-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O3y7V2breHtKX1UPDMqnT96/hszrvTJY3uOdhtrw+riKpW2vlkdef55i2OX6kjcC enxbyeXLM2tqtgSzkYzAwg== 0000895813-96-000007.txt : 19960125 0000895813-96-000007.hdr.sgml : 19960125 ACCESSION NUMBER: 0000895813-96-000007 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960118 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960124 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PREMIER FINANCIAL SERVICES INC CENTRAL INDEX KEY: 0000036340 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 362852290 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-13425 FILM NUMBER: 96506714 BUSINESS ADDRESS: STREET 1: 27 WEST MAIN ST STE 101 CITY: FREEPORT STATE: IL ZIP: 61032 BUSINESS PHONE: 8152333671 FORMER COMPANY: FORMER CONFORMED NAME: FIRST FREEPORT CORP DATE OF NAME CHANGE: 19840710 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): January 18, 1996 PREMIER FINANCIAL SERVICES, INC. (Exact name of registrant as specified in its charter) _________________________ Delaware 0-13425 36-2852290 (State or other jurisdiction (Commission file (I.R.S. employer of incorporation or number) identification no.) organization) 27 West Main Street 61032 Freeport, Illinois (Zip Code) (Address of principal executive offices) Registrant's telephone number, include area code: (815) 233-3671 Not Applicable (Former name or former address, if changed since last year) Page 1 of 106 pages Exhibit Index at sequentially numbered page 4. 2 Item 5. Other Events. ------------ On January 18, 1996, Premier Financial Services, Inc., a Delaware corporation ("Registrant"), and Northern Illinois Financial Corporation, an Illinois corporation ("Northern Illinois"), announced that they had reached an understanding on substantially all material terms to merge their assets and operations into a new financial services organization to be named Grand Premier Financial, Inc., as more fully described in the Press Release filed as Exhibit 99 to this Report. On January 22, 1996, (i) the Registrant, Northern Illinois and Grand Premier Financial, Inc., a newly formed Delaware corporation ("GPF"), entered into an Agreement and Plan of Reorganization (the "Merger Agreement"), providing for the merger of the Registrant and Northern Illinois with and into GPF, and (ii) the Registrant and Northern Illinois entered into Stock Option Agreements pursuant to which the Registrant has granted Northern Illinois an option to acquire, under certain circumstances, up to 19.9% of the outstanding shares of the common stock of the Registrant, and Northern Illinois has granted the Registrant an option to acquire, under certain circumstances, up to 19.9% of the outstanding shares of common stock of Northern Illinois, subject in each case to the terms and conditions set forth therein. Copies of the Merger Agreement and the Stock Option Agreements are filed as exhibits to this Report. Consummation of the merger is subject to the receipt of required regulatory and shareholder approvals and the satisfaction of other terms and conditions set forth in the Merger Agreement. Item 7(c). Exhibits. -------- Exhibit 2 Agreement and Plan of Reorganization among Northern Illinois Financial Corporation, Premier Financial Services, Inc., and Grand Premier Financial, Inc., dated January 22, 1996. Exhibit 10.1 Stock Option Agreement, dated January 22, 1996, between Northern Illinois Financial Corporation, as issuer, and Premier Financial Services, Inc., as grantee. Exhibit 10.2 Stock Option Agreement, dated January 22, 1996, between Premier Financial Services, Inc., as issuer, and Northern Illinois Financial Corporation, as grantee. Exhibit 99 Press Release dated January 18, 1996. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Premier Financial Services, Inc. Dated: January 24, 1996 By: /s/ David L. Murray ------------------------------ David L. Murray Executive Vice President and Chief Financial Officer 4 EXHIBIT INDEX ------------- Exhibit Sequentially Numbered Page 2 Agreement and Plan of Reorganization among Northern Illinois Financial Corporation, Premier Financial Services, Inc., and Grand Premier Financial, Inc., dated January 22, 1996 5 10.1 Stock Option Agreement, dated January 22, 1996, between Northern Illinois Financial Corporation, as issuer, and Premier Financial Services, Inc., as grantee. 67 10.2 Stock Option Agreement, dated January 22, 1996, between Premier Financial Services, Inc., as issuer, and Northern Illinois Financial Corporation, as grantee. 85 99 Press Release dated January 18, 1996 103 EX-2 2 EXHIBIT 2 EXECUTION COPY AGREEMENT AND PLAN OF REORGANIZATION AMONG NORTHERN ILLINOIS FINANCIAL CORPORATION, PREMIER FINANCIAL SERVICES, INC. AND GRAND PREMIER FINANCIAL, INC. DATED: JANUARY 22, 1996 6 TABLE OF CONTENTS Page ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Effective Time . . . . . . . . . . . . . . . . . . . . 2 1.3 Effects of the Merger . . . . . . . . . . . . . . . . . 2 1.4 Conversion of Northern Illinois Common Stock, Premier Common Stock and Premier Preferred Stock; Treatment of GPF Common Stock . . . . . . . . . . . . . . . . . . . 2 1.5 Options . . . . . . . . . . . . . . . . . . . . . . . . 5 1.6 Certificate of Incorporation . . . . . . . . . . . . . 5 1.7 By-Laws . . . . . . . . . . . . . . . . . . . . . . . . 5 1.8 Tax Consequences . . . . . . . . . . . . . . . . . . . 5 1.9 Plans for Management Succession . . . . . . . . . . . . 6 1.10 Board of Directors; Filling of Vacancies on the Board . 6 1.11 Headquarters of GPF . . . . . . . . . . . . . . . . . . 7 1.12 Share Purchase Rights Agreement . . . . . . . . . . . . 7 1.13 Closing . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . 7 2.1 GPF to Make Shares Available . . . . . . . . . . . . . 7 2.2 Exchange of Shares . . . . . . . . . . . . . . . . . . 7 ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 REPRESENTATIONS AND WARRANTIES OF NORTHERN ILLINOIS . . . . . . . 10 3.1 Corporate Organization . . . . . . . . . . . . . . . . 10 3.2 Capitalization . . . . . . . . . . . . . . . . . . . . 11 3.3 Certain Beneficial Owners of Northern Illinois Common Stock and Premier Common Stock . . . . . . . . . . . . 12 3.4 Authority; No Violation . . . . . . . . . . . . . . . . 12 3.5 Consents and Approvals . . . . . . . . . . . . . . . . 13 3.6 Reports . . . . . . . . . . . . . . . . . . . . . . . . 14 3.7 Financial Statements . . . . . . . . . . . . . . . . . 14 3.8 Broker's Fees . . . . . . . . . . . . . . . . . . . . . 15 3.9 Absence of Certain Changes or Events . . . . . . . . . 15 3.10 Legal Proceedings . . . . . . . . . . . . . . . . . . . 16 3.11 Taxes and Tax Returns . . . . . . . . . . . . . . . . . 16 3.12 Employees . . . . . . . . . . . . . . . . . . . . . . . 17 3.13 SEC Reports . . . . . . . . . . . . . . . . . . . . . . 19 3.14 Compliance with Applicable Law . . . . . . . . . . . . 19 3.15 Certain Contracts . . . . . . . . . . . . . . . . . . . 19 3.16 Agreements with Regulatory Agencies . . . . . . . . . . 21 3.17 Other Activities of Northern Illinois and its Subsidiaries . . . . . . . . . . . . . . . . . . . . . 21 3.18 Investment Securities . . . . . . . . . . . . . . . . . 22 3.19 Undisclosed Liabilities . . . . . . . . . . . . . . . . 22 3.20 Environmental Liability . . . . . . . . . . . . . . . . 22 3.21 Insurance . . . . . . . . . . . . . . . . . . . . . . . 23 7 3.22 Loan Loss Reserves . . . . . . . . . . . . . . . . . . 23 3.23 Approval Delays . . . . . . . . . . . . . . . . . . . . 23 3.24 Pooling of Interests . . . . . . . . . . . . . . . . . 23 ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 REPRESENTATIONS AND WARRANTIES OF PREMIER . . . . . . . . . . . . 23 4.1 Corporate Organization . . . . . . . . . . . . . . . . 23 4.2 Capitalization . . . . . . . . . . . . . . . . . . . . 24 4.3 Certain Beneficial Owners of Premier Common Stock and Northern Illinois Common Stock . . . . . . . . . . . . 26 4.4 Authority; No Violation . . . . . . . . . . . . . . . . 26 4.5 Consents and Approvals . . . . . . . . . . . . . . . . 27 4.6 Reports . . . . . . . . . . . . . . . . . . . . . . . . 28 4.7 Financial Statements . . . . . . . . . . . . . . . . . 28 4.8 Broker's Fees . . . . . . . . . . . . . . . . . . . . . 29 4.9 Absence of Certain Changes or Events . . . . . . . . . 29 4.10 Legal Proceedings . . . . . . . . . . . . . . . . . . . 29 4.11 Taxes and Tax Returns . . . . . . . . . . . . . . . . . 30 4.12 Employees . . . . . . . . . . . . . . . . . . . . . . . 31 4.13 SEC Reports . . . . . . . . . . . . . . . . . . . . . . 32 4.14 Compliance with Applicable Law . . . . . . . . . . . . 32 4.15 Certain Contracts . . . . . . . . . . . . . . . . . . . 33 4.16 Agreements with Regulatory Agencies . . . . . . . . . . 34 4.17 Other Activities of Premier and its Subsidiaries . . . 34 4.18 Investment Securities . . . . . . . . . . . . . . . . . 35 4.19 Undisclosed Liabilities . . . . . . . . . . . . . . . . 35 4.20 Environmental Liability . . . . . . . . . . . . . . . . 35 4.21 Insurance . . . . . . . . . . . . . . . . . . . . . . . 36 4.22 Loan Loss Reserves . . . . . . . . . . . . . . . . . . 36 4.23 Approval Delays . . . . . . . . . . . . . . . . . . . . 36 4.24 State Takeover Laws . . . . . . . . . . . . . . . . . . 36 4.25 Pooling of Interests . . . . . . . . . . . . . . . . . 36 ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 COVENANTS RELATING TO CONDUCT OF BUSINESS . . . . . . . . . . . . 36 5.1 Conduct of Businesses Prior to the Effective Time . . . 36 5.2 Forbearances . . . . . . . . . . . . . . . . . . . . . 37 ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . 39 6.1 Regulatory Matters; Cooperation with Respect to Filing 39 6.2 Access to Information . . . . . . . . . . . . . . . . . 41 6.3 Stockholders' Approvals . . . . . . . . . . . . . . . . 42 6.4 Legal Conditions to Merger . . . . . . . . . . . . . . 43 6.5 Affiliates; Publication of Combined Financial Results . 43 6.6 Listing of GPF Common Stock . . . . . . . . . . . . . . 