCORP SINCE EXPIRE
------------------------------ --- ------------------- ------- ------
Mark L. Smith................. 53 Director 2001 2006
Wesley E. Walker.............. 67 Director 1992 2006
CONTINUING DIRECTORS
TERM
POSITION(S) HELD DIRECTOR TO
NAME AGE IN KANKAKEE BANCORP SINCE EXPIRE
------------------------------ --- -------------------------- -------- ------
Brenda L. Baird............... 41 Director 2000 2004
Michael A. Griffith........... 44 Chairman of the Board and 2002 2004
Director
Larry D. Huffman.............. 56 President, Chief 1992 2004
Executive Officer and
Director
William Cheffer............... 72 Director 1992 2005
6
During the third quarter of 2002, the board of directors decided to
consider the advisability of adding an additional independent director to the
board. Following a process conducted by the nominating committee, which included
discussions with several stockholders who own more than 5% of our common stock,
the nominating committee recommended to the board that Michael A. Griffith be
appointed as a director. This recommendation was conditioned upon our entering
into a standstill and voting agreement with an investment group led by Jeffrey
L. Gendell. In December, 2002, we entered into an agreement with Mr. Gendell and
certain entities under his control whereby the board agreed to appoint Mr.
Griffith to the board and Mr. Gendell agreed, among other things, to (i) keep
his group's aggregate beneficial ownership below 9.99% of our stock, (ii) vote
in favor of the board's recommendations on matters presented to the stockholders
at the 2003 annual meeting, and (iii) otherwise not to seek to control
Kankakee's board, management or policies. The standstill agreement expires in
December, 2003.
In January, 2003, Mr. Cheffer resigned as chairman of the board, and Mr.
Griffith was unanimously selected by the full board of directors to serve as
chairman. Additionally, Mr. Huffman, president and chief executive officer of
Kankakee Bancorp and KFS Bank, tendered his resignation from these positions, in
which he has served since April, 2001, for personal reasons. Mr. Huffman has
agreed to remain in these positions until his successor is hired.
No member of the board of directors is related to any other member of the
board of directors. No member of the board of directors is a member of a group
which includes any other member of the board of directors for purposes of the
Savings and Loan Holding Company Act and the Securities Act of 1933, as amended.
The business experience of each continuing director and nominee is set
forth below. All directors have held their present positions for at least five
years unless otherwise indicated.
Brenda L. Baird. Ms. Baird is president and chief executive officer of
Mobile Communications, located in Bourbonnais, Illinois. Ms. Baird served as the
first female chairman of the Kankakee River Valley Chamber of Commerce and led
the 1999 local United Way drive. She is a recipient of the Sam Walton Business
Leadership Award and has served on the Illinois Department of Commerce and
Community Affairs Small Business 100 Advisory Board, the National Independent
Dealers Association and the Ameritech Cellular Dealer Council.
William Cheffer. Mr. Cheffer has been a director of Kankakee Bancorp since
1992, serving as chairman from 2000 to 2003 and vice chairman from 1992 to 2000.
Mr. Cheffer joined KFS Bank in 1952 and served as president and chief executive
officer from 1990 through 1993, president and chief operating officer from 1988
to 1990 and senior vice president and secretary from 1974 to 1988. Mr. Cheffer
is chairman of the investment committee of Riverside Medical Center and vice
chairman of the finance committee of Riverside Medical Center Foundation.
Michael A. Griffith. Mr. Griffith has served on the board of both Kankakee
Bancorp and KFS Bank since December, 2002 and as chairman of Kankakee Bancorp
since January, 2003 and of KFS Bank since February, 2003. Mr. Griffith was most
recently chairman and chief executive officer of ChiRex Inc., a contract
manufacturer of active pharmaceutical ingredients. He is a graduate of
Northwestern University's Kellogg School of Management and has nearly 15 years
of experience in commercial and investment banking.
Larry D. Huffman. Since April, 2001, Mr. Huffman has served as president
and chief executive officer of both Kankakee Bancorp and KFS Bank. Mr. Huffman
has tendered his resignation from these positions, but will continue to serve
until a successor has been hired. Mr. Huffman serves as vice chairman of both
Kankakee Bancorp and KFS Bank. He served as president and chief executive
officer of Kankakee Community College located in Kankakee, Illinois from 1987
until 2001. As president and chief executive officer of the college, Mr.
Huffman's responsibilities included management of the fiscal and educational
functions of the college. He has served on the boards of the Riverside Medical
Center Foundation, the United Way of Kankakee County, the Kankakee Area Chamber
of Commerce and the Kankakee Development Corporation. Mr. Huffman has also
served as treasurer and chairman of the Kankakee County Economic Development
Council board of directors.
Mark L. Smith. Mr. Smith is president of Smith, Koelling, Dykstra and Ohm,
P.C., a certified public accounting firm located in Bourbonnais, Illinois and
managing member of Solutions for Wealth Management, LLC,
7
a financial planning and investment advisory firm also located in Bourbonnais,
Illinois. He also serves as a board member of the Kankakee Development
Corporation, chairman of St. Patrick's Catholic Church Administrative Committee,
chairman of Bishop McNamara High School Finance Committee and as a member of
Kankakee Community College Foundation Board. From 1997 through 2001, Mr. Smith
was treasurer and a board member of Provena Hospital Corporation located in
Frankfort, Illinois and from 1991 through 2000 was a board member and treasurer
of Provena St. Mary's Hospital located in Kankakee, Illinois. In 1972, Mr. Smith
received his certified public accountant certificate and in 1995 was accredited
as a personal financial specialist by the American Institute of Certified Public
Accountants.
Wesley E. Walker. Mr. Walker currently serves as the chairman of the
Riverside Medical Center Foundation. Mr. Walker served as executive director of
the YMCA located in Kankakee for 25 years, from 1970 to 1995. He was responsible
for oversight of the YMCA's facility and 90 employees. In connection with his
involvement in the YMCA, Mr. Walker has received many awards, including the
National YMCA's "Award of Excellence", which he received in 1991 in recognition
of his leadership abilities. He has also served as vice chairman of the Kankakee
Area Chamber of Commerce board of directors. Since his retirement from the YMCA,
he has been a consultant to seven local non-profit organizations.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
directors, executive officers and persons who own more than 10% of our common
stock file reports of ownership and changes in ownership with the Securities and
Exchange Commission and with the exchange on which the shares of common stock
are traded. These persons are also required to furnish us with copies of all
Section 16(a) forms they file. Based solely on our review of the copies of such
forms furnished to us and, if appropriate, representations made to us by any
reporting person concerning whether a Form 5 was required to be filed for 2002,
we are not aware of any failures to comply with the filing requirements of
Section 16(a) during 2002.
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
General. Currently, there are seven directors serving on the board of
directors of Kankakee Bancorp. All of the directors other than Messrs. Cheffer
and Huffman are deemed to be "independent," as such term is defined by the
American Stock Exchange and the Securities and Exchange Commission. Mr. Michael
Stanfa, an executive vice president of Kankakee Bancorp, served as a director
from 1995 until January, 2003, at which time he voluntarily stepped down as
director. Mr. Huber, a current director whose term will expire at the annual
meeting, is not seeking re-election.
Meetings of our board of directors are generally held on a monthly basis.
The board of directors met 14 times during 2002. During 2002, no director of
Kankakee Bancorp attended fewer than 75% of the aggregate of the total number of
board meetings and the total number of meetings held by the committees of the
board of directors on which he or she served, with the exception of Mr. Huber,
who was absent from several meetings for health related reasons. The board of
directors of Kankakee Bancorp has standing executive, audit, nominating and
corporate governance, and compensation committees.
Audit Committee. In 2002, the audit committee was chaired by Mr. Smith.
Messrs. Walker and Huber and Ms. Baird served as members on the committee. In
2003, Ms. Baird stepped down from the committee and Mr. Griffith became a
member. Each of these members is considered "independent" according to the
American Stock Exchange listing requirements and the rules and regulations
promulgated under the Exchange Act. The board of directors has determined that
each of Mr. Griffith and Mr. Smith qualifies as an "audit committee financial
expert" under the rules of the Securities and Exchange Commission. The board
based this decision regarding Mr. Griffith on his education and previous
experience as a chief executive officer and chief financial officer of ChiRex,
Inc. and his professional experience in commercial and investment banking. In
regard to Mr. Smith, the board based its decision on his education and his
professional experience as serving as president for a public accounting firm and
as managing member of a financial planning and investment advisory firm.
Kankakee Bancorp's audit committee met five times during 2002.
8
The functions performed by the audit committee include, but are not limited
to, the following:
. the selection of our independent auditors and pre-approval of all
engagements and fee arrangements;
. reviewing the independence of the independent auditors;
. reviewing actions by management on recommendations of the independent
auditors and internal auditors;
. meeting with management, the internal auditors and the independent
auditors to review the effectiveness of our system of internal control
and internal audit procedures;
. reviewing our earnings releases and reports filed with the Securities
and Exchange Commission; and
. reviewing reports of bank regulatory agencies and monitoring
management's compliance with recommendations contained in those
reports.
To promote independence of the audit function, the audit committee consults
separately and jointly with the independent auditors, the internal auditors and
management. The audit committee has adopted a written charter, which sets forth
the committee's duties and responsibilities. We have attached a copy of the
current charter to this proxy statement as Appendix A.
Nominating and Governance Committee. We formed a separate nominating
committee in June, 2002 and Messrs. Smith, Huber and Walker and Ms. Baird were
the original members. Previously, the full board of directors considered
nominations for the board. The committee's first task was to search for and
evaluate experienced, independent and qualified candidates to serve on the board
of directors. The committee recommended Mr. Griffith to serve on the board, and
the full board unanimously approved the recommendation in December, 2002. In
January, 2003, the board of directors charged the nominating committee with
overseeing our corporate governance programs, and the committee was renamed the
"nominating and governance committee," with Ms. Baird serving as chairperson and
Mr. Griffith joining the committee. All of the members are "independent"
directors, as such term is defined by AMEX. The committee will consider nominees
for directors recommended by stockholders, although the committee is not
actively soliciting such nominations. Pursuant to our bylaws, nominations by
stockholders must be delivered in writing to the secretary at least 30 days
before the date of the annual meeting and must otherwise comply with the
provisions of the bylaws. In 2002, this committee met six times.
Compensation Committee. During 2002, the compensation committee was
comprised of Messrs. Huber, who served as chairman, and Walker and Ms. Baird. In
2003, Ms. Baird became chairperson and Mr. Griffith joined the committee. All of
the members are "independent" directors, as such term is defined by AMEX. This
committee is responsible for administering our stock option plan and reviews
compensation and benefit matters. During 2002, this committee met three times.
The compensation committee's report on executive compensation appears later in
this proxy statement.
Kankakee Bancorp also has an executive committee which meets on an as
needed basis and exercises many of the powers of the board of directors between
board meetings. Currently, Messrs. Griffith, Huffman, Smith and Walker serve on
the executive committee. Additionally, an ad hoc search committee has been
formed to facilitate the search for applicants for the chief executive officer
position at both Kankakee Bancorp and KFS Bank. The committee is comprised of
all of our independent directors.
DIRECTOR COMPENSATION
Each director of Kankakee Bancorp is also currently a director of KFS Bank.
In 2002, we paid each director an annual retainer of $11,000 for service on the
bank's board. Each of our directors who was not a salaried officer was paid a
fee of $100 for each Kankakee Bancorp committee meeting attended. Additionally,
the chairman of the board was paid approximately $68,000 annually.
9
The board changed director compensation for 2003. Directors will no longer
receive an annual retainer and will instead receive $1,000 for every Kankakee
Bancorp board meeting attended and $500 for each committee meeting. Each
director will also receive $1,250 for each KFS Bank board meeting attended and
$500 for each committee meeting. The chairperson for the full board, the audit
committee, and the nominating and governance committee will receive an annual
retainer of $10,000, paid quarterly, and the chairperson of the compensation
committee will receive an annual retainer of $2,500, paid quarterly. Each
director will also receive an option to purchase 2,500 shares of common stock
pursuant to the 2003 Stock Incentive Plan, if approved by stockholders at the
annual meeting.
The board of directors has approved, subject to stockholder approval, the
Kankakee Bancorp, Inc. Non-Employee Directors' Deferred Compensation Plan. A
detailed discussion of this plan begins on page 18 of this proxy statement.
EXECUTIVE COMPENSATION
Our executive officers do not receive any separate compensation for
services performed in their capacities as officers of Kankakee Bancorp. However,
for services performed for Kankakee Bancorp by certain officers, a percentage of
the salary paid by KFS Bank for those officers is reimbursed by Kankakee
Bancorp.
The following table sets forth information regarding compensation paid or
accrued to our chief executive officer and to each of our other most highly
compensated executive officers of Kankakee Bancorp and KFS Bank whose aggregate
salary and bonus exceeded $100,000 for 2002.
10
SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------------------------------------------------
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F) (G) (H)
FISCAL
YEAR RESTRICTED SECURITIES
ENDED OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND DECEMBER BONUS COMPENSATION AWARDS OPTIONS/ COMPENSATION
PRINCIPAL POSITION 31ST SALARY($)/(1)/ ($) ($) ($) SARS(#) ($)
--------------------------------------------------------------------------------------------------------------------------
Larry D. Huffman/(2)/ 2002 $ 147,173 $ --- $ --- $ --- $ --- $ 10,834/(5)/
President and Chief 2001 105,000 --- --- --- --- ---
Executive Officer
Carol S. Hoekstra/(3)/ 2002 $ 97,065 $ --- $ --- $ --- $ --- $ 10,182/(5)/
Executive Vice
President and Interim
Chief Operating Officer
Ronald J. Walters 2002 $ 127,700 $ --- $ --- $ --- $ --- $ 13,390/(5)/
Vice President and 2001 117,323 --- --- --- --- 12,041/(6)/
Chief Financial 2000 112,250 --- --- --- --- 17,295/(7)/
Officer
Michael A. Stanfa 2002 $ 109,509 $ --- $ --- $ --- $ --- $ $ 11,483/(5)/
Executive Vice 2001 101,389 --- --- --- --- 10,406/(6)/
President/(4)/
----------
/(1)/ Includes amounts deferred under the 401(k) plan.
/(2)/ Mr. Huffman became president and chief executive officer on April 1,
2001. Mr. Huffman did not receive a salary from us prior to that date.
/(3)/ Ms. Hoekstra was named as executive vice president and interim chief
operating officer of Kankakee Bancorp and KFS Bank in February, 2003 and
will receive a base salary of $135,000 in 2003. We were not required to
report Ms. Hoekstra's salary information in 2000 or 2001 and, therefore,
we are including only her information for 2002.
/(4)/ We were not required to report Mr. Stanfa's salary information in 2000
and, therefore, we are including only his information from 2001 and
2002.
/(5)/ Represents contributions made under KFS Bank's retirement plan and the
cost to Kankakee Bancorp of share allocations made under our employee
stock ownership plan in 2002. The dollar amounts of these contributions
and allocations were $7,226 and $3,608 for Mr. Huffman; $6,791 and
$3,391 for Ms. Hoekstra; $8,931 and $4,459 for Mr. Walters; $7,659 and
$3,824 for Mr. Stanfa.
/(6)/ Represents contributions made under KFS Bank's retirement plan and the
cost to Kankakee Bancorp of share allocations made under our employee
stock ownership plan in 2001. The dollar amounts of these contributions
and allocations were $8,213 and $3,829 for Mr. Walters; $7,097 and
$3,309 for Mr. Stanfa.
11
/(7)/ Represents contributions made under KFS Bank's retirement plan and the
cost to Kankakee Bancorp of share allocations made under our employee
stock ownership plan in 2000. The dollar amounts of these contributions
and allocations were $7,857 and $9,438 for Mr. Walters.
No options were granted to the named executive officers in 2002. The
following table sets forth certain information concerning the number and value
of stock options at December 31, 2002 held by the named executive officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
-------------------------------------------------------------------------------------------------------------------
SHARES NUMBER OF SECURITIES
ACQUIRED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
ON VALUE OPTIONS/SARS AT FY-END THE-MONEY OPTIONS/SARS
NAME EXERCISE REALIZED (#)(D) AT FY-END ($)(E)
(#)(A) (#)(B) ($)(C) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------------------------------------------------------------------------------------------------------------
Larry D. Huffman 2,200 $ 79,310 --- --- $ --- $ ---
Carol S. Hoekstra --- $ --- --- --- $ --- $ ---
Ronald J. Walters 1,200 $ 29,250 --- --- $ --- $ ---
Michael A. Stanfa 5,950 $ 148,601 --- --- $ --- $ ---
THE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The incorporation by reference of this proxy statement into any document
filed with the Securities and Exchange Commission by us shall not be deemed to
include the following report unless the report is specifically stated to be
incorporated by reference into such document.
During 2002, the compensation committee of the board of directors was
comprised of three independent directors who are not employees or former
employees of Kankakee Bancorp, KFS Bank or its predecessors, and is responsible
for recommendations to the board for compensation of executive officers of KFS
Bank and Kankakee Bancorp. At this time, no separate salary is paid by Kankakee
Bancorp to its executive officers. However, a portion of the officers' KFS Bank
salary is allocated to Kankakee Bancorp expense for work performed by the
officers. In determining compensation, the following factors are generally taken
into consideration:
. KFS Bank maintains a base salary administration and performance
program as well as an incentive plan. The purpose of the program is to
provide equitable, competitive and performance-based salaries for all
KFS Bank employees. The executive officers are reviewed on an annual
basis by the president of KFS Bank, who makes compensation
recommendations to the committee based upon salary level, performance
and adjustments for items such as inflation. Information regarding
industry comparisons and adjustments is provided by an independent
consulting firm.
. The performance of the executive officers in achieving the short and
long term goals of Kankakee Bancorp is reviewed. Our executive
committee is responsible for establishing these short and long term
goals.
. Payment of compensation is made commensurate with the ability and
expertise of the executive officers.
12
. An attempt is made to structure compensation packages so that they are
competitive with similar companies.
The compensation committee considers the foregoing factors, as well as others,
in determining compensation. There is no assigned weight given to any of these
factors. In addition to salary and other benefits granted, officers may also
participate in an incentive program based upon achievement of certain target
performance levels.
The committee also considers various benefits which have already been
awarded, including those pursuant to KFS Bank's incentive plan, our employee
stock ownership plan and our stock option plan, together with other perquisites
in determining compensation. The committee believes that the benefits provided
through the stock based plans more closely tie the compensation of the officers
to the interests of the stockholders and provide significant additional
performance incentives for the officers which directly benefit the stockholders
through an increase in the stock value.
The 2002 compensation of Mr. Huffman, the president and chief executive
officer of Kankakee Bancorp, was based upon a variety of factors, including, but
not limited to, his employment agreement, his performance, experience, expertise
and length of service with the organization. Additionally, the committee looked
at the long and short term goals of the company and determined that Mr. Huffman
played an integral part in Kankakee Bancorp achieving a 8.20% return on equity,
0.69% return on assets and 16.42% growth in loans in 2001. Because of these
accomplishments, the committee recommended that his annual salary for 2002 be
set at $149,100, which was comparable to other similarly situated financial
institutions.
Compensation committee as of December 31, 2002:
Charles C. Huber, Chairman
Brenda L. Baird
Wesley E. Walker
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2002, the members of the compensation committee were Messrs. Huber
and Walker and Ms. Baird. In 2003, Mr. Griffith joined the committee. None of
these individuals was an officer or employee of Kankakee Bancorp or KFS Bank in
2002, and none of these individuals is a former officer or employee of either
organization. In addition, during 2002 no executive officer served on the board
of directors or compensation committee of any other corporation with respect to
which any member of our compensation committee was engaged as an executive
officer.
PERFORMANCE GRAPH
The incorporation by reference of this proxy statement into any document
filed with the Securities and Exchange Commission by us shall not be deemed to
include the following performance graph and related information unless such
graph and related information are specifically stated to be incorporated by
reference into such document.
The following graph shows a five year comparison of cumulative total
returns on an investment of $100 on December 31, 1997 in our common stock, the
Standard & Poor's 500 Stock Index and the SNL American Stock Exchange Thrift
Index. The graph assumes the reinvestment of all dividends received. The graph
was prepared by SNL Securities, Charlottesville, Virginia, at our request.
13
[GRAPHIC APPEARS HERE]
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
------------------------------------------------------------------------------------------------------------------
Kankakee Bancorp-IL $ 100.00 $ 69.27 $ 54.17 $ 61.74 $ 83.83 $ 106.22
Standard & Poor's Stock 500 Index $ 100.00 $ 128.55 $ 155.60 $ 141.42 $ 124.63 $ 96.95
SNL AMEX Thrift Index $ 100.00 $ 77.41 $ 74.17 $ 88.76 $ 116.42 $ 154.36
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Directors and officers of Kankakee Bancorp and KFS Bank, and their
associates, were customers of and had banking transactions with Kankakee Bancorp
and KFS Bank during 2002. Additional transactions may be expected to take place
in the future. All loans by KFS Bank to its senior officers and directors are
subject to Office of Thrift Supervision Regulations. A savings association is
generally prohibited from making loans to its senior officers and directors at
favorable rates or on terms not comparable to those prevailing to the general
public. All outstanding loans, commitments to loan, transactions in repurchase
agreements and certificates of deposit and depository relationships, in the
opinion of management, were made in the ordinary course of business, on
substantially the same terms, including interest rates and collateral as those
prevailing at the time for comparable transactions with other persons and did
not involve more than the normal risk of collectibility or present other
unfavorable features.
14
AUDIT COMMITTEE REPORT
The incorporation by reference of this proxy statement into any document
filed with the Securities and Exchange Commission by us shall not be deemed to
include the following report unless the report is specifically stated to be
incorporated by reference into such document.
The audit committee assists the board in carrying out its oversight
responsibilities for our financial reporting process, audit process and internal
controls. The committee also reviews the audited financial statements and
recommends to the board that they be included in our annual report on Form 10-K.
The committee is comprised solely of independent directors. A copy of the audit
committee's charter is attached to the proxy statement for the 2003 annual
stockholders' meeting.
Management is responsible for the preparation, presentation and integrity
of our financial statements, accounting and financial reporting principles,
internal controls, and procedures designed to ensure compliance with accounting
standards, applicable laws and regulations. McGladrey & Pullen, LLP, our
independent auditor, is responsible for performing an independent audit of the
financial statements in accordance with generally accepted auditing standards.
Kankakee Bancorp outsources the internal audit function to a third party that
reports directly to the audit committee and management. This third party is
responsible for objectively reviewing and evaluating the adequacy, effectiveness
and quality of our system of internal controls relating to the reliability and
integrity of our financial information. The audit committee has ultimate
authority and responsibility to select, evaluate and, when appropriate, replace
our independent auditors.
The audit committee has reviewed and discussed our audited financial
statements for the fiscal year ended December 31, 2002 with our management and
McGladrey & Pullen, LLP, our independent auditors. The committee has also
discussed with McGladrey & Pullen, LLP the matters required to be discussed by
SAS 61 (Codification for Statements on Auditing Standards) as well as having
received and discussed the written disclosures and the letter from McGladrey &
Pullen, LLP required by Independence Standards Board Statement No. 1
(Independence Discussions with Audit Committees). Based on the review and
discussions with management and McGladrey & Pullen, LLP the committee has
recommended to the board that the audited financial statements be included in
our annual report on Form 10-K for the fiscal year ending December 31, 2002 for
filing with the Securities and Exchange Commission.