43 6.7 Employee Benefit Plans . . . . . . . . . . . . . . . . 43 6.8 Indemnification; Directors' and Officers' Insurance . . 44 6.9 Additional Agreements . . . . . . . . . . . . . . . . . 46 6.10 Advice of Changes . . . . . . . . . . . . . . . . . . . 46 8 6.11 Dividends . . . . . . . . . . . . . . . . . . . . . . . 46 6.12 No Conduct Inconsistent with this Agreement . . . . . . 47 ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . 47 7.1 Conditions to Each Party's Obligation To Effect the Merger . . . . . . . . . . . . . . . . . . . . . . . . 47 7.2 Conditions to Obligations of Northern Illinois . . . . 49 7.3 Conditions to Obligations of Premier . . . . . . . . . 51 ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . 52 TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . . . 52 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . 52 8.2 Effect of Termination . . . . . . . . . . . . . . . . . 54 8.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . 54 8.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . 54 ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 55 9.1 Non-survival of Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . . . . 55 9.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . 55 9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . 55 9.4 Interpretation . . . . . . . . . . . . . . . . . . . . 56 9.5 Counterparts . . . . . . . . . . . . . . . . . . . . . 57 9.6 Entire Agreement . . . . . . . . . . . . . . . . . . . 57 9.7 Governing Law . . . . . . . . . . . . . . . . . . . . . 57 9.9 Publicity . . . . . . . . . . . . . . . . . . . . . . . 57 9.10 Assignment; Third Party Beneficiaries . . . . . . . . . 57 Exhibit A - Form of Northern Illinois Stock Option Agreement Exhibit B - Form of Premier Stock Option Agreement Exhibit C - Form of Amended and Restated Certificate Incorporation of Newco Exhibit D - Form of By-laws of Newco Exhibit E - Form of Share Purchase Rights Agreement Exhibit F - Form of Affiliate Letter Exhibit G - Form of Agreement Governing Right of First Refusal Exhibit H - Form of Opinion of Schiff Hardin & Waite Exhibit I - Form of Opinion of Crowley Barrett & Karaba, Ltd. 9 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated January 22, 1996, by and among NORTHERN ILLINOIS FINANCIAL CORPORATION, an Illinois corporation ("Northern Illinois"), PREMIER FINANCIAL SERVICES, INC., a Delaware corporation ("Premier"), and Grand Premier Financial, Inc., a Delaware corporation ("GPF"). WHEREAS, the Boards of Directors of Northern Illinois, Premier and GPF have determined that it is in the best interests of their respective companies and their stockholders to consummate the business combination transaction provided for herein in which Northern Illinois and Premier will each, subject to the terms and conditions set forth herein, merge with and into GPF (the "Merger"), so that GPF is the resulting corporation (hereinafter sometimes called the "Resulting Corporation") in the Merger; and WHEREAS, it is the intent of the respective Boards of Directors of Northern Illinois and Premier that the Merger be structured as a "merger of equals" of Northern Illinois and Premier and that the Resulting Corporation be governed and operated on this basis; and WHEREAS, as a condition to, and immediately after the execution of, this Agreement, Northern Illinois and Premier are entering into a Northern Illinois stock option agreement (the "Northern Illinois Option Agreement") attached hereto as Exhibit A; and WHEREAS, as a condition to, and immediately after the execution of, this Agreement, Northern Illinois and Premier are entering into a Premier stock option agreement (the "Premier Option Agreement"; and together with the Northern Illinois Option Agreement, the "Option Agreements") attached hereto as Exhibit B; and WHEREAS, the parties desire to make certain representations, warranties and agreements in connection with the Merger and also to prescribe certain conditions to the Merger. NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained herein, and intending to be legally bound hereby, the parties agree as follows: ARTICLE I THE MERGER 1.1 The Merger. Subject to the terms and conditions of this Agreement, in accordance with the Delaware General Corporation Law (the "DGCL") and the Illinois Business Corporation Act of 1983, as amended (the "IBCA"), at the Effective Time (as defined in Section 1.2), Northern Illinois and Premier shall merge with and into GPF which shall be the Resulting Corporation in the Merger and shall continue its corporate existence under the laws of the State of 10 Delaware. Upon consummation of the Merger, the separate corporate existence of Northern Illinois and Premier shall terminate. 1.2 Effective Time. The Merger shall become effective upon the later of (i) the issuance of a certificate of merger by the Secretary of State of the State of Illinois (the "Illinois Secretary"), following the filing of articles of merger with such office, and (ii) the time and date on which a certificate of merger is filed with the Secretary of State of the State of Delaware (the "Delaware Secretary"). The parties shall each use reasonable efforts to cause articles of merger to be filed, and a certificate of merger to be issued, by the Illinois Secretary and a certificate of merger to be filed with the Delaware Secretary on the Closing Date. The term "Effective Time" shall be the date and time when the Merger becomes effective, in accordance with this Section 1.2. 1.3 Effects of the Merger. At and after the Effective Time, the Merger shall have the effects set forth in Sections 259 and 261 of the DGCL and Section 11.50 of the IBCA. 1.4 Conversion of Northern Illinois Common Stock, Premier Common Stock and Premier Preferred Stock; Treatment of GPF Common Stock. At the Effective Time, in each case, subject to Section 2.2(e), by virtue of the Merger and without any action on the part of Northern Illinois, Premier or the holder of any of the following securities: (a) Each share of the common stock, no par value, of Northern Illinois (the "Northern Illinois Common Stock") issued and outstanding immediately prior to the Effective Time (other than shares of Northern Illinois Common Stock with respect to which the holders have validly asserted, and not withdrawn or forfeited, dissenters' rights pursuant to Sections 11.65 and 11.70 of the IBCA ("Dissenting Shares")) shall be converted into the right to receive 4.250 shares (the "Northern Illinois Exchange Ratio") of the common stock, par value $0.01 per share, of GPF (the "GPF Common Stock"). (b) Each share of common stock, par value $5.00 per share, of Premier (the "Premier Common Stock") issued and outstanding immediately prior to the Effective Time (other than shares of Premier Common Stock held in Premier's treasury) shall be converted into the right to receive 1.116 shares (the "Premier Exchange Ratio") of GPF Common Stock. (c) Each share of Series A Perpetual Preferred Stock of Premier, par value $1.00 per share and with a stated value of $1,000 per share (the "Premier Series A Perpetual Preferred Stock"), issued and outstanding immediately prior to the Effective Time (other than shares of Premier Series A Perpetual Preferred Stock with respect to which the holders have validly asserted, and not withdrawn, dissenters' rights pursuant to 2 11 Section 262 of the DGCL) shall be converted into the right to receive one share of Series A Perpetual Preferred Stock of GPF, par value $0.01 per share and with a stated value of $1,000 per share (the "GPF Series A Perpetual Preferred Stock," and together with the GPF Series B Perpetual Preferred Stock (as defined below) and the GPF Series C Perpetual Preferred Stock (as defined below), the "GPF Preferred Stock"), together with accrued but unpaid dividends on the Premier Series A Perpetual Preferred Stock to but not including the Effective Time. The terms of the GPF Series A Perpetual Preferred Stock shall be substantially identical to the terms of the Premier Series A Perpetual Preferred Stock. (d) Each share of Premier Series B Perpetual Preferred Stock of Premier, par value $1.00 per share and with a stated value of $1,000 per share, with a right of conversion into shares of Premier Common Stock (the "Premier Series B Perpetual Preferred Stock"), issued and outstanding immediately prior to the Effective Time (other than shares of Premier Series B Perpetual Preferred Stock with respect to which the holders have validly asserted, and not withdrawn, dissenters' rights pursuant to Section 262 of the DGCL) shall be converted into the right to receive one share of convertible preferred stock of GPF, par value $0.01 per share and with a stated value of $1,000 per share (the "GPF Series B Perpetual Preferred Stock"), together with accrued but unpaid dividends on the Premier Series B Perpetual Preferred Stock to but not including the Effective Time. The terms of the GPF Series B Perpetual Preferred Stock shall be substantially identical to the terms of the Premier Series B Perpetual Preferred Stock. (e) Each share of Series D Perpetual Preferred Stock of Premier, par value $1.00 per share and with a stated value of $1,000 per share (the "Series D Perpetual Preferred Stock"), issued and outstanding immediately prior to the Effective Time (other than shares of Premier Series D Perpetual Preferred Stock with respect to which the holders have validly asserted, and not withdrawn, dissenters' rights pursuant to Section 262 of the DGCL) shall be converted into the right to receive one share of perpetual preferred stock of GPF (the "GPF Series C Perpetual Preferred Stock"), together with accrued but unpaid dividends on the Premier Series D Perpetual Preferred Stock to but not including the Effective Time. The terms of the GPF Series C Perpetual Preferred Stock shall be substantially identical to the terms of the Premier Series D Perpetual Preferred Stock. (f) All of the shares of Northern Illinois Common Stock and Premier