Mark L. Smith, Chairman
Michael A. Griffith
Charles C. Huber
Wesley E. Walker
ADOPTION OF THE KANKAKEE BANCORP, INC. 2003 STOCK INCENTIVE PLAN
On February 11, 2003, our board of directors unanimously adopted
resolutions approving the Kankakee Bancorp, Inc. 2003 Stock Incentive Plan,
subject to stockholder approval, to promote equity ownership of Kankakee Bancorp
by our directors and selected officers and employees, to increase their
proprietary interest in our success and to encourage them to remain in our
employ. A summary of the Stock Incentive Plan is set forth below. This summary
is qualified in its entirety by reference to the Stock Incentive Plan, a copy of
which is attached as Appendix B to this proxy statement. If approved by the
stockholders, in addition to the items discussed below each director will
receive an option to purchase 2,500 shares of our common stock pursuant to the
plan.
ADMINISTRATION
The Stock Incentive Plan is to be administered by the compensation
committee which will be comprised of at least two independent directors
appointed by our board of directors. The committee will have the authority to
select the directors, officers and employees to whom awards may be granted, to
determine the terms of each award, to interpret the provisions of the Stock
Incentive Plan and to make all other determinations that it may deem necessary
or advisable for the administration of the Stock Incentive Plan.
15
The Stock Incentive Plan provides for the grant of "incentive stock
options," as defined under Section 422(b) of the Internal Revenue Code of 1986,
as amended, options that do not so qualify ("nonstatutory options"), restricted
stock and stock appreciation rights, as determined in each individual case by
the compensation committee. Our board of directors has reserved 116,500 shares
of common stock for issuance under the Stock Incentive Plan. In general, if any
award (including an award granted to a non-employee director) granted under the
Stock Incentive Plan expires, terminates, is forfeited or is cancelled for any
reason, the shares of common stock allocable to that award may again be made
subject to an award granted under the Stock Incentive Plan.
AWARDS
Directors, officers and employees of Kankakee Bancorp and KFS Bank are
eligible to receive grants under the Stock Incentive Plan. Options may be
granted subject to a vesting requirement and will become fully vested upon a
merger or change of control of Kankakee Bancorp. The exercise price of incentive
stock options granted under the Stock Incentive Plan must at least equal the
fair market value of the common stock subject to the option (determined as
provided in the plan) on the date the option is granted. The exercise price of
nonstatutory options and stock appreciation rights will be determined by the
committee.
An incentive stock option granted under the Stock Incentive Plan to an
employee owning more than 10% of the total combined voting power of all classes
of capital stock of Kankakee Bancorp is subject to the further restriction that
such option must have an exercise price of at least 110% of the fair market
value of the shares of common stock issuable upon exercise of the option
(determined as of the date the option is granted) and may not have an exercise
term of more than five years. Incentive stock options are also subject to the
further restriction that the aggregate fair market value (determined as of the
date of grant) of common stock as to which any such incentive stock option first
becomes exercisable in any calendar year, is limited to $100,000. To the extent
options covering more than $100,000 worth of common stock first become
exercisable in any one calendar year, the excess will be nonstatutory options.
For purposes of determining which, if any, options have been granted in excess
of the $100,000 limit, options will be considered to become exercisable in the
order granted.
Each director, officer and key employee eligible to participate in the
Stock Incentive Plan will be notified by the committee. To receive an award
under the Stock Incentive Plan, an award agreement must be executed which
specifies the type of award to be granted, the number of shares of common stock
(if any) to which the award relates, the terms and conditions of the award and
the date granted. In the case of an award of options, the award agreement will
also specify the price at which the shares of common stock subject to the option
may be purchased, the date(s) on which the option becomes exercisable and
whether the option is an incentive stock option or a nonstatutory option.
The full exercise price for all shares of common stock purchased upon the
exercise of options granted under the Stock Incentive Plan may be paid by cash,
award surrender or common stock owned at the time of exercise, as directed by
the compensation committee. Incentive stock options granted to employees under
the Stock Incentive Plan may remain outstanding and exercisable for ten years
from the date of grant or until the expiration of three months (or such lesser
period as the compensation committee may determine) from the date on which the
person to whom they were granted ceases to be employed by Kankakee Bancorp.
Nonstatutory options and stock appreciation rights granted under the Stock
Incentive Plan remain outstanding and exercisable for such period as the
compensation committee may determine.
INCOME TAX
Incentive stock options granted under the Stock Incentive Plan have certain
advantageous tax attributes to the recipient under the income tax laws. No
taxable income is recognized by the option holder for income tax purposes at the
time of the grant or exercise of an incentive stock option, although neither is
there any income tax deduction available to Kankakee Bancorp as a result of such
a grant or exercise. Any gain or loss recognized by an option holder on the
later disposition of shares of common stock acquired pursuant to the exercise of
an incentive stock option generally will be treated as capital gain or loss if
such disposition does not occur prior to one year after the date of exercise of
the option, or two years after the date the option was granted.
16
As in the case of incentive stock options, the grant of nonstatutory stock
options, restricted stock or stock appreciation rights will not result in
taxable income for income tax purposes to the recipient of the awards, nor will
Kankakee Bancorp be entitled to an income tax deduction. Upon the exercise of
nonstatutory stock options or stock appreciation rights, or the lapse of
restrictions on restricted stock, the award holder will generally recognize
ordinary income for income tax purposes equal to the difference between the
exercise price and the fair market value of the shares of common stock acquired
or deemed acquired on the date of exercise, and Kankakee Bancorp will be
entitled to an income tax deduction in the amount of the ordinary income
recognized by the option holder. In general, any gain or loss realized by the
option holder on the subsequent disposition of such shares will be a capital
gain or loss.
AMENDMENT AND TERMINATION
The Stock Incentive Plan expires ten years after its adoption, unless
sooner terminated by our board of directors. Our board of directors has
authority to amend the Stock Incentive Plan in such manner as it deems
advisable, except that our board of directors is not permitted without our
stockholders' approval to amend the plan in a manner that would materially
increase the number of shares of common stock that may be granted as incentive
stock options or change the class of persons eligible to recent incentive stock
options. The Stock Incentive Plan provides for appropriate adjustment, as
determined by the compensation committee, in the number and kind of shares
subject to unexercised options, in the event of any change in the outstanding
shares of common stock by reason of a stock split, stock dividend, combination
or reclassification of shares, recapitalization, merger or similar event.
STOCKHOLDER VOTE NECESSARY FOR APPROVAL OF THE STOCK INCENTIVE PLAN
The affirmative vote of the holders of a majority of the shares of common
stock present in person or by proxy at the annual meeting is required to approve
the Stock Incentive Plan. Our board of directors unanimously recommends a vote
FOR the proposed Stock Incentive Plan.
AGGREGATED EQUITY PLAN INFORMATION
The table below sets forth the following information as of December 31,
2002 for (i) all compensation plans previously approved by our stockholders and
(ii) all compensation plans not previously approved by our stockholders:
(a) the number of securities to be issued upon the exercise of outstanding
options, warrants and rights;
(b) the weighted-average exercise price of such outstanding options, warrants
and rights;
(c) other than securities to be issued upon the exercise of such outstanding
options, warrants and rights, the number of securities remaining
available for future issuance under the plans.
17
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF SECURITIES TO BE NUMBER OF SECURITIES
ISSUED UPON EXERCISE OF WEIGHTED-AVERAGE EXERCISE REMAINING AVAILABLE FOR FUTURE
PLAN CATEGORY OUTSTANDING OPTIONS PRICE OF OUTSTANDING OPTIONS ISSUANCE
====================================================================================================================================
Equity compensation plans approved
by security holders.................. 2,250/(1)/ $ 20.50 0
Equity compensation plans not
approved by security holders......... 2,500/(2)/ $ 37.15 0
------------------------------------------------------------------------------------------------------------------------------------
Total................................ 4,750 $ 29.26 0
====================================================================================================================================
/(1)/ We had a stock incentive plan, which was adopted and approved by
stockholders in 1992. That plan expired in 2002, and no additional
options may be granted under the plan.
/(2)/ Represents the customary grant of options to an incoming director and
was made in connection with the grant to Mr. Griffith upon his joining
the board in December, 2002.
ADOPTION OF THE KANKAKEE BANCORP, INC. NON-EMPLOYEE DIRECTORS'
DEFERRED COMPENSATION PLAN
On March 11, 2003, our board of directors unanimously adopted resolutions
approving the Kankakee Bancorp, Inc. Non-Employee Directors' Deferred
Compensation Plan, subject to stockholder approval. The plan allows directors to
defer receipt of their fees and, in effect, invest those fees in our stock. The
primary purpose of the plan is to promote equity ownership of Kankakee Bancorp
by our non-employee directors, to increase their proprietary interest in our
success and to encourage them to maintain their relationship with us. A summary
of the deferred compensation plan is set forth below. This summary is qualified
in its entirety by reference to the deferred compensation plan, a copy of which
is attached as Appendix C to this proxy statement.
Generally, the deferred compensation plan provides that an eligible
director may elect to be paid the retainer and annual fee compensation paid
annually to directors either in cash on a quarterly basis with no deferral of
income, or to defer receipt of all or a portion of such compensation until a
time following termination of such director's service on the board or age
sixty-five (65). Amounts deferred will be converted into units with each such
unit representing a share of our common stock.
Distributions of amounts credited under the account may be made in shares
of our common stock or, at the election of the participating director, in cash.
The deferred compensation plan will be accounted for on our financial statements
using variable plan accounting.
STOCKHOLDER VOTE NECESSARY FOR APPROVAL OF THE DEFERRED COMPENSATION PLAN
The affirmative vote of the holders of a majority of the shares of common
stock present in person or by proxy at the annual meeting is required to approve
the deferred compensation plan. Our board of directors unanimously recommends a
vote FOR the proposed deferred compensation plan.
18
RATIFICATION OF THE APPOINTMENT OF AUDITORS
Stockholders will be asked to approve the appointment of McGladrey &
Pullen, LLP, as our independent public accountants to conduct the audit for the
year ending December 31, 2003. A proposal will be presented at the annual
meeting to ratify the appointment of McGladrey & Pullen, LLP. If the appointment
of McGladrey & Pullen, is not ratified, the matter of the appointment of
independent public accountants will be considered by the board of directors. A
representative of McGladrey & Pullen, LLP is expected to attend the annual
meeting and will be available to respond to appropriate questions and to make a
statement if he or she so desires.
The board of directors unanimously recommends that you vote FOR the
ratification of the appointment of McGladrey & Pullen, LLP, as our auditors for
the fiscal year ending December 31, 2003.
ACCOUNTANT FEES
Audit Fees. The aggregate fees and expenses billed by McGladrey & Pullen,
LLP in connection with the audit of our annual financial statements as of and
for the years ended December 31, 2002 and for the required review of our
financial information included in our SEC filings for the year 2002 was $49,435.
Financial Information Systems Design and Implementation Fees. There were no
fees incurred for these services for the year 2002.
All Other Fees: All other fees include audit-related fees, tax fees and
other fees and expenses billed by McGladrey & Pullen, LLP and its affiliate, RSM
McGladrey, Inc., in 2002. Audit-related fees include fees reasonably related to
the performance of the audit or review of the financial statements, including
the administration of our employee benefit plans. Aggregate fees for
audit-related services were $26,015. Tax fees include fees for tax compliance,
tax advice, preparation of our tax return and supporting schedules, review of
our quarterly tax estimates and tax planning services. Aggregate fees for tax
services were $13,131. Other fees, aggregated at $68,880, include assistance
with bank branch optimization and other branch related work.
The audit committee, after consideration of the matter, does not believe
that the rendering of these services by McGladrey & Pullen, LLP, and its
affiliates, to be incompatible with maintaining McGladrey & Pullen, LLP's
independence as our principal accountant. In 2003, the audit committee will
pre-approve all independent auditor fees as well as all services performed by
McGladrey & Pullen, LLP, and its affiliates, to ensure that they are not
prohibited by the Securities and Exchange Commission.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in our proxy materials for next
year's annual meeting of stockholders, any stockholder proposal to take action
at such meeting must be received at our executive offices, 310 S. Schuyler
Avenue, P.O. Box 3, Kankakee, Illinois 60901-0003, no later than November 14,
2003, based on this year's mailing date of March 14, 2003.
19
OTHER MATTERS
We are not aware of any business to come before the annual meeting other
than the matters described above in this proxy statement. However, if any other
matters should properly come before the meeting, it is intended that holders of
the proxies will act in accordance with their best judgment.
By Order of the Board of Directors
/s/ Michael A. Stanfa
----------------------------------
Michael A. Stanfa
Secretary
Kankakee, Illinois
March 14, 2003
20
APPENDIX A
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. PURPOSE
The primary function of the Audit Committee is to assist the Boards of
Directors of Kankakee Bancorp, Inc., and KFS Bank, F.S.B. (together, the
"Company") in fulfilling their oversight responsibilities by reviewing the
financial reports and other financial information provided by the Company
to any governmental body or the public; the Company's systems of internal
controls regarding finance, accounting, legal compliance and ethics that
management and the Boards of Directors have established; and the Company's
auditing, accounting and financial reporting processes generally.
Consistent with this function, the Audit Committee should encourage
continuous improvement of, and should foster adherence to, the Company's
policies, procedures and practices at all levels. The Audit Committee's
primary duties and responsibilities are to:
. Retain, oversee, review and terminate the Company's independent
accountants and pre-approve all services performed by the independent
accountants.
. Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system.
. Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal auditors,
and the Boards of Directors.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Article IV of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Boards of Directors, Each Audit Committee member shall be
an independent director, free from any relationship that, in the opinion of
the Boards of Directors, would interfere with the exercise of his or her
independent judgment as a member of the Audit Committee. Additionally, each
Audit Committee member shall be independent as defined by the rules and
regulations of the Securities and Exchange Commission and the American
Stock Exchange (or by the rules and regulations of any other exchange or
national market on which the Company's common stock is quoted or listed for
trading). All members of the Audit Committee shall have a working
familiarity with basic finance and accounting practices, and the Chairman
of the Audit Committee shall have accounting and financial management
expertise sufficient to qualify as a "audit committee financial expert", as
defined by the rules and regulations of the Securities and Exchange
Commission. Audit Committee members may enhance their familiarity with
finance and accounting by participating in educational programs conducted
by the Company or an outside consultant and shall satisfy all continuing
education requirements of the Securities and Exchange Commission and the
American Stock Exchange (or by the rules and regulations of any other
exchange or national market on which the Company's common stock is quoted
or listed for trading).
The members of the Audit Committee shall be elected by the Boards of
Directors at the annual organizational meetings of the Boards of Directors
and shall serve until their successors shall be duly elected and qualified.
Unless a Chairman is elected by the full Boards of Directors, the members
of the Audit Committee may designate a Chairman by majority vote of the
full Audit Committee membership.
A-1
III. MEETINGS
The Audit Committee shall meet at least once quarterly, or more frequently
as circumstances dictate. As part of its job to foster open communication,
the Audit Committee shall meet at least annually with management, the
internal auditors and the independent accountants in separate executive
sessions to discuss any matters that the Audit Committee or each of these
groups believes should be discussed privately. In addition, the Audit
Committee, or the Chairman of the Audit Committee, shall meet with the
independent accountants and management quarterly to review the Company's
financials consistent with Article IV.4. below.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties, the Audit Committee shall:
Documents/Reports Review
1. Review this Charter at least annually, and shall update the Charter
as conditions may dictate.
2. Review the Company's annual financial statements and any reports or
other financial information submitted to any governmental body or
the public, including any certification, report, opinion or review
rendered by the independent accountants.
3. Review the regular internal reports to management prepared by the
internal auditors and management's responses to such reports.
4. Review with financial management and the independent accountants the
Company's quarterly and annual reports, and all other significant
reports filed with the Securities and Exchange Commission, prior to
their filing or prior to the release of earnings. The Chairman of
the Audit Committee may represent the entire Audit Committee for
purposes of this review.
Independent Accountants
5. Have sole authority over, and responsibility for, the retention and
oversight of the Company's independent accountants. The Audit
Committee shall approve all fees and other compensation to be paid
to the independent accountants. In fulfilling these duties, the
Audit Committee shall consider the independence and effectiveness of
the independent accountants. The Audit Committee shall continuously
review and discuss with the independent accountants all significant
relationships that the independent accountants have with the Company
to determine the accountants' independence.
6. Have sole authority over, and responsibility for, reviewing the
performance of the independent accountants and discharging the
independent accountants when circumstances warrant.
7. Pre-approve all audit and non-audit services to be performed by the
independent accountants.
8. Monitor the services performed by the independent accountants to
ensure that any services prohibited by the Securities and Exchange
Commission or the American Stock Exchange are not performed during
the period in which the independent accountants are performing audit
services for the Company.
9. Consult with the independent accountants out of the presence of
management regarding the Company's internal controls and the
fullness and accuracy of the Company's financial statements.
A-2
Financial Reporting Processes
10. In consultation with the independent accountants and the internal
auditors, review the integrity of the Company's financial reporting
processes, both internal and external, including the Company's
internal control policies and procedures.
11. Consider the independent accountants' judgments about the quality
and appropriateness of the Company's accounting principles as
applied in its financial reporting.
12. Consider and approve, if appropriate, major changes to the Company's
auditing and accounting principles as suggested by the independent
accountants, management or the internal auditors.
Process Improvement
13. Establish regular and separate systems of reporting to the Audit
Committee by each of management, the independent accountants and the
internal auditors regarding any significant judgments made in
management's preparation of the financial statements and the view of
each as to the appropriateness of such judgments.
14. Following completion of the annual audit, review separately with
each of management, the independent accountants and the internal
auditors any significant difficulties encountered during the course
of the audit, including any restrictions on the scope of work or
access to required information.
15. Review any significant disagreement among management and the
independent accountants or the internal auditors in connection with
the preparation of the financial statements.
16. Review with the independent accountants, the internal auditors and
management the extent to which changes or improvements in financial
or accounting practices, as approved by the Audit Committee, have
been implemented. This review should be conducted at an appropriate
time subsequent to implementation of changes or improvements, as
decided by the Audit Committee.
17. While the audit committee has the responsibilities and powers set
forth in the Charter, it is not the duty of the audit committee to
plan and conduct audits or to determine that the Company's financial
statements are complete and accurate and are in accordance with
generally accepted principles. Management is responsible for
preparing the financial statements and the independent auditors are
responsible for auditing those financial statements.
Ethical and Legal Compliance
18. Establish, review and update periodically the Conflict of
Interest/Code of Ethics of the Company and ensure that management
has established a system to enforce such policies.
19. Review and pre-approve all related party transactions that are not
prohibited by the rules of the Securities and Exchange Commission,
the American Stock Exchange or of any other exchange or national
market on which the Company's common stock is quoted or listed for
trading.
20. Establish and maintain policies and procedures for employees of the
Company to anonymously report accounting errors or improprieties
directly to the Audit Committee.
21. Retain independent legal counsel or other advisors as the Audit
Committee deems, in its sole discretion, necessary to fulfill its
duties under this Charter. The Audit Committee shall be afforded all
funding necessary to retain such independent legal counsel and
advisors.
22. Review the activities, the organizational structure and the
qualifications of the internal auditors.
A-3
23. Review, with the Company's counsel, legal compliance matters,
including corporate securities trading policies.
24. Review, with the Company's counsel, any legal matters that could
have a significant impact on the Company's financial statements.
25. Perform any other activities consistent with this Charter, the
Company's By-laws and the rules and regulations of the Securities
and Exchange Commission, the American Stock Exchange or any other
exchange or national market on which the Company's common stock is
quoted or listed for trading, as the Audit Committee or the Boards
of Directors deem necessary or appropriate.
###
A-4
APPENDIX B
KANKAKEE BANCORP, INC.
2003 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE OF THE PLAN.
THE KANKAKEE BANCORP, INC. 2003 STOCK INCENTIVE PLAN (the "Plan") is
intended to provide a means whereby directors and employees of KANKAKEE BANCORP,
INC., a Delaware corporation (the "Company"), and the Related Corporations may
sustain a sense of proprietorship and personal involvement in the continued
development and financial success of the Company and the Related Corporations,
and to encourage them to remain with and devote their best efforts to the
business of the Company and the Related Corporations, thereby advancing the
interests of the Company and its stockholders. Accordingly, the Company may
permit certain directors and employees to acquire Shares or otherwise
participate in the financial success of the Company, on the terms and conditions
established herein.
SECTION 2. DEFINITIONS.
The following terms, when used herein and unless the context clearly
requires otherwise, shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
(a) "Award" means any Option, SAR or Restricted Stock Award granted
pursuant to this Plan.
(b) "Board" means the board of directors of the Company.
(c) "Cause" means the commission of fraud, the misappropriation of or
intentional material damage to the property or business of the Company or the
Related Corporations, the substantial failure to fulfill the duties and
responsibilities of a regular position and/or comply with the Company's or the
Related Corporations' policies, rules or regulations, or the conviction of a
felony.
(d) "Change of Control" means:
(i) The consummation of the acquisition by any person (as such
term is defined in Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act")) of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the 1934 Act) of twenty-five percent
(25%) or more of the combined voting power of the then
outstanding Voting Securities of the Company other than
through receipt of Shares pursuant to the Plan;
(ii) The individuals who, as of the date hereof, are members of
the Board cease for any reason to constitute a majority of
the Board, unless the election, or nomination for election
by the stockholders of the Company, of any new director was
approved by a vote of a majority of the Board, and such new
director shall, for purposes of this Plan, be considered as
a member of the Board; or
(iii) Consummation of: (1) a merger or consolidation to which the
Company is a party if the stockholders of the Company
immediately before such merger or consolidation do not, as
a result of such merger or consolidation, own, directly or
indirectly, more than sixty-seven percent (67%) of the
combined voting power of the then outstanding Voting
Securities of the entity resulting from such merger or
consolidation in substantially the same proportion as their
ownership of the combined voting power of the Company's
Voting Securities outstanding immediately before such
merger or consolidation; or (2) a complete liquidation or
dissolution or sale or other disposition of all or
substantially all of the assets of the Company.
B-1
Notwithstanding the foregoing, a Change of Control shall
not be deemed to occur solely because twenty-five percent (25%)
or more of the combined voting power of the Company's then
outstanding voting securities is acquired by: (1) a trustee or
other fiduciary holding securities under one or more employee
benefit plans maintained for employees of the entity; or (2) any
corporation which, immediately prior to such acquisition, is
owned directly or indirectly by the stockholders in the same
proportion as their ownership of stock immediately prior to such
acquisition
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations promulgated thereunder.
(f) "Committee" means the Compensation Committee of the Board, which
is comprised solely of directors who are (i) "non-employee directors" for
purposes of Section 16 and Rule 16b-3 of the Exchange Act, and (ii) "outside
directors" for purposes of Section 162(m) of the Code.
(g) "Compete" means within a period of one (1) year after the
Termination of Service, the direct or indirect competition with the business of
the Company or a Related Corporation, including, but not by way of limitation,
the direct or indirect owning, managing, operating, controlling, financing or
serving as an officer, employee, director or consultant to, or by soliciting or
inducing, or attempting to solicit or induce, any employee or agent of the
Company or a Related Corporation to terminate employment and become employed by
any person, firm, partnership, corporation, trust or other entity which owns or
operates, a bank, savings and loan association, credit union, brokerage firm, or
similar financial institution within a thirty (30) mile radius of the office of
the Company or a Related Corporation in which the individual is principally
located, except with the express prior written consent of the Company.