Common Stock converted into GPF Common Stock pursuant to this Article I shall no longer be outstanding and shall automatically be canceled and shall cease to exist as of the Effective Time, and each certificate (each a "Common Stock Certificate") previously representing any such shares of Northern 3 12 Illinois Common Stock or Premier Common Stock shall thereafter represent only the right to receive (i) a certificate representing the number of whole shares of GPF Common Stock and (ii) cash in lieu of fractional shares into which the shares of Northern Illinois Common Stock or Premier Common Stock represented by such Common Stock Certificate have been converted pursuant to this Section 1.4 and Section 2.2(e). Common Stock Certificates previously representing shares of Northern Illinois Common Stock and Premier Common Stock shall be exchanged for certificates representing whole shares of GPF Common Stock and cash in lieu of fractional shares issued in consideration therefor upon the surrender of such Common Stock Certificates in accordance with Section 2.2, without any interest thereon. If, prior to the Effective Time, the outstanding shares of Northern Illinois Common Stock or Premier Common Stock shall have been increased, decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar change in capitalization, then an appropriate and proportionate adjustment shall be made to the Northern Illinois Exchange Ratio and the Premier Exchange Ratio, respectively. (g) At the Effective Time, all shares of Premier Common Stock that are owned by Premier as treasury stock, if any, shall be canceled and shall cease to exist, and no stock of GPF or other consideration shall be delivered in exchange therefor. (h) All of the shares of Premier Series A Perpetual Preferred Stock, Series B Perpetual Preferred Stock, and Series D Perpetual Preferred Stock converted into GPF Preferred Stock pursuant to this Article I shall no longer be outstanding and shall automatically be canceled and shall cease to exist as of the Effective Time, and each certificate (each a "Preferred Stock Certificate") previously representing any such shares of Premier Preferred Stock shall thereafter represent only the right to receive a certificate representing the number of whole shares of corresponding GPF Preferred Stock into which the shares of Premier Preferred Stock represented by such Preferred Stock Certificate have been converted pursuant to this Section 1.4. Preferred Stock Certificates previously representing shares of Premier Preferred Stock shall be exchanged for certificates representing whole shares of corresponding GPF Preferred Stock issued in consideration therefor upon the surrender of such Preferred Stock Certificates in accordance with Section 2.2 hereof, without any interest thereon. (i) Any Dissenting Shares shall not be converted pursuant to this Agreement, and the holders thereof shall be entitled only to such rights as are granted by Sections 11.65 and 11.70 of the IBCA; provided that if any holder of shares of Northern Illinois Common Stock shall fail to perfect his or her 4 13 rights to payment pursuant to Section 11.70 of the IBCA, each share of Northern Illinois Common Stock held by such holder shall be converted into the right to receive the consideration specified in subparagraph (a) of this Section 1.4. (j) Each share of GPF Common Stock which is issued and outstanding immediately prior to the Effective Time shall at the Effective Time be automatically canceled without consideration and without further action. 1.5 Options. At the Effective Time, each option granted by Premier to purchase shares of Premier Common Stock which is outstanding and unexercised immediately prior thereto shall cease to represent a right to acquire shares of Premier Common Stock and shall be converted automatically into an option to purchase shares of GPF Common Stock in an amount and at an exercise price determined as provided below, subject to the terms of the Premier benefit plans under which they were issued (collectively, the "Premier Stock Plans") and the agreements evidencing grants of such options thereunder: (a) The number of shares of GPF Common Stock to be subject to each new option shall be equal to the product of the number of shares of Premier Common Stock subject to the original option and the Premier Exchange Ratio, provided that any fractional shares of GPF Common Stock resulting from such multiplication shall be rounded to the nearest whole share; and (b) The exercise price per share of GPF Common Stock under the new option shall be equal to the exercise price per share of Premier Common Stock under the original option divided by the Premier Exchange Ratio, provided that such exercise price shall be rounded down to the nearest whole cent. 1.6 Certificate of Incorporation. Subject to the terms and conditions of this Agreement, at the Effective Time, an amended and restated Certificate of Incorporation of GPF shall be filed with the Delaware Secretary so that the Amended and Restated Certificate of Incorporation of GPF, substantially in the form attached as Exhibit C hereto, shall be the Amended and Restated Certificate of Incorporation of the Resulting Corporation until thereafter amended in accordance with applicable law. 1.7 By-Laws. Subject to the terms and conditions of this Agreement, at the Effective Time, the By-Laws of GPF, substantially in the form attached as Exhibit D hereto, shall be the By-Laws of the Resulting Corporation until thereafter amended in accordance with applicable law. 1.8 Tax Consequences. It is intended that the Merger shall constitute a reorganization within the meaning of Section 368(a)(i)(A) of the Code, and that this Agreement shall constitute a "plan of reorganization" for the purposes of Section 368 of the Code. 5 14 1.9 Plans for Management Succession. At the Effective Time, (a) Richard L. Geach shall be the Chief Executive Officer of GPF, (b) Robert W. Hinman shall be the President and Chief Operating Officer of GPF, and (c) David L. Murray shall be an Executive Vice President and Chief Financial Officer of GPF. Mr. Hinman, or such other person nominated for the office of President by the Northern Illinois Representatives (as defined in Section 1.10), shall immediately and without further action of the Board of Directors become Chief Executive Officer of GPF on the date upon which Mr. Geach ceases to be Chief Executive Officer of GPF, which date shall in no event be later than December 31 of the third full calendar year following the year in which the Effective Time occurs. Nothing in this Section 1.9 shall preclude the Board of Directors of GPF from subsequently removing any person appointed as an officer of GPF pursuant to this Section 1.9. 1.10 Board of Directors; Filling of Vacancies on the Board. (a) From and after the Effective Time, the Board of Directors of GPF shall consist of sixteen (16) persons, including Mr. Geach, Mr. Hinman and Mr. Murray. Seven (7) directors, in addition to Mr. Hinman, shall have been selected by Northern Illinois (the "Northern Illinois Representatives"), and six (6) directors, in addition to Mr. Geach and Mr. Murray, shall have been selected by Premier (the "Premier Representatives"). The Northern Illinois Representatives and the Premier Representatives, respectively, shall be divided as equally as practicable among the three classes of directors of GPF, in accordance with Schedule 1.10, and shall serve in such capacities until their successors shall have been elected or appointed and shall have qualified in accordance with the Amended and Restated Certificate of Incorporation of GPF and By-laws of GPF and the DGCL. Directors chosen from among the Northern Illinois Representatives and the Premier Representatives shall be equally represented on the executive committee of the Board of Directors. (b) Prior to the third annual meeting of the stockholders of GPF, the Northern Illinois Representatives and the Premier Representatives, respectively, shall have the right to designate (i) the person or persons to fill any vacancies occurring on the Board of Directors of GPF as the result of the death, resignation or removal of any of the Northern Illinois Representatives or the Premier Representatives, respectively, (ii) the person or persons to be nominated in place of each of the Northern Illinois Representatives and Premier Representatives, respectively, whose terms of offices expire at each of the first three annual meetings of the stockholders of GPF, and (iii) the person or persons to serve on the executive committee in place of any Northern Illinois Representatives or Premier Representatives, respectively, previously appointed to the executive committee. For purposes of Section 1.9 and this Section 1.10, the terms "Northern Illinois Representatives" and "Premier Representatives" shall include any person or persons subsequently appointed or elected directors of GPF following their designation as nominees for director by the Northern Illinois Representatives or 6 15 Premier Representatives, respectively, in accordance with the preceding sentence. 1.11 Headquarters of GPF. At the Effective Time, the headquarters and principal executive offices of GPF shall be in Wauconda, Illinois, or in such other place as may be mutually agreed upon by Northern Illinois and Premier prior to the Effective Time. 1.12 Share Purchase Rights Agreement. At the Effective Time, GPF shall be a party to a Share Purchase Rights Agreement, substantially in the form of Exhibit E hereto (the "Rights Agreement"), and such Rights Agreement shall remain in effect from and after the Effective Time until such Rights Agreement is amended or terminated in accordance with its terms. 