(h) "Disability" means a physical or mental disability (within the
meaning of Section 22(e)(3) of the Code) which impairs the individual's ability
to substantially perform his or her current duties for a period of at least six
(6) consecutive months, as determined by the Committee.
(i) "Effective Date" means February 11, 2003, the date this Plan is
adopted by the Board.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations promulgated thereunder.
(k) "Fair Market Value" means as of any date, the value of a share of
the Company's common stock determined as follows:
(i) if such common stock is then quoted on the American Stock
Exchange, its last reported sale price on the American
Stock Exchange on such date or, if no such reported sale
takes place on such date, the average of the closing bid
and asked prices;
(ii) if such common stock is publicly traded and is then listed
on a national securities exchange, the last reported sale
price on such date or, if no such reported sale takes place
on such date, the average of the closing bid and asked
prices on the principal national securities exchange on
which the common stock is listed or admitted to trading;
(iii) if such common stock is publicly traded but is not quoted
on the NASDAQ National Market nor listed or admitted to
trading on a national securities exchange, the average of
the closing bid and asked prices on such date, as reported
by The Wall Street Journal, for the over-the-counter
market; or
(iv) if none of the foregoing is applicable, by the Board of
Directors of the Company in good faith.
B-2
(l) "Incentive Stock Option" means an award under the Plan that
satisfies the general requirements of Section 422 of the Code, namely: (i)
grantees must be employees; (ii) the exercise price may not be less than the
fair market value of the underlying Shares at the date of grant; (iii) no more
than $100,000 worth of Shares may become exercisable in any year; (iv) the
maximum duration of an award may be ten (10) years; (v) awards must be exercised
within three (3) months after termination of employment, except in the event of
Disability or death; and (vi) Shares received upon exercise must be retained for
the greater of two (2) years from the date of grant or one (1) year from the
date of exercise.
(m) "Nonqualified Option" means an option award under the Plan that
is not an Incentive Stock Option.
(n) "Related Corporation" means any corporation, bank or other entity
which would be a parent or subsidiary corporation with respect to the Company as
defined in Section 424(e) or (f), respectively, of the Code.
(o) "Restricted Stock" means an award of Shares under the Plan that
are restricted as to transfer and subject to forfeiture.
(p) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act,
as amended from time to time.
(q) "Shares" means shares of the common stock of the Company.
(r) "Stock Appreciation Rights" means rights entitling the grantee to
receive the appreciation in the market value of a stated number of Shares.
(s) "Securities Act" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations promulgated thereunder.
(t) "Termination of Service" means the termination of a person's
status as a director or employee of the Company or a Related Corporation.
(u) "Voting Securities" means any securities which ordinarily possess
the power to vote in the election of directors without the happening of any
pre-condition or contingency.
SECTION 3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Committee The Committee, shall
have sole authority to:
(a) select the directors and employees to whom awards shall be
granted under the Plan;
(b) establish the amount and conditions of each such award;
(c) prescribe any legend to be affixed to certificates representing
such awards;
(d) interpret the Plan; and
(e) adopt such rules, regulations, forms and agreements, not
inconsistent with the provisions of the Plan, as it may deem advisable to carry
out the Plan.
All decisions made by the Committee in administering the Plan shall be
final.
B-3
SECTION 4. SHARES SUBJECT TO THE PLAN.
The aggregate number of Shares that may be obtained by directors and
employees under the Plan shall be 116,500 Shares. Each person is eligible to
receive Awards with respect to an aggregate maximum of 100,000 Shares under the
term of the Plan. If an Award expires, is canceled, terminated, surrendered
(without exercise), or otherwise becomes unexercisable for any reason, then the
Shares allocable to the expired, canceled, terminated, surrendered or otherwise
unexercisable Award shall again be subject to Awards available under the Plan.
Any Shares that remain unissued at the termination of the Plan shall cease to be
subject to the Plan, but until termination of the Plan, the Company shall at all
times make available sufficient Shares to meet the requirements of the Plan.
SECTION 5. STOCK OPTIONS.
(a) Type of Options. The Committee may issue options that constitute
Incentive Stock Options to employees and Nonqualified Options to directors and
employees under the Plan. The grant of each option shall be confirmed by a stock
option agreement that shall be executed by the Company and the optionee as soon
as practicable after such grant. The stock option agreement shall expressly
state or incorporate by reference the provisions of the Plan and state whether
the option is an Incentive Stock Option or a Nonqualified Option.
(b) Terms of Options. Except as provided in paragraphs (c) and (d) of
this Section, each option granted under the Plan shall be subject to the terms
and conditions set forth by the Committee in the stock option agreement
including, without limitation, option price, vesting schedule and option term.
(c) Additional Terms Applicable to All Options. Each option shall be
subject to the following terms and conditions:
(i) Written Notice. An option may be exercised only by giving
written notice to the Company specifying the number of
Shares to be purchased. The Committee may specify a
reasonable minimum number of Shares that may be purchased
on any exercise of an option; provided that the minimum
number will not prevent the option holder from exercising
an option for the full number of Shares for which it is
then exercisable.
(ii) Method of Exercise. Except as otherwise provided in any
written option agreement, the exercise price of an option
shall be paid in full (i) in cash; (ii) in Common Stock
valued at its Fair Market Value on the date of exercise,
provided it has been owned by the optionee for at least six
(6) months prior to the exercise; (iii) in cash by an
unaffiliated broker-dealer to whom the holder of the option
has submitted an exercise notice consisting of a fully
endorsed option; (iv) by agreeing to surrender SARs then
exercisable by him valued at their Fair Market Value on the
date of exercise; (v) by such other medium of payment as
the Committee, in its discretion, shall authorize; or (vi)
by any combination of clauses (i) through (v) above, as the
optionee shall elect. In the case of payment pursuant to
clauses (ii) through (v) above, the optionee's election
must be made on or prior to the date of exercise of the
option and must be irrevocable. In lieu of a separate
election governing each exercise of an option, an optionee
may file a blanket election that shall govern all future
exercises of options until revoked by the optionee.
(iii) Term of Option. No option may be exercised more than the
(10) years after the date of grant. No option may be
exercised more than three (3) months after the optionee
terminates employment with the Company, except in the event
of Disability or death as provided in subparagraph (c)(iv)
below.
(iv) Cessation of Vesting. Immediately upon an optionee's
Termination of Service for any reason, all vesting of
outstanding and unvested Options shall cease and all
unvested Options shall be forfeited, unless otherwise
provided by the Committee or in the Stock Option Agreement.
B-4
(v) Disability or Death of Optionee. If an optionee's
Termination of Service occurs due to Disability or death
prior to exercise in full of any options, he or she, or his
or her beneficiary, executor, administrator or personal
representative, shall have the right to exercise the
options within a period of twelve (12) months after the
date of such termination to the extent that the right was
exercisable at the date of such termination as provided in
the stock option agreement, or as may otherwise be provided
by the Committee.
(vi) Termination For Cause. If an Optionee's Termination of
Service is for Cause, all Options, vested and unvested,
shall be forfeited.
(vii) Transferability. No option may be transferred, assigned or
encumbered by an optionee, except: (a) by will or the laws
of descent and distribution; (b) by gifting for the benefit
of descendants for estate planning purposes; or (c)
pursuant to a certified domestic relations order.
(d) Additional Terms Applicable to Incentive Options. Each Incentive
Stock Option shall be subject to the following terms and conditions:
(i) Option Price. The option price per Share shall not be less
than 100% of the fair market value of a Share on the date
the option is granted. Notwithstanding the preceding
sentence, the option price per Share granted to an
individual who, at the time such option is granted, owns
stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company (a "10%
Stockholder") shall not be less than 110% of the fair
market value of a Share on the date the option is granted.
(ii) Term of Option. No option may be exercised more than ten
(10) years after the date of grant. No option granted to a
10% Stockholder may be exercised more than five (5) years
after the date of grant. Notwithstanding any other
provisions hereof, no option may be exercised more than
three (3) months after the optionee terminates employment
with the Company, except in the event of death or
Disability, in which case the option may be exercised as
provided in subparagraph (c)(v) of this Section.
(iii) Annual Exercise Limit. The aggregate fair market value of
Shares which first become exercisable during any calendar
year shall not exceed $100,000. For purposes of the
preceding sentence, the fair market value of each Share
shall be determined on the date the option with respect to
such Share is granted. To the extent the $100,000
limitation is exceeded, the excess shall be deemed a
Nonqualified Option.
(iv) Transferability. No option may be transferred, assigned or
encumbered by an optionee, except by will or the laws of
descent and distribution, and during the optionee's
lifetime an option may only be exercised by him or her.
(v) Notice of Disqualifying Dispositions. If an optionee sells
or otherwise disposes of any Shares acquired pursuant to
the exercise of an Incentive Option on or before the later
of (1) the date two (2) years after the date of grant, and
(2) the date one year after the exercise of the Incentive
Option (in either case, a "Disqualifying Disposition"), the
optionee must immediately notify the Company in writing of
such disposition. The optionee may be subject to income tax
withholding by the Company on the compensation income
recognized by the optionee from the Disqualifying
Disposition.
B-5
SECTION 6. RESTRICTED STOCK AWARDS.
(a) Grants. An award of Restricted Stock under the Plan ("RSAs")
shall be evidenced by a written agreement in such form and consistent with the
Plan as the Committee shall approve from time to time.
(b) Restriction Period. RSAs awarded under the Plan shall be subject
to such terms, conditions and restrictions as shall be determined by the
Committee at the time of grant, including, without limitation: (i) prohibitions
against transfer; (ii) substantial risks of forfeiture; (iii) attainment of
performance objectives; and (iv) repurchase by the Company or right of first
refusal for such period or periods as shall be determined by the Committee. The
Committee shall have the power to permit, in its discretion, an acceleration of
the expiration of the applicable restriction period with respect to any part or
all of the RSAs awarded to a grantee.
(c) Registration. Any Restricted Stock may be evidenced in such
manner as the Committee in its sole discretion shall deem appropriate, including
book-entry registration or issuance of a stock certificate or certificates. In
the event any stock certificate is issued in respect of shares of Restricted
Stock awarded under the Plan, such certificate shall be registered in the name
of the grantee, shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Award, and shall be held in
escrow by the Company. Grantee shall execute a stock power or powers assigning
the Shares of Restricted Stock back to the Company, which stock powers shall be
held in escrow by the Company and used only in the event of the forfeiture of
any of the Shares of Restricted Stock.
(d) Restrictions Upon Transfer. RSAs awarded, and the right to vote
underlying Shares and to receive dividends thereon, may not be sold, assigned,
transferred, exchanged, pledged, hypothecated or otherwise encumbered during the
restriction period applicable to such Shares, except: (i) by will or the laws of
descent and distribution; (ii) by gifting for the benefit of descendants for
estate planning purposes; or (iii) pursuant to a certified domestic relations
order. Subject to the foregoing, and except as otherwise provided in the Plan,
the grantee shall have all the other rights of a stockholder including, without
limitation, the right to receive dividends and the right to vote such Shares.
(e) Lapse of Restrictions. Each restricted stock agreement shall
specify the terms and conditions upon which any restrictions upon Shares awarded
under the Plan shall lapse, as determined by the Committee. Upon the lapse of
such restrictions, Shares, free of the foregoing restrictive legend, shall be
issued to the grantee or his or her legal representative.