1.13 Closing. Subject to the terms and conditions of this Agreement and the Option Agreements, including but not limited to the provisions of Article VII of this Agreement, the closing of the Merger (the "Closing") will take place at 10:00 a.m. on a date and at a place to be specified by the parties, which shall be no later than the last business day in the calendar month in which all of the conditions precedent to the Merger set forth in Section 7.1(a), (b), (c) and (e) have occurred, unless such date is extended by mutual agreement of the parties (the "Closing Date"). ARTICLE II EXCHANGE OF SHARES 2.1 GPF to Make Shares Available. At or prior to the Effective Time, GPF shall deposit, or shall cause to be deposited, with a bank, trust company or other entity (including any subsidiary bank or trust company of GPF as of the Effective Time) reasonably acceptable to each of Northern Illinois and Premier (the "Exchange Agent"), for the benefit of the holders of Common Stock Certificates and Preferred Stock Certificates (collectively, the "Certificates"), for exchange in accordance with this Article II, certificates representing the shares of GPF Common Stock and GPF Preferred Stock and cash in lieu of any fractional shares of GPF Common Stock (such cash and certificates for shares of GPF Common Stock and GPF Preferred Stock, together with any dividends or distributions with respect thereto, being hereinafter referred to as the "Exchange Fund") to be issued pursuant to Section 1.4 and paid pursuant to Section 2.2(a) in exchange for outstanding shares of Northern Illinois Common Stock, Premier Common Stock or Premier Preferred Stock, respectively. 2.2 Exchange of Shares. (a) As soon as practicable after the Effective Time, and in no event later than ten business days thereafter, the Exchange Agent shall mail to each holder of record of one or more Certificates a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent) and instructions for use in effecting the surrender of 7 16 the Certificates in exchange for certificates representing the shares of GPF Common Stock, GPF Preferred Stock and any cash in lieu of fractional shares into which the shares of Northern Illinois Common Stock, Premier Common Stock and Premier Preferred Stock represented by such Certificate or Certificates shall have been converted pursuant to this Agreement. Upon proper surrender of a Certificate for exchange and cancellation to the Exchange Agent, together with such properly completed letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor, as applicable, (i) a certificate representing that number of whole shares of GPF Common Stock or GPF Preferred Stock to which such holder of Northern Illinois Common Stock, Premier Common Stock or Premier Preferred Stock shall have become entitled pursuant to the provisions of Article I, and (ii) a check representing the amount of any cash in lieu of fractional shares and, in the case of the Premier Preferred Stock, any accrued but unpaid dividends thereon, which such holder has the right to receive in respect of the Certificates surrendered pursuant to the provisions of this Article II, and the Certificate so surrendered shall forthwith be canceled. No interest will be paid or accrued on any cash in lieu of fractional shares or on any unpaid dividends and distributions payable to holders of Certificates. (b) No dividends or other distributions declared with respect to GPF Common Stock or GPF Preferred Stock with a record date following the Effective Time shall be paid to the holder of any unsurrendered Certificate until the holder thereof shall have surrendered such Certificate in accordance with this Article II. Subject to Section 2.2(e) and to the effect of applicable laws, after the surrender of a Certificate in accordance with this Article II, the record holder thereof shall be entitled to receive any such dividends or other distributions with a record date following the Effective Time, without any interest thereon, which had theretofore become payable with respect to shares of GPF Common Stock or GPF Preferred Stock represented by such Certificate. (c) If any certificate representing shares of GPF Common Stock or GPF Preferred Stock is to be issued in a name other than that in which the Certificate surrendered in exchange therefor is registered, it shall be a condition of the issuance thereof that the Certificate so surrendered shall be properly endorsed (or accompanied by an appropriate instrument of transfer) and otherwise in proper form for transfer, and that the person requesting such exchange shall pay to the Exchange Agent in advance any transfer or other taxes required by reason of the issuance of a certificate representing shares of GPF Common Stock or GPF Preferred Stock in any name other than that of the registered holder of the Certificate surrendered, or required for any other reason, or shall establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable. 8 17 (d) After the Effective Time, there shall be no transfers on the stock transfer books of Northern Illinois of the shares of Northern Illinois Common Stock and no transfers on the stock transfer books of Premier of the shares of Premier Common Stock or Premier Preferred Stock which were issued and outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates representing such shares are presented for transfer to the Exchange Agent, they shall be canceled and exchanged for certificates representing shares of GPF Common Stock or GPF Preferred Stock as provided in this Article II. (e) Notwithstanding anything to the contrary contained herein, no certificates or scrip representing fractional shares of GPF Common Stock shall be issued upon the surrender for exchange of Certificates, no dividend or distribution with respect to GPF Common Stock shall be payable on or with respect to any fractional share, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a stockholder of GPF. In lieu of the issuance of any such fractional share, GPF shall pay to each former stockholder of Northern Illinois and Premier who otherwise would be entitled to receive such fractional share an amount in cash determined by multiplying (i) $9.75 by (ii) the fraction of a share (rounded to the nearest thousandth when expressed as an Arabic number) of GPF Common Stock to which such holder would otherwise be entitled to receive pursuant to Section 1.4. (f) Any portion of the Exchange Fund that remains unclaimed by the stockholders of Northern Illinois and Premier for 12 months after the Effective Time shall be paid to GPF. Any stockholders of Northern Illinois and Premier who have not theretofore complied with this Article II shall thereafter look only to GPF for the issuance of certificates representing shares of GPF Common Stock or GPF Preferred Stock and the payment of cash in lieu of any fractional shares and any unpaid dividends and distributions on the GPF Common Stock or GPF Preferred Stock deliverable in respect of each share of Northern Illinois Common Stock, Premier Common Stock or Premier Preferred Stock, as the case may be, such stockholder holds as determined pursuant to this Agreement, in each case, without any interest thereon. Notwithstanding the foregoing, none of GPF, Northern Illinois, Premier, the Exchange Agent or any other person shall be liable to any former holder of shares of Northern Illinois Common Stock, Premier Common Stock or Premier Preferred Stock for any amount delivered in good faith to a public official pursuant to applicable abandoned property, escheat or similar laws. (g) In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if reasonably required by GPF, the posting by such person of a bond in such amount as GPF may determine is reasonably necessary as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for 9 18 such lost, stolen or destroyed Certificate the shares of GPF Common Stock, GPF Preferred Stock and any cash in lieu of fractional shares deliverable in respect thereof pursuant to this Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES OF NORTHERN ILLINOIS Except as disclosed in the Northern Illinois disclosure schedules delivered to Premier concurrently herewith (the "Northern Illinois Disclosure Schedules"), Northern Illinois hereby represents and warrants to Premier as follows: 3.1 Corporate Organization. (a) Northern Illinois is a corporation duly organized, validly existing and in good standing under the laws of the State of Illinois. Northern Illinois has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified would not have a Material Adverse Effect (as defined below) on Northern Illinois. Northern Illinois is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHC Act"). True and complete copies of the Articles of Incorporation and By-Laws of Northern Illinois, as in effect as of the date of this Agreement, have previously been made available by Northern Illinois to Premier. As used in this Agreement, the term "Material Adverse Effect" means, with respect to Northern Illinois, Premier or GPF, as the case may be, a material adverse effect on the business, results of operations, financial condition, or (insofar as they can reasonably be foreseen) prospects of such party and its Subsidiaries taken as a whole. The word "Subsidiary" when used with respect to any party means any bank, corporation, partnership, limited liability company, or other organization, whether incorporated or unincorporated, which is consolidated with such party for financial reporting purposes. (b) As of the date of this Agreement, Northern Illinois has, as its sole direct or indirect Subsidiaries, Grand National Bank (South Chicago Heights), a national banking association, First National Bank of Niles, a national banking association, Grand National Bank (Waukegan), a national banking association, Grand National Bank (Crystal Lake), a national banking association, and American Suburban Mortgage Corporation, an Illinois corporation (the "Northern Illinois Subsidiaries"). On November 27, 1995, Northern Illinois filed an application with the Office of the Comptroller of the Currency (the "Comptroller") requesting the Comptroller's approval to effect the merger of the Northern Illinois Subsidiaries that are organized as national banks into a single national banking association under the charter of Grand National Bank (Crystal Lake) and with the name of Grand National Bank (the "Northern Illinois Subsidiary Bank Merger"). 10 19 In the event that such application is approved and the Northern Illinois Subsidiary Bank Merger is effected prior to the Effective Time, at the Effective Time Northern Illinois will have, as its sole Subsidiaries, Grand National Bank and American Suburban Mortgage Corporation. Except as set forth in Schedule 3.1(b) of the Northern Illinois Disclosure Schedules, Northern Illinois does not own any voting stock or equity securities of any bank, corporation, partnership, limited liability company, or other organization, whether incorporated or unincorporated, other than the Northern Illinois Subsidiaries. (c) Each Northern Illinois Subsidiary (i) is duly organized and validly existing as a bank or corporation under the laws of its jurisdiction of organization, (ii) is duly qualified to do business and in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so qualified and in which the failure to be so qualified would have a Material Adverse Effect on Northern Illinois, and (iii) has all requisite corporate power and authority to own or lease its properties and assets and to carry on its business as now conducted. Except as set forth in Schedule 3.1(c) of the Northern Illinois Disclosure Schedules, none of the Northern Illinois Subsidiaries owns any voting stock or equity securities of any bank, corporation, partnership, limited liability company, or other organization, whether incorporated or unincorporated. (d) The minute books of Northern Illinois and of each of the Northern Illinois Subsidiaries accurately reflect in all material respects all corporate meetings held or actions taken since January 1, 1994 by the stockholders and Boards of Directors of Northern Illinois and each Northern Illinois Subsidiary, respectively, (including committees of the Boards of Directors of Northern Illinois and the Northern Illinois Subsidiaries). 3.2 Capitalization. (a) The authorized capital stock of Northern Illinois consists of 10,000,000 shares of Northern Illinois Common Stock, of which, as of December 31, 1995, 2,956,784 shares were issued and outstanding and no shares were held in treasury. All of the issued and outstanding shares of Northern Illinois Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. Except for the Northern Illinois Option Agreement, Northern Illinois does not have and is not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of Northern Illinois Common Stock or any other equity securities of Northern Illinois or any securities representing the right to purchase or otherwise receive any shares of Northern Illinois Common Stock. No shares of Northern Illinois Common Stock have been reserved for issuance, other than the shares of Northern Illinois Common Stock reserved for issuance under the Northern Illinois Option Agreement. Since December 31, 1995, Northern Illinois 11 20 has not issued any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock. (b) Northern Illinois owns, directly or indirectly, all of the issued and outstanding shares of capital stock of each of the Northern Illinois Subsidiaries, free and clear of any liens, pledges, charges, encumbrances and security interests whatsoever ("Liens"), and all of such shares are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. No Northern Illinois Subsidiary has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of such Northern Illinois Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Northern Illinois Subsidiary. 3.3 Certain Beneficial Owners of Northern Illinois Common Stock and Premier Common Stock. Schedule 3.3 of the Northern Illinois Disclosure Schedules sets forth the name and the number of shares of Northern Illinois Common Stock and the percentage of the outstanding shares of Northern Illinois Common Stock beneficially owned by any individual, entity or group, including any "person" within the meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), known to Northern Illinois to be the beneficial owner, alone or together with such person's affiliates or associates (as such terms are defined in Rule 12b-2 under the Exchange Act), of 10% or more of the outstanding shares of Northern Illinois Common Stock as of the date of this Agreement. To the best knowledge of Northern Illinois, no person listed on Schedule 3.3 beneficially owns any shares of Premier Common Stock as of the date of this Agreement. For purposes of this Agreement, "beneficial ownership" shall have the meaning given such term in Rule 13d-3 under the Exchange Act. 3.4 Authority; No Violation. (a) Northern Illinois has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by the Board of Directors of Northern Illinois. The Board of Directors of Northern Illinois has directed that this Agreement and the transactions contemplated hereby be submitted to Northern Illinois' stockholders for approval at a meeting of such stockholders and, except for the adoption of this Agreement by the affirmative vote of the holders of two-thirds of the outstanding shares of Northern Illinois Common Stock, no other corporate proceedings on the part of Northern Illinois are necessary to approve this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Northern Illinois and (assuming due authorization, execution and delivery by Premier and 12 21 GPF) constitutes a valid and binding obligation of Northern Illinois, enforceable against Northern Illinois in accordance with its terms. (b) Neither the execution and delivery of this Agreement by Northern Illinois nor the consummation by Northern Illinois of the transactions contemplated hereby, nor compliance by Northern Illinois with any of the terms or provisions hereof, will (i) violate any provision of the Articles of Incorporation or By-Laws of Northern Illinois, or (ii) assuming that the consents and approvals referred to in Section 3.5 are duly obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Northern Illinois or any of the Northern Illinois Subsidiaries or any of their respective properties or assets, or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of Northern Illinois or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Northern Illinois or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except (in the case of clause (y) above) for such violations, conflicts, breaches or defaults which, either individually or in the aggregate, will not have or be reasonably likely to have a Material Adverse Effect on Northern Illinois or GPF. 3.5 Consents and Approvals. No consents or approvals of or filings or registrations with any court, administrative agency or commission or other governmental authority or instrumentality (each a "Governmental Entity") or with any third party are necessary in connection with the execution and delivery by Northern Illinois of this Agreement and the consummation by Northern Illinois of the Merger and the other transactions contemplated hereby except for (a) the filing by GPF of an application with the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") under the BHC Act and the approval of such application, (b) the filing with the Securities and Exchange Commission (the "SEC") of a joint proxy statement in definitive form relating to the meetings of Northern Illinois' and Premier's stockholders to be held in connection with this Agreement and the transactions contemplated hereby (the "Joint Proxy Statement") and the registration statement on Form S-4 (the "S- 4") in which such Joint Proxy Statement will be included as a prospectus, (c) the filing of a registration statement on Form 8-A (the "8-A") registering the GPF Common Stock under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (d) the filing of articles of merger with, and the issuance of a certificate of merger by, the Illinois Secretary under the IBCA, and the filing of a certificate of merger with the Delaware Secretary 13 22 pursuant to the DGCL, (e) the filing of a consent to service of process, an appointment of the Illinois Secretary as agent for service of process, and an agreement with respect to any Dissenting Shares required to be filed by GPF with the Illinois Secretary pursuant to Section 11.35 of the IBCA, (f) such filings and approvals as are required to be made or obtained under the securities or "Blue Sky" laws of various states in connection with the issuance of the shares of GPF Common Stock and GPF Preferred Stock pursuant to this Agreement, (g) the approval of an application to list the GPF Common Stock on The Nasdaq Stock Market's National Market, subject to official notice of issuance, and (h) the approval of this Agreement by the requisite vote of the stockholders of Northern Illinois and Premier. 3.6 Reports. Northern Illinois and each of the Northern Illinois Subsidiaries have timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file since January 1, 1994 with (i) the Federal Reserve Board, (ii) the Federal Deposit Insurance Corporation (the "FDIC"), (iii) any state regulatory authority (each a "State Regulator"), (iv) the Comptroller, (vi) the SEC, and (vii) any self-regulatory organization ("SRO") with jurisdiction over any of the activities of Northern Illinois or any of its Subsidiaries (collectively "Regulatory Agencies"), and all other reports and statements required to be filed by them since January 1, 1994, including, without limitation, any report or statement required to be filed pursuant to the laws, rules or regulations of the United States, any state, or any Regulatory Agency, and have paid all fees and assessments due and payable in connection therewith, except where the failure to file such report, registration or statement or to pay such fees and assessments, either individually or in the aggregate, will not have a Material Adverse Effect on Northern Illinois or GPF. Except for normal examinations conducted by a Regulatory Agency in the regular course of the business of Northern Illinois and the Northern Illinois Subsidiaries, no Regulatory Agency has initiated any proceeding or, to the best knowledge of Northern Illinois, investigation into the business or operations of Northern Illinois or any of the Northern Illinois Subsidiaries since January 1, 1994. There is no unresolved written violation, written criticism, or written exception by any Regulatory Agency with respect to any report or statement relating to any examinations of Northern Illinois or any of the Northern Illinois Subsidiaries, which is likely, either individually or in the aggregate, to have a Material Adverse Effect on Northern Illinois or GPF. 3.7 Financial Statements. Northern Illinois has previously made available to Premier copies of (a) the consolidated balance sheets of Northern Illinois and its Subsidiaries as of December 31, 1993 and 1994 and the related consolidated statements of income, changes in stockholders' equity and cash flows for the fiscal years ended December 31, 1992, 1993 and 1994, inclusive, as reported in Northern Illinois' Annual Report on Form 10-K for the fiscal year 14 23 ended December 31, 1994 filed with the SEC under the Exchange Act, in each case accompanied by the audit report of Hutton, Nelson and McDonald LLP, independent public accountants with respect to Northern Illinois, and (b) the unaudited consolidated balance sheet of Northern Illinois and its Subsidiaries as of September 30, 1995 and September 30, 1994 and the related unaudited consolidated statements of income, cash flows and changes in stockholders' equity for the three- and nine-month periods then ended as reported in Northern Illinois' Quarterly Report on Form 10-Q for the period ended September 30, 1995 filed with the SEC under the Exchange Act (the "Northern Illinois Third Quarter 10-Q"). The December 31, 1994 consolidated balance sheet of Northern Illinois (including the related notes, where applicable) fairly presents the consolidated financial position of Northern Illinois and its Subsidiaries as of the date thereof, and the other financial statements referred to in this Section 3.7 (including the related notes, where applicable) fairly present the results of the consolidated operations and changes in stockholders' equity and consolidated financial position of Northern Illinois and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth, subject, in the case of the unaudited statements, to recurring audit adjustments normal in nature and amount; each of such statements (including the related notes, where applicable) comply in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto; and each of such statements (including the related notes, where applicable) has been prepared in all material respects in accordance with generally accepted accounting principles ("GAAP") consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q. The books and records of Northern Illinois and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. 3.8 Broker's Fees. Except as set forth in Schedule 3.8, neither Northern Illinois nor any Northern Illinois Subsidiary nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with the Merger or related transactions contemplated by this Agreement or the Option Agreements. 3.9 Absence of Certain Changes or Events. (a) Except as publicly disclosed in Northern Illinois Reports (as defined in Section 3.13) filed prior to the date hereof, since September 30, 1995, (i) Northern Illinois and its Subsidiaries taken as a whole have not incurred any material liability, except in the ordinary course of their business, and (ii) no event has occurred which has had, individually or in the aggregate, a Material Adverse Effect on Northern Illinois or will have a Material Adverse Effect on GPF. 15 24 (b) Except as publicly disclosed in the Northern Illinois Reports filed prior to the date hereof, since September 30, 1995, Northern Illinois and its Subsidiaries have carried on their respective businesses in all material respects in the ordinary and usual course. (c) Since December 31, 1994, neither Northern Illinois nor any of its Subsidiaries has (i) except for such actions as are in the ordinary course of business consistent with past practice or except as required by applicable law, (A) increased the wages, salaries, compensation, pension, or other fringe benefits or perquisites payable to any executive officer, employee, or director from the amount thereof in effect as of December 31, 1994, or (B) granted any severance or termination pay, entered into any contract to make or grant any severance or termination pay, or paid any bonuses, other than customary year-end bonuses for the 1994 and 1995 fiscal years which did not exceed, in the aggregate, 5% of Northern Illinois' 1994 salary and employee benefits, or (ii) suffered any strike, work stoppage, slowdown, or other labor disturbance. 3.10 Legal Proceedings. (a) Except as set forth in Schedule 3.10(a), there are no pending or, to the best of Northern Illinois' knowledge, threatened, legal, administrative, arbitration or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Northern Illinois or any of its Subsidiaries or challenging the validity or propriety of the transactions contemplated by this Agreement or the Northern Illinois Option Agreement. (b) There is no injunction, order, judgment, decree, or regulatory restriction (other than those that apply to similarly situated bank holding companies or banks) imposed upon Northern Illinois, any of its Subsidiaries or the assets of Northern Illinois or any of its Subsidiaries. 3.11 Taxes and Tax Returns. (a) Each of Northern Illinois and its Subsidiaries has duly filed all federal, state, county, foreign and, to the best of Northern Illinois' knowledge, local information returns and tax returns required to be filed by it on or prior to the date hereof (all such returns being accurate and complete in all material respects) and has duly paid or made provisions for the payment of all Taxes (as defined in Section 3.11(b)) and other governmental charges which have been incurred or are due or claimed to be due from it by federal, state, county, foreign or local taxing authorities on or prior to the date of this Agreement (including, without limitation, if and to the extent applicable, those due in respect of its properties, income, business, capital stock, deposits, franchises, licenses, sales and payrolls) other than Taxes or other charges which are not yet delinquent or are being contested in good faith and have not been finally determined. The income tax returns of Northern Illinois and its Subsidiaries have never been examined by the Internal Revenue Service (the "IRS"). There are no material disputes 16 25 pending, or claims asserted for, Taxes or assessments upon Northern Illinois or any of its Subsidiaries for which Northern Illinois does not have adequate reserves, nor has Northern Illinois or any of its Subsidiaries given any currently effective waivers extending the statutory period of limitation applicable to any federal, state, county or local income tax return for any period. In addition, (i) proper and accurate amounts have been withheld by Northern Illinois and its Subsidiaries from their employees for all prior periods in compliance in all material respects with the tax withholding provisions of applicable federal, state and local laws, except where failure to do so would not have a Material Adverse Effect on Northern Illinois, (ii) federal, state, county and local returns which are accurate and complete in all material respects have been filed by Northern Illinois and its Subsidiaries for all periods for which returns were due with respect to income tax withholding, Social Security and unemployment taxes, (iii) the amounts shown on such federal, state, local or county returns to be due and payable have been paid in full or adequate provision therefor has been included by Northern Illinois in its consolidated financial statements as of December 31, 1994, and (iv) there are no Tax liens upon any property or assets of Northern Illinois or its Subsidiaries except liens for current taxes not yet due. Except as set forth in Schedule 3.11, neither Northern Illinois nor any of its Subsidiaries has been required to include in income any adjustment pursuant to Section 481 of the Code by reason of a voluntary change in accounting method initiated by Northern Illinois or any of its Subsidiaries, and the IRS has not initiated or proposed any such adjustment or change in accounting method. Except as set forth in the financial statements described in Section 3.7, neither Northern Illinois nor any of its Subsidiaries has entered into a transaction which is being accounted for as an installment obligation under Section 453 of the Code. (b) As used in this Agreement, the term "Tax" or "Taxes" means all federal, state, county, local, and foreign income, excise, gross receipts, gross income, ad valorem, profits, gains, property, capital, sales, transfer, use, payroll, employment, severance, withholding, duties, intangibles, franchise, backup withholding, and other taxes, charges, levies or like assessments together with all penalties and additions to tax and interest thereon. 3.12 Employees. (a) Schedule 3.12 in the Northern Illinois Disclosure Schedules sets forth a true and complete list of each employee benefit plan, arrangement, commitment, agreement or understanding that is maintained as of the date of this Agreement (the "Northern Illinois Benefit Plans") (i) by Northern Illinois or any of its Subsidiaries or (ii) by any trade or business, whether or not incorporated which (A) is under "common control," as described in Section 414(c) of the Code, with Northern Illinois, or (B) is a member of a "controlled group," as defined in Section 414(b) of the Code, which includes Northern Illinois (a "Northern Illinois ERISA Affiliate"), all of which together with Northern Illinois would be 17 26 deemed a "single employer" within the meaning of Section 4001 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). (b) Northern Illinois has heretofore delivered to Premier true and complete copies of each of the Northern Illinois Benefit Plans and certain related documents, including, but not limited to, (i) the actuarial report for such Northern Illinois Benefit Plan (if applicable) for each of the last two years, and (ii) the most recent determination letter from the IRS (if applicable) for such Northern Illinois Benefit Plan. (c) (i) Each of the Northern Illinois Benefit Plans has been operated and administered in all material respects with applicable laws, including, but not limited to, ERISA and the Code, (ii) each of the Northern Illinois Benefit Plans intended to be "qualified" within the meaning of Section 401(a) of the Code is so qualified, (iii) with respect to each Northern Illinois Benefit Plan which is subject to Title IV of ERISA, the present value of accrued benefits under such Northern Illinois Benefit Plan, based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such Northern Illinois Benefit Plan's actuary with respect to such Northern Illinois Benefit Plan, did not, as of its latest valuation date, exceed the then current value of the assets of such Northern Illinois Benefit Plan allocable to such accrued benefits, (iv) no Northern Illinois Benefit Plan provides benefits, including, without limitation, death or medical benefits (whether or not insured), with respect to current or former employees of Northern Illinois, its Subsidiaries or any ERISA Affiliate beyond their retirement or other termination of service, other than (A) coverage mandated by applicable law, (B) death benefits or retirement benefits under any "employee pension plan" (as such term is defined in Section 3(2) of ERISA), (C) deferred compensation benefits accrued as liabilities on the books of Northern Illinois, its Subsidiaries or the ERISA Affiliates, or (D) benefits the full cost of which is borne by the current or former employee (or his beneficiary), (v) no material liability under Title IV of ERISA has been incurred by Northern Illinois, its Subsidiaries or any ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to Northern Illinois, its Subsidiaries or any ERISA Affiliate of incurring a material liability thereunder, (vi) no Northern Illinois Benefit Plan is a "multiemployer pension plan" (as such term is defined in Section 3(37) of ERISA), (vii) all contributions or other amounts payable by Northern Illinois or its Subsidiaries as of the Effective Time with respect to each Northern Illinois Benefit Plan in respect of current or prior plan years have been paid or accrued in accordance with GAAP and Section 412 of the Code, (viii) neither Northern Illinois, its Subsidiaries nor any ERISA Affiliate has engaged in a transaction in connection with which Northern Illinois, its Subsidiaries or any ERISA Affiliate reasonably could be subject to either a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code, and (ix) to the best knowledge of Northern Illinois, 18 27 there are no pending, threatened or anticipated claims (other than routine claims for benefits) by, on behalf of or against any of the Northern Illinois Benefit Plans or any trusts related thereto which are, in the reasonable judgment of Northern Illinois, likely, either individually or in the aggregate, to have a Material Adverse Effect on Northern Illinois. 3.13 SEC Reports. Northern Illinois has previously made available to Premier an accurate and complete copy of each (a) final registration statement, prospectus, report, schedule and definitive proxy statement filed since January 1, 1994 by Northern Illinois with the SEC pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act (the "Northern Illinois Reports") and prior to the date hereof and (b) communication mailed by Northern Illinois to its stockholders since January 1, 1994 and prior to the date hereof. None of the Northern Illinois Reports or such communications to stockholders contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, except that information as of a later date shall be deemed to modify information as of an earlier date. Since January 1, 1994, Northern Illinois has timely filed all Northern Illinois Reports and other documents required to be filed by it under the Securities Act and the Exchange Act, and, as of their respective dates, all Northern Illinois Reports complied in all material respects with the published rules and regulations of the SEC with respect thereto. 3.14 Compliance with Applicable Law. Northern Illinois and each of its Subsidiaries hold all licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses under and pursuant to all, and have complied with and are not in default under any, applicable laws, statutes, orders, rules, regulations, policies and/or guidelines of any Governmental Entity relating to Northern Illinois or any of its Subsidiaries, except where the failure to hold such license, franchise, permit or authorization or such noncompliance or default would not, individually or in the aggregate, have a Material Adverse Effect on Northern Illinois. 3.15 Certain Contracts. (a) Except as set forth in Schedule 3.15 of the Northern Illinois Disclosure Schedules, neither Northern Illinois nor any of its Subsidiaries is a party to or bound by: (i) any contract, arrangement, commitment or understanding (whether written or oral) with respect to the employment of any directors, officers or employees other than in the ordinary course of business consistent with past practice; (ii) any contract, arrangement, commitment or understanding (whether written or oral) which, upon the consummation of the transactions contemplated by this Agreement will (either alone or 19 28 upon the occurrence of any additional acts or events) result in any payment (including, without limitation, severance, unemployment compensation, golden parachute or otherwise) becoming due from Northern Illinois, Premier, GPF or any of their respective Subsidiaries to any officer, director or employee thereof; (iii) any contract, arrangement, commitment or understanding (whether written or oral) which is a "material contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement that has not been filed or incorporated by reference in the Northern Illinois Reports; (iv) any contract, arrangement, commitment or understanding (whether written or oral)which materially restricts the conduct of any line of business by Northern Illinois; (v) any contract, arrangement, commitment or understanding (whether written or oral) with a labor union or guild (including any collective bargaining agreement); or (vi) any contract, arrangement, commitment or understanding (whether written or oral), including any stock option plan, stock appreciation rights plan, restricted stock plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement, or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. Northern Illinois has previously made available to Premier true and correct copies of all employment and deferred compensation agreements which are in writing and to which Northern Illinois is a party. Each contract, arrangement, commitment or understanding of the type described in this Section 3.15(a), whether or not set forth in the Northern Illinois Disclosure Schedules, is referred to herein as a "Northern Illinois Contract", and neither Northern Illinois nor any of its Subsidiaries knows of, or has received notice of, any violation of the above by any of the other parties thereto, which, individually or in the aggregate, would have a Material Adverse Effect on Northern Illinois or GPF. (b) (i) Each Northern Illinois Contract is valid and binding on Northern Illinois or any of its Subsidiaries, as applicable, and is in full force and effect, (ii) Northern Illinois and each of its Subsidiaries has performed all obligations required to be performed by it to date under each Northern Illinois Contract, except where such noncompliance, individually or in the aggregate, would not have a Material Adverse Effect on Northern Illinois, and (iii) no event or condition exists which constitutes or, after notice or lapse of time 20 29 or both, would constitute, a default on the part of Northern Illinois or any of its Subsidiaries under any such Northern Illinois Contract, except where any such default, individually or in the aggregate, would not have a Material Adverse Effect on Northern Illinois or GPF. 3.16 Agreements with Regulatory Agencies. Neither Northern Illinois nor any of its Subsidiaries is subject to any cease-and- desist or other order issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or has been since January 1, 1994, a recipient of any supervisory letter from, or since January 1, 1994, has adopted any board resolutions at the request of any Regulatory Agency or other Governmental Entity that currently restricts the conduct of its business or that relates to its capital adequacy, its credit policies, its management or its business (each, whether or not set forth in the Northern Illinois Disclosure Schedules, a "Northern Illinois Regulatory Agreement"), nor has Northern Illinois or any of its Subsidiaries been advised since January 1, 1994, by any Regulatory Agency or other Governmental Entity that it is considering issuing or requesting any such Northern Illinois Regulatory Agreement. 3.17 Other Activities of Northern Illinois and its Subsidiaries. (a) Neither Northern Illinois nor any of its Subsidiaries that is neither a bank, a bank operating subsidiary or a bank service corporation directly or indirectly engages in any activity prohibited by the Federal Reserve Board. Without limiting the generality of the foregoing, no equity investment of Northern Illinois and each Northern Illinois Subsidiary that is not a bank, bank operating subsidiary or a bank service corporation is prohibited by the Federal Reserve Board. (b) Each Northern Illinois Subsidiary that engages in personal trust, corporate trust and other fiduciary activities ("Trust Activities") engages in such Trust Activities with requisite authority under the applicable law of Governmental Entities and in accordance in all material respects with the terms of the agreements and instruments governing such Trust Activities and applicable law and regulation (specifically including, but not limited to, applicable law governing such Northern Illinois Subsidiary's performance of its fiduciary obligations and Section 9 of Title 12 of the Code of Federal Regulations); there is no investigation or inquiry by any Governmental Entity pending, or to the best knowledge of Northern Illinois, threatened, against or affecting Northern Illinois or any Northern Illinois Subsidiary relating to the compliance by Northern Illinois or any Northern Illinois Subsidiary with sound fiduciary principles and applicable regulations; and except where any such failure would not have a Material Adverse Effect on Northern Illinois, each employee of a Northern Illinois Subsidiary had the authority to act in the capacity in which he or she acted with respect to Trust Activities, in 21 30 each case, in which such employee held himself or herself out as a representative of a Northern Illinois Subsidiary; and each Northern Illinois Subsidiary has established policies and procedures for the purpose of complying with applicable laws of Governmental Entities relating to Trust Activities, has followed such policies and procedures in all material respects and has performed appropriate internal audit reviews of, and has engaged independent accountants to perform audits of, Trust Activities, which audits since January 1, 1994 have disclosed no material violations of applicable laws of Governmental Entities or such policies and procedures. 3.18 Investment Securities. Each of Northern Illinois and its Subsidiaries has good and marketable title to all securities held by it (except securities sold under repurchase agreements or held in any fiduciary or agency capacity), free and clear of any Lien, except to the extent such securities are pledged in the ordinary course of business consistent with prudent banking practices to secure obligations of Northern Illinois or any of the Northern Illinois Subsidiaries. Such securities are valued on the books of Northern Illinois and the Northern Illinois Subsidiaries in accordance with GAAP. 3.19 Undisclosed Liabilities. Except for those liabilities that are fully reflected or reserved against on the consolidated balance sheet of Northern Illinois included in the Northern Illinois Third-Quarter 10-Q and for liabilities incurred in the ordinary course of business consistent with past practice, since September 30, 1995 neither Northern Illinois nor any of the Northern Illinois Subsidiaries has incurred any liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due) that, either alone or when combined with all similar liabilities, has had, or could reasonably be expected to have, a Material Adverse Effect on Northern Illinois. 3.20 Environmental Liability. There are no legal, administrative, arbitration or other proceedings, claims, actions, causes of action, private environmental investigations or remediation activities or governmental investigations of any nature pending or, to the best of Northern Illinois' knowledge, threatened against Northern Illinois seeking to impose, or that could reasonably result in the imposition, on Northern Illinois of any liability or obligation arising under common law or under any local, state or federal environmental statute, regulation or ordinance including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"). To the best of Northern Illinois' knowledge, there is no reasonable basis for any such proceeding, claim, action or governmental investigation that would impose any such liability or obligation. Northern Illinois is not subject to any agreement, order, judgment, decree, letter or memorandum by or with any court, governmental authority, regulatory agency or third party imposing any such liability or obligation. 22 31 3.21 Insurance. Schedule 3.21 in the Northern Illinois Disclosure Schedules describes all policies of insurance in which Northern Illinois or any of the Northern Illinois Subsidiaries is named as an insured party or which otherwise relate to or cover any assets or properties of Northern Illinois or any of the Northern Illinois Subsidiaries. Each of such policies is in full force and effect, and the coverage provided under such properties complies with the requirements of any contracts binding on Northern Illinois or any of the Northern Illinois Subsidiaries relating to such assets or properties. 3.22 Loan Loss Reserves. Except as set forth in Schedule 3.22, the reserve for possible loan losses shown on the September 30, 1995 call reports filed for each of the Northern Illinois Subsidiaries is adequate in all material respects under the requirements of GAAP to provide for possible losses, net of recoveries relating to loans previously charged off, on loans outstanding (including accrued interest receivable) as of September 30, 1995. The aggregate loan balances of each of the Northern Illinois Subsidiaries at such date in excess of such reserves are, to the best knowledge and belief of Northern Illinois, collectible in accordance with their terms. 3.23 Approval Delays. Northern Illinois knows of no reason why any of the Requisite Regulatory Approvals (as defined in Section 7.1(c)) should be denied or unduly delayed. 3.24 Pooling of Interests. As of the date of this Agreement, Northern Illinois has no reason to believe that the Merger will not qualify as a "pooling of interests" for accounting purposes. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PREMIER Except as disclosed in the Premier disclosure schedules delivered to Northern Illinois concurrently herewith (the "Premier Disclosure Schedules"), Premier hereby represents and warrants to Northern Illinois as follows: 4.1 Corporate Organization. (a) Premier is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Premier has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified would not have a Material Adverse Effect on Premier. Premier is duly registered as a bank holding company under the BHC Act. True and complete copies of the Restated Certificate of 23 32 Incorporation and By-Laws of Premier, as in effect as of the date of this Agreement, have previously been made available by Premier to Northern Illinois. (b) As of the date of this Agreement, Premier, has as its sole direct or indirect Subsidiaries, First Bank North, an Illinois state bank, First Bank South, an Illinois state bank, First National Bank of Northbrook, a national banking association, First Security Bank of Cary Grove, an Illinois state bank, Premier Acquisition Company, a Delaware corporation and an intermediate holding company for First National Bank of Northbrook and First Security Bank of Cary Grove, Premier Operating Systems, Inc., an Illinois corporation, Premier Trust Services, Inc., an Illinois trust company, and Premier Insurance Services, Inc., an Illinois corporation (the "Premier Subsidiaries"). Premier does not own, directly or indirectly, any voting stock or equity securities of any bank, corporation, partnership, limited liability company, or other organization, whether incorporated or unincorporated, other than the Premier Subsidiaries. (c) Each Premier Subsidiary (i) is duly organized and validly existing as a bank, trust company or corporation under the laws of its jurisdiction of organization, (ii) is duly qualified to do business and in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so qualified and in which the failure to be so qualified would have a Material Adverse Effect on Premier, and (iii) has all requisite corporate power and authority to own or lease its properties and assets and to carry on its business as now conducted. None of the Premier Subsidiaries owns any voting stock or equity securities of any bank, corporation, partnership, limited liability company, or other organization, whether incorporated or unincorporated, except that First Bank North owns all of the issued and outstanding capital stock of Premier Trust Services, Inc. (d) The minute books of Premier and of each of the Premier Subsidiaries accurately reflect in all material respects all corporate meetings held or actions taken since January 1, 1994 of the stockholders and Boards of Directors of Premier and each Premier Subsidiary, respectively, (including committees of the Boards of Directors of Premier and the Premier Subsidiaries). 4.2 Capitalization. (a) The authorized capital stock of Premier consists of 15,000,000 shares of Premier Common Stock, of which, as of December 31, 1995, 6,544,347 shares were issued and outstanding, and 1,000,000 shares of Preferred Stock, par value $1.00 per share (the "Premier Preferred Stock", of which (i) 7,000 shares were designated and 5,000 shares were issued and outstanding as Premier Series A Perpetual Preferred Stock, (ii) 7,250 shares were designated and issued and outstanding as Premier Series B Perpetual Preferred Stock, and (iii) 2,000 shares were designated and issued and outstanding as Premier Series D Perpetual Preferred Stock. During the 24 33 fiscal year ended December 31, 1994, (i) Premier redeemed all 1,950 shares of Premier Series C Perpetual Preferred Stock, with a par value of $1.00 and a stated value of $1,000 per share, that had previously been authorized and issued, and such shares reverted to authorized but unissued shares of Premier Preferred Stock in accordance with the terms of the Certificate of Designation establishing the Premier Series C Perpetual Preferred Stock, and (ii) 1,300 shares of Premier Series D Perpetual Preferred Stock were converted into 1,300 shares of Premier Series B Perpetual Perpetual Preferred Stock and such 1,300 shares of Series D Perpetual