(f) Termination Prior to Lapse of Restrictions. In the event of a
grantee's Termination of Service prior to the lapse of restrictions applicable
to any RSAs awarded to such grantee, all Shares as to which there still remain
restrictions shall be forfeited by such grantee without payment of any
consideration to the grantee, and neither the grantee nor any successors, heirs,
assigns, or personal representatives of such grantee shall thereafter have any
further rights or interest in such Shares or certificates.
SECTION 7. STOCK APPRECIATION RIGHTS.
(a) Grants. An award of Stock Appreciation Rights under the Plan
("SARs") may be granted separately or in tandem with or by reference to an
option granted prior to or simultaneously with the grant of such rights, to such
eligible directors and employees, as may be selected by the Committee, and shall
be evidenced by a written agreement in such form and consistent with the Plan as
the Committee shall approve from time to time.
(b) Terms of Grant. SARs may be granted in tandem with or with
reference to a related option, in which event the grantee may elect to exercise
either the option or the SAR, but not both. SARs shall not be transferable,
except: (i) by will or the laws of descent and distribution; (ii) by gifting for
the benefit of descendants for estate planning purposes; or (iii) pursuant to a
certified domestic relations order, and shall be exercisable for no more than
ten (10) years after the date of grant.
(c) Payment on Exercise. Upon exercise of a SAR, the grantee shall be
paid the excess of the then fair market value of the number of Shares to which
the SAR relates over the fair market value of such number of Shares
B-6
at the date of grant of the SAR or of the related option, as the case may be.
Such excess shall be paid in cash or in such other form as the Committee shall
determine.
SECTION 8. RIGHT OF FIRST REFUSAL.
(a) Restrictions on Transfer. As a condition to the receipt of any
award under this Plan and without the express prior written consent of the
Company, an owner of any Shares issued under the Plan ("Plan Shares") shall not
sell any Plan Shares without first complying with the terms of this Section. Any
owner of Plan Shares (the "Owner") who receives a bona fide offer to purchase
all of any portion of the Owner's Plan Shares (the "Offer") shall first offer
the Plan Shares to the Company in accordance with the terms of this Section. The
Owner shall give written notice to the Company stating that he or she has
received the Offer, stating the number of Plan Shares to be sold, the name and
address of the person(s) making the Offer and the purchase price and terms of
payment described in the Offer. The Company or any assignee named by the Company
shall have five (5) business days to exercise the Company's right to purchase
the Plan Shares that are the subject of the Offer. If the Company assigns such
right to purchase, then such assignee shall have all of the rights of the
Company with respect to such right to purchase as described in this Section. If
neither the Company nor any assignee of the Company decides to purchase the Plan
Shares, the Owner may accept the Offer and sell the Plan Shares, but only in
strict accordance with the terms of the Offer and only if consummated within
fifteen (15) business days after the expiration of the Company's 5-day exercise
period. If the Company or its assignee decides to purchase the Plan Shares, the
closing of such purchase shall be completed within five (5) business days of the
Company's or assignee's notification to the Owner of the exercise of the right
to purchase the Plan Shares. For purposes of this Section, the Owner shall
include any person who acquires Shares from any other person and for any reason;
including, without limitation, by gift, death or sale.
(b) Additional Restrictions on Transfer. Notwithstanding anything to
the contrary contained in this Plan, an Owner may not sell or otherwise transfer
Plan Shares at any time in which (i) the Company or any of its executive
officers are prohibited from engaging in a transaction of the Company's
securities pursuant to the terms of the Company's insider trading policy then in
effect; or (ii) the Company is unable to purchase the Plan Shares pursuant to
(A) the Exchange Act or (B) the rules governing any securities exchange or
quotation service on which the Plan Shares are quoted or listed for trading.
(c) Legends. Each certificate issued by the Company that represents
any Plan Shares shall bear the following legends:
"This certificate and the shares represented hereby are subject
to the terms and conditions (including forfeiture and
restrictions against transfer) contained in the Kankakee Bancorp,
Inc. 2003 Stock Option Plan. Release from such terms and
conditions shall be obtained only in accordance with the
provisions of such Plan, a copy of which is on file in the office
of the Secretary of said Company."
SECTION 9. AMENDMENT OR TERMINATION OF THE PLAN.
The Board may amend, suspend or terminate the Plan or any portion
thereof at any time, but (except as provided in Section 13 below) no amendment
shall be made without approval of the stockholders of the Company which shall:
(a) increase the aggregate number of Shares with respect to which Incentive
Stock Option awards may be made under the Plan; or (b) change the class of
persons eligible to receive Incentive Stock Option awards under the Plan;
provided, however, that no amendment, suspension or termination shall impair the
rights of any individual, without his or her consent, in any award theretofore
made pursuant to the Plan.
SECTION 10. TERM OF PLAN.
The Plan shall be effective upon the date of its adoption by the Board,
which date is February 11, 2003 (the "Effective Date"); provided that Incentive
Stock Options may be granted only if the Plan is approved by the stockholders
within twelve (12) months before or after the date of adoption by the Board.
Unless sooner terminated under the provisions of Section 8 above, Shares and
SARs shall not be granted under the Plan after the expiration of
B-7
ten (10) years from the Effective Date of the Plan. However, awards may be
exercisable after the end of the term of the Plan.
SECTION 11. RIGHTS AS STOCKHOLDER.
Upon delivery of any Share to a director or employee, such person shall
have all of the rights of a stockholder of the Company with respect to such
Share, including the right to vote such Share and to receive all dividends or
other distributions paid with respect to such Share.
SECTION 12. MERGER OR CONSOLIDATION.
In the event of a Change of Control, the surviving corporation shall
either (a) exchange options, Restricted Stock and SARs issued under this Plan
for options, Restricted Stock and SARs (with the same aggregate exercise price)
to acquire and participate in that number of shares in the surviving corporation
that have a fair market value equal to the fair market value (determined on the
date of such Change of Control) of Shares that the grantee is entitled to
acquire and participate in under this Plan on the date of such Change of
Control, or (b) pay to the Grantee, as of the date of the Change of Control, the
excess of the Fair Market Value of the Shares as of the Change of Control over
the exercise price, if any, of the Award. In the event of a Change of Control,
options and SARs shall become immediately and fully exercisable and all
restrictions on Restricted Shares shall lapse.
SECTION 13. CHANGES IN CAPITAL AND CORPORATE STRUCTURE.
The aggregate number of Shares and interests awarded and which may be
awarded under the Plan shall be adjusted to reflect a change in the outstanding
Shares of the Company by reason of a recapitalization, reclassification,
reorganization, stock split, reverse stock split, combination of shares, stock
dividend or similar transaction. The adjustment shall be made in an equitable
manner which will cause the awards and the economic benefits thereof to remain
unchanged as a result of the applicable transaction.
SECTION 14. SERVICE.
An individual shall be considered to be in the service of the Company
or a Related Corporation as long as he or she remains a director or employee of
the Company or such Related Corporation. Nothing herein shall confer on any
individual the right to continued service with the Company or a Related
Corporation or affect the right of the Company or such Related Corporation to
terminate such service.
SECTION 15. WITHHOLDING OF TAX.
(a) In General. To the extent the award, issuance or exercise of
Options, Restricted Stock or SARs results in the receipt of compensation by a
director or employee, the Company is authorized to withhold a portion of such
Shares receivable or any cash compensation then or thereafter payable to such
person to pay any tax required to be withheld by reason of the receipt of the
compensation. Alternatively, the director or employee may tender Shares with a
value equal to, or a personal check in the amount of, the tax required to be
withheld.
(b) Stock Withholding. To the extent a grantee incurs tax liability
in connection with the exercise or vesting of any award that is subject to tax
withholding and the grantee is obligated to pay the Company the amount required
to be withheld, the Committee may, in its sole discretion, allow the grantee to
satisfy the minimum withholding tax obligation by electing to have the Company
withhold from the Shares to be issued that number of Shares having a fair market
value equal to the minimum amount required to be withheld, determined on the
date that the amount of tax to be withheld is to be determined. All elections by
a grantee to have Shares withheld for this purpose shall be made in writing in a
form acceptable to the Committee.
SECTION 16. DELIVERY AND REGISTRATION OF STOCK.
The Company's obligation to deliver Shares with respect to an award
shall, if the Committee so requests, be conditioned upon the receipt of a
representation as to the investment intention of the individual to whom such
Shares are to be delivered, in such form as the Committee shall determine to be
necessary or advisable to comply with the
B-8
provisions of the Securities Act or any other federal, state or local securities
legislation or regulation. It may be provided that any representation
requirement shall become inoperative upon a registration of the Shares or other
action eliminating the necessity of such representation under securities
legislation. The Company shall not be required to deliver any Shares under the
Plan prior to: (a) the admission of such Shares to listing on any stock exchange
on which Shares may then be listed, and (b) the completion of such registration
or other qualification of such Shares under any state or federal law, rule or
regulation, as the Committee shall determine to be necessary or advisable. The
Plan is intended to comply with Rule 16b-3, if applicable. Any provision of the
Plan which is inconsistent with said rule shall, to the extent of such
inconsistency, be inoperative and shall not affect the validity of the remaining
provisions of the Plan.
SECTION 17. NON-COMPETITION; TERMINATION AND REVERSION.
Notwithstanding anything contained herein to the contrary, if any
recipient of an Award competes with the Company or any Related Corporation, then
(a) any unexercised option or SAR or unvested Restricted Stock held by such
recipient shall immediately terminate; and (b) the exercise of any options or
SARs or the vesting of any Restricted Stock within the six (6) month period
immediately preceding the recipient's Termination of Service shall be rescinded
and if the recipient has sold any Shares received upon such exercise or vesting
of an Award, the recipient shall be obligated to immediately pay the Company the
fair market value, as determined by the Committee, of the Shares as of the date
of Termination of Service.
B-9
APPENDIX C
KANKAKEE BANCORP, INC.
NON-EMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN
KANKAKEE BANCORP, INC. (the "Company"), hereby adopts the KANKAKEE
BANCORP, INC. NON-EMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN (the "Plan"),
for the benefit of its non-employee Directors and the non-employee Directors of
its subsidiaries. The Plan is an unfunded arrangement for the benefit of
non-employee Directors and is intended to be exempt from the requirements of the
Employee Retirement Income Security Act of 1974, as amended. The Plan is
effective as of January 1, 2003.
ARTICLE 1
DEFINITIONS
1.1 Account. The bookkeeping account established for each Participant as
provided in Section 5.1 hereof.
1.2 Administrator. Such person or entity as determined by the Board, and in
the absence of such determination, the Company.
1.3 Bank. KFS Bank, F.S.B.
1.4 Board. The Board of Directors of the Company.
1.5 Change of Control. Any one of:
(a) The consummation of the acquisition by any person (as such term
is defined in Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "1934 Act")) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the 1934 Act)
of twenty-five percent (25%) or more of the combined voting power
of the then outstanding voting securities of the Company;
(b) The individuals who, as of the date hereof, are members of the
Board cease for any reason to constitute a majority of the Board,
unless the election, or nomination for election by the
stockholders, of any new director was approved by a vote of a
majority of the Board, and such new director shall, for purposes
of this Agreement, be considered as a member of the Board; or
(c) Consummation of: (1) a merger or consolidation to which the
Company is a party if the stockholders of the Company immediately
before such merger or consolidation do not, as a result of such
merger or consolidation, own, directly or indirectly, more than
sixty-seven percent (67%) of the combined voting power of the
then outstanding voting securities of the entity resulting from
such merger or consolidation in substantially the same proportion
as their ownership of the combined voting power of the Company's
voting securities outstanding immediately before such merger or
consolidation; or (2) a complete liquidation or dissolution or
sale or other disposition of all or substantially all of the
assets of the Company or the Bank.
Notwithstanding the foregoing, a Change of Control shall not be
deemed to occur solely because twenty-five percent (25%) or more
of the combined voting power of the Company's then outstanding
voting securities is acquired by: (1) a trustee or other
fiduciary holding securities under one or more employee benefit
plans maintained for employees of the entity; or (2) any
corporation which, immediately prior to such acquisition, is
owned directly or indirectly by the stockholders in the same
proportion as their ownership of stock immediately prior to such
acquisition.
1.6 Code. The Internal Revenue Code of 1986, as amended.
C-1
1.7 Deferrals. The portion of the Fees that a Participant elects to defer
in accordance with Section 3.1 hereof.
1.8 Deferral Date. The date the Deferrals will be credited to the
Director's Account, which date shall be the date it would otherwise
have been payable to the Director.
1.9 Deferral Election. The separate written agreement, submitted to the
Administrator, by which a Director elects to participate in the Plan
and to make Deferrals.
1.10 Director. Any person serving on the Board of the Company or the Bank
and who is not an employee of the Company or the Bank in any capacity.
1.11 Disability. Any medically determinable physical or mental disorder that
renders a Participant incapable of continuing as a Director, as
determined by the Administrator in its sole discretion.
1.12 Effective Date. January 1, 2003.
1.13 Fees. The Participant's earned director fee remuneration for serving as
a Director of the Company or the Bank, including any fees for committee
participation.
1.14 Participant. A Director who is a Participant as provided in Article 2.
1.15 Plan Year. January 1 to December 31.
1.16 Retirement. Retirement shall occur upon the termination of a
Participant's service, voluntary or involuntary, as a Director.
ARTICLE 2
PARTICIPATION
2.1 Commencement of Participation. Each Director shall become a Participant
of the Plan on the date the Director's Deferral Election first becomes
effective.
(a) A Participant who is no longer a Director or who also becomes an
employee of the Company or the Bank shall not be permitted to
submit a Deferral Election and all Deferrals for such Participant
shall cease as of the end of the Plan Year in which such
Participant is determined to no longer be a Director or becomes
an employee of the Company or the Bank.
(b) Amounts credited to the Participant's Account described in
subsection (a) shall continue to be held, pursuant to the terms
of the Plan and shall be distributed as provided in Article 6.
2.2 Deferral Continuance Requirement. A Participant's Deferral Election
shall continue in effect until the later of (a) six (6) months; or (b)
the date the Participant delivers to the Administrator a written
revocation or modification of such election with respect to Fees that
relate to services yet to be performed.
ARTICLE 3
CONTRIBUTIONS
3.1 Deferrals.
(a) The Company shall credit to the Participant's Account an amount
equal to the amount designated in the Participant's Deferral
Election for that Plan Year. Such amounts shall not be made
available to such Participant, except as provided in Article 6,
and shall reduce such Participant's Fees from the Company or the
Bank in accordance with the provisions of the
C-2
applicable Deferral Election; provided, however, that all such
amounts shall be subject to the rights of the general creditors
of the Company and the Bank as provided in Article 8.
(b) Each Director shall deliver a Deferral Election to the
Administrator before any Deferrals may become effective. Such
Deferral Election shall be void with respect to any Deferral
unless submitted before the beginning of the calendar year during
which the amount to be deferred will be earned; provided,
however, that in the year in which the Plan is first adopted or a
Director is first eligible to participate, such Deferral Election
shall be filed within thirty (30) days of the date on which the
Plan is adopted or the date on which a Director is first eligible
to participate, respectively, with respect to Fees earned during
the remainder of the calendar year.
(c) Subject to the limitation set forth in Section 3.1, the Deferral
Election shall remain effective until modified or revoked and
will contain the following:
(i) the Participant's designation as to the amount of Fees to
be deferred;
(ii) the beneficiary or beneficiaries of the Participant; and
(iii) such other information as the Administrator may require.
(d) The maximum amount that may be deferred each Plan Year is one
hundred percent (100%) of the Participant's Fees.
3.2 Time of Contributions. Deferrals shall be credited to the Account of
the appropriate Participant as of the Deferral Date.
ARTICLE 4
VESTING
4.1 Vesting of Deferrals. A Participant shall have a vested right to his
Account attributable to Deferrals and any earnings on the investment of
such Deferrals.
ARTICLE 5
ACCOUNTS
5.1 Accounts. The Administrator shall establish and maintain a bookkeeping
account in the name of each Participant. The Participant's Account
shall be credited with Units, as defined in Section 5.2(a). Each
Participant's Account shall be debited by any distributions made plus
any federal, state and/or local tax withholding as may be required by
applicable law. Distributions under Article 6 shall be equal to the
Participant's Account balance as of the date of the applicable
distribution thereunder.
C-3
5.2 Investments, Gains and Losses.
(a) The Participant's Account will be credited with the hypothetical
number of stock units ("Units"), calculated to the nearest
thousandths of a Unit, determined by dividing the amount of the
Deferrals on the Deferral Date by the average of the closing
market price of the Company's common stock as reported on the
American Stock Exchange for the 20 trading days immediately
preceding and including such date. The Participant's Account will
also be credited with the number of Units determined by
multiplying the number of Units in the Participant's Account by
any cash dividends declared by the Company on its common stock
and dividing the product by the closing market price of the
Company's common stock as reported on the American Stock Exchange
on the related dividend record date, and also by multiplying the
number of Units in the Participant's Account by any stock
dividends declared by the Company on its common stock.
(b) The Administrator shall adjust the amounts credited to each
Participant's Account to reflect Deferrals, distributions and any
other appropriate adjustments. Such adjustments shall be made as
frequently as is administratively feasible.
(c) The Participant's Account, established pursuant to Section 5.1,
will be valued by the Administrator on a yearly basis.
(d) Any amounts contributed to a "Rabbi Trust" as provided in Section
8.2 shall be invested by the trustee of the Rabbi Trust in
accordance with written directions from the Company. Such
directions shall provide the trustee with the investment
discretion to invest the above-referenced amounts within broad
guidelines established by Administrator and Company as set forth
therein.
ARTICLE 6
DISTRIBUTIONS
6.1 Payment. Payment of a Participant's Account shall commence as soon as
administratively feasible immediately following the Participant's
Retirement, provided, however, that if a Participant, prior to
commencing participation in the Plan and prior to any Deferrals being
made, executes an irrevocable election to commence payments upon
attainment of age sixty-five (65), payments shall commence as soon as
administratively feasible immediately following the Participant's
attainment of age sixty-five (65). The Participant may elect, in
writing, any one of the following forms of payment, provided that such
election is delivered to the Administrator and is made at the time of
the Deferral Election:
(a) single lump-sum payment of the value of the Participant's
Account; or
(b) substantially equal annual installments over a period of either
five (5) years or ten (10) years.
6.2 Commencement of Payment upon Death or Change of Control.
(a) Upon the death of a Participant, all amounts credited to his
Account shall be paid in a single lump sum, as soon as
administratively feasible, to his beneficiary or beneficiaries,
as determined under Article 7.
(b) Upon a Change of Control, all amounts credited to a Participant's
Account shall be paid in a single lump sum as of the date of the
Change of Control.
6.3 Form of Payment.
(a) A Participant, former Participant, or deceased Participant's
beneficiary or legal representative may elect at anytime to have
any or all payouts, or remaining payouts, of the Participant's
C-4
Account paid out in cash or in shares of Company common stock. At
any time before the end of the calendar year prior to termination
of Board service, a Director may revise and supersede any or all
of his or her previous elections with respect to the form of
payment (cash or shares of common stock).
(b) If a Participant's Account is payable in cash and in
installments, the amount of the first cash installment payment
shall be a fraction of the Units in the Participant's Account on
the date of the initial installment payment, the numerator of
which is one and the denominator of which is the total number of
installments elected. Each subsequent installment shall be
calculated in the same manner as of each subsequent annual
payment except that the denominator shall be reduced by the
number of installments which have been previously paid. The
amount of cash payable for Deferrals accounted for as Units based
on Company common stock value will be paid, as described above,
based on the number of Units in the Participant's Account on the
payment date multiplied by the average of the closing market
price of the Company's common stock as reported on the American
Stock Exchange for the 20 trading days immediately preceding such
date.
(c) If a Participant's Account is payable in Company common stock and
in installments, the amount of the first installment payment
shall be a fraction of the value of the Units in the
Participant's Account on the date of the initial installment
payment, the numerator of which is one and the denominator of
which is the total number of installments elected. Each
subsequent installment shall be calculated in the same manner as
of each subsequent annual payment except that the denominator
shall be reduced by the number of installments which have been
previously paid. Except for the final installment payment, only
whole shares shall be payable, and the value of any fractional
share payable shall be retained in the Participant's Account
until the final installment payment, at which time the value of
any fractional share payable shall be paid in cash, based on the
fractional share multiplied by the average of the closing market
price of the Company's common stock as reported on the American
Stock Exchange for the 20 trading days immediately preceding such
date.
ARTICLE 7
BENEFICIARIES
7.1 Beneficiaries. Each Participant may from time to time designate one or
more persons (who may be any one or more members of such person's
family or other persons, administrators, trusts, foundations or other
entities) as his beneficiary under the Plan. Such designation shall be
made on a form prescribed by the Administrator. Each Participant may at
any time and from time to time, change any previous beneficiary
designation, without notice to or consent of any previously designated
beneficiary, by amending his previous designation on a form prescribed
by the Administrator. If the beneficiary does not survive the
Participant (or is otherwise unavailable to receive payment) or if no
beneficiary is validly designated, then the amounts payable under this
Plan shall be paid to the Participant's surviving spouse, if any, and,
if none, to his estate. If more than one person is the beneficiary of a
deceased Participant, each such person shall receive a pro rata share
of any death benefit payable unless otherwise designated on the
applicable form. If a beneficiary who is receiving benefits dies, all
benefits that were payable to such beneficiary shall then be payable to
the estate of that beneficiary.
7.2 Lost Beneficiary.
(a) All Participants and beneficiaries shall have the obligation to
keep the Administrator informed of their current address until
such time as all benefits due have been paid.
(b) If a Participant or beneficiary cannot be located by the
Administrator exercising due diligence, then, in its sole
discretion, the Administrator may presume that the Participant or
beneficiary is deceased for purposes of the Plan and all unpaid
amounts (net of due diligence expenses) owed to the Participant
or beneficiary shall be paid accordingly or, if a beneficiary
cannot be so located, then such amounts may be forfeited. Any
such presumption of death shall be final,
C-5
conclusive and binding on all parties. Notwithstanding the
foregoing, if any such beneficiary is located within five (5)
years from the date of any such forfeiture, such beneficiaries
shall be entitled to receive the amount previously forfeited.
ARTICLE 8
FUNDING
8.1 Prohibition Against Funding. Should any investment be acquired in
connection with the liabilities assumed under this Plan, it is
expressly understood and agreed that the Participants and beneficiaries
shall not have any right with respect to, or claim against, such assets
nor shall any such purchase be construed to create a trust of any kind
or a fiduciary relationship between the Company and the Participants,
their beneficiaries or any other person. Any such assets shall be and
remain a part of the general, unpledged, unrestricted assets of the
Company, subject to the claims of its general creditors. It is the
express intention of the parties hereto that this arrangement shall be
unfunded for tax purposes. Each Participant and beneficiary shall be
required to look to the provisions of this Plan and to the Company
itself for enforcement of any and all benefits due under this Plan, and
to the extent any such person acquires a right to receive payment under
this Plan, such right shall be no greater than the right of any
unsecured general creditor of the Company. The Company shall be
designated the owner and beneficiary of any investment acquired in
connection with its obligation under this Plan.
8.2 Deposits. Notwithstanding paragraph 8.1, or any other provision of this
Plan to the contrary, the Company may deposit any amounts it deems
appropriate to pay the benefits under this Plan to a "Rabbi Trust" as
established pursuant to Treasury Department Revenue Procedures 92-64
and 92-65.
8.3 Withholding of Director Deferrals. The Administrator is authorized to
make any and all necessary arrangements with the Company in order to
withhold the Participant's Deferrals under Section 3.1 hereof from the
Participant's Fees. The Administrator shall determine the amount and
timing of such withholding.
ARTICLE 9
CLAIMS ADMINISTRATION
9.1 General. In the event that a Participant or his beneficiary does not
receive any Plan benefit that is claimed, such Participant or
beneficiary shall be entitled to consideration and review as provided
in this Article 9.
9.2 Claim Review. Upon receipt of any written claim for benefits, the
Administrator shall be notified and shall give due consideration to the
claim presented. If the claim is denied to any extent by the
Administrator, the Administrator shall furnish the claimant with a
written notice setting forth (in a manner calculated to be understood
by the claimant):
(a) The specific reason or reasons for denial of the claim;
(b) A specific reference to the Plan provisions on which the denial
is based;
(c) A description of any additional material or information necessary
for the claimant to perfect the claim and an explanation of why
such material or information is necessary; and
(d) An explanation of the provisions of this Article.
9.3 Right of Appeal. A claimant who has a claim denied under Section 9.2
may appeal to the Administrator for reconsideration of that claim. A
request for reconsideration under this Section 9.3 must be filed by
written notice within sixty (60) days after receipt by the claimant of
the notice of denial under Section 9.2.
C-6
9.4 Review of Appeal. Upon receipt of an appeal the Administrator shall
promptly take action to give due consideration to the appeal. Such
consideration may include a hearing of the parties involved, if the
Administrator feels such a hearing is necessary. In preparing for this
appeal the claimant shall be given the right to review pertinent
documents and the right to submit in writing a statement of issues and
comments. After consideration of the merits of the appeal the
Administrator shall issue a written decision, which shall be binding on
all parties subject to Section 9.6 below. The decision shall be written
in a manner calculated to be understood by the claimant and shall
specifically state its reasons and pertinent Plan provisions on which
it relies. The Administrator's decision shall be issued within sixty
(60) days after the appeal is filed, except that if a hearing is held
the decision may be issued within one hundred twenty (120) days after
the appeal is filed.
9.5 Designation. The Administrator may designate any other person of its
choosing to make any determination otherwise required under this
Article.
9.6 Arbitration. Each and every dispute or controversy arising pursuant to
the Plan or a Deferral Election shall, after exhaustion of the review
procedure set forth in Section 9.4, be settled exclusively by
arbitration, conducted before a single arbitrator sitting in Kankakee,
Illinois in accordance with the rules of JAMS then in effect. The costs
and expenses of arbitration, including the fees of the arbitrators,
shall be borne by the losing party. The prevailing party shall recover
as expenses all reasonable attorneys' fees incurred by it in connection
with the arbitration proceeding or any appeals therefrom.
ARTICLE 10
GENERAL PROVISIONS
10.1 Administrator. The Administrator:
(a) Is expressly empowered to limit the amount of Fees that may be
deferred; to deposit amounts in accordance with Section 8.2
hereof; to interpret the Plan, and to determine all questions
arising in the administration, interpretation and application of
the Plan; to employ actuaries, accountants, counsel, and other
persons it deems necessary in connection with the administration
of the Plan; to request any information from the Company it deems
necessary to determine whether the Company would be considered
insolvent or subject to a proceeding in bankruptcy; and to take
all other necessary and proper actions to fulfill its duties as
Administrator.
(b) Shall not be liable for any actions by it hereunder, unless due
to its own negligence, willful misconduct or lack of good faith.
(c) Shall be indemnified and saved harmless by the Company, if the
Administrator is not the Company, from and against all personal
liability to which it may be subject by reason of any act done or
omitted to be done in its official capacity as Administrator in
good faith in the administration of the Plan, including all
expenses reasonably incurred in its defense in the event the
Company fails to provide such defense upon the request of the
Administrator. The Administrator is relieved of all
responsibility in connection with its duties hereunder to the
fullest extent permitted by law, short of breach of duty to the
beneficiaries.
10.2 No Assignment. Benefits or payments under this Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by
creditors of the Participant or the Participant's beneficiary, whether
voluntary or involuntary, and any attempt to so anticipate, alienate,
sell, transfer, assign, pledge, encumber, attach or garnish the same
shall not be valid, nor shall any such benefit or payment be in any way
liable for or subject to the debts, contracts, liabilities, engagement
or torts of any Participant or beneficiary, or any other person
entitled to such benefit or payment pursuant to the terms of this Plan,
except to such extent as may be required by law. If any Participant or
beneficiary or any other person entitled to a benefit or payment
pursuant to the terms of this Plan becomes bankrupt or attempts to
alienate, sell, transfer, assign, pledge,
C-7
encumber, attach or garnish any benefit or payment under this Plan, in
whole or in part, or if any attempt is made to subject any such benefit
or payment, in whole or in part, to the debts, contracts, liabilities,
engagements or torts of the Participant or beneficiary or any other
person entitled to any such benefit or payment pursuant to the terms of
this Plan, then such benefit or payment, in the discretion of the
Administrator, shall cease and terminate with respect to such
Participant or beneficiary, or any other such person.
10.3 No Rights to Remain a Director. Participation in this Plan shall not be
construed to confer upon any Participant the legal right to be retained
as a Director, or give a Participant or beneficiary, or any other
person, any right to any payment whatsoever, except to the extent of
the benefits provided for hereunder. Each Participant shall remain
subject to removal as a Director to the same extent as if this Plan had
never been adopted.
10.4 Incompetence. If the Administrator determines that any person to whom a
benefit is payable under this Plan is incompetent by reason of physical
or mental disability, the Administrator shall have the power to cause
the payments becoming due to such person to be made to another for his
benefit without responsibility of the Administrator to see to the
application of such payments. Any payment made pursuant to such power
shall, as to such payment, operate as a complete discharge of the
Company and the Administrator, if the Administrator is not the Company.
10.5 Identity. If, at any time, any doubt exists as to the identity of any
person entitled to any payment hereunder or the amount or time of such
payment, the Administrator shall be entitled to hold such sum until
such identity or amount or time is determined or until an order of a
court of competent jurisdiction is obtained. The Administrator shall
also be entitled to pay such sum into court in accordance with the
appropriate rules of law. Any expenses incurred by the Company or the
Administrator incident to such proceeding or litigation shall be
charged against the Account of the affected Participant.
10.6 No Liability. No liability shall attach to or be incurred by any
manager of the Company, or any Administrator under or by reason of the
terms, conditions and provisions contained in this Plan, or for the
acts or decisions taken or made thereunder or in connection therewith;
and as a condition precedent to the establishment of this Plan or the
receipt of benefits thereunder, or both, such liability, if any, is
expressly waived and released by each Participant and by any and all
persons claiming under or through any Participant or any other person.
Such waiver and release shall be conclusively evidenced by any act or
participation in or the acceptance of benefits or the making of any
election under this Plan.
10.7 Expenses. All expenses incurred in the administration of the Plan,
whether incurred by the Company or the Plan, shall be paid by the
Company.
10.8 Insolvency. Should the Company be considered insolvent, the Company,
through its Board and chief executive officer, shall give immediate
written notice of such to the Administrator of the Plan, if the Company
is not the Administrator. Upon receipt of such notice, the
Administrator shall cease to make any payments to Participants who were
Directors or their beneficiaries and shall hold any and all assets
attributable to the Company for the benefit of the general creditors of
the Company.
10.9 Amendment and Termination.
(a) Except as otherwise provided in this Section 10.9, the Board
shall have the sole authority to modify, amend or terminate this
Plan; provided, however, that any modification or termination of
this Plan shall not reduce, without the consent of a Participant,
a Participant's right to any amounts already credited to his
Account, or lengthen the time period for a payout from an
established Account, on the day before the effective date of such
modification or termination. Following such termination, payment
of such credited amounts may be made in a single sum payment if
the Company so designates. Any such decision to pay in a single
sum shall apply to all Participants.
C-8
(b) Any funds remaining after the termination of the Plan, and
satisfaction of all liabilities to Participants and others, shall
be returned to the Company.
10.10 Company Determinations. Any determinations, actions or decisions of the
Company (including but not limited to, Plan amendments and Plan
termination) shall be made by the Board or a properly delegated
committee thereof in accordance with its established procedures.
10.11 Construction. All questions of interpretation, construction or
application arising under or concerning the terms of this Plan shall be
decided by the Administrator, in its sole and final discretion, whose
decision shall be final, binding and conclusive upon all persons.
10.12 Governing Law. This Plan shall be governed by, construed and
administered in accordance with the laws of the State of Illinois,
other than its laws respecting choice of law.
10.13 Headings. The Article headings contained herein are inserted only as a
matter of convenience and for reference and in no way define, limit,
enlarge or describe the scope or intent of this Plan, nor in any way
shall they affect this Plan or the construction of any provision
thereof.
10.14 Terms. Capitalized terms shall have meanings as defined herein.
Singular nouns shall be read as plural, masculine pronouns shall be
read as feminine, and vice versa, as appropriate.
C-9
IN WITNESS WHEREOF, KANKAKEE BANCORP, INC. has caused this Non-Employee
Directors' Deferred Compensation Plan to be executed by its duly authorized
officer, effective as of this _____ day of _______________, 2003.
KANKAKEE BANCORP, INC.
By:
-----------------------------------------------------------
Title:
--------------------------------------------------------
C-10
KANKAKEE BANCORP, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER
USING DARK INK ONLY. [X]
[ ]
1. Election of Directors For All
Mark L. Smith and Wesley E. Walker For Withheld Except
(INSTRUCTIONS: To withhold authority to
vote for any individual nominee, write [_] [_] [_]
that nominee's name in the space below.)
________________________________________
2. To approve the adoption of the Kankakee For Against Abstain
Bancorp, Inc. 2003 Stock Incentive Plan.
[_] [_] [_]
3. To approve the adoption of the Kankakee For Against Abstain
Bancorp, Inc. Non-Employee Directors'
Deferred Compensation Plan. [_] [_] [_]
4. To ratify the selection of McGladrey & For Against Abstain
Pullen, LLP, as auditors for Kankakee
Bancorp, Inc. for 2003. [_] [_] [_]
The board of directors recommends a vote FOR all nominees and FOR all proposals.
THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH SPECIFICATION MADE.
IF NO CHOICES ARE INDICATED, THIS
PROXY WILL BE VOTED FOR ALL
PROPOSALS.
NOTE: Please sign exactly as your
name(s) appears. For joint
accounts, each owner should sign.
When signing as executor,
administrator, attorney, trustee or
guardian, etc., please give your
full title.
Dated:_______________________, 2003
___________________________________
___________________________________
signature(s)
PROXY KANKAKEE BANCORP, INC. PROXY
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
For the Annual Meeting of Stockholders--April 25, 2003
The undersigned hereby appoints Brenda L. Baird, Michael A. Griffith and
Wesley E. Walker, or any two of them acting in the absence of the other, with
power of substitution, attorneys and proxies, for and in the name and place of
the undersigned, to vote the number of shares of common stock that the
undersigned would be entitled to vote if then personally present at the annual
meeting of the stockholders of Kankakee Bancorp, Inc., to be held at
Sully's-Sullivan's Warehouse, a banquet facility located at 555 South West
Avenue, Kankakee, Illinois 60901, on Friday, April 25, 2003, at 10:00 a.m.,
local time, or any adjournments or postponements of the meeting, upon the
matters set forth in the notice of annual meeting and proxy statement (receipt
of which is hereby acknowledged) as designated on the reverse side, and in their
discretion, the proxies are authorized to vote upon such other business as may
come before the meeting:
[_] Check here for address change. [_] Check here if you plan to attend
the meeting.
New Address: _________________
______________________________
______________________________
(Continued and to be signed on reverse side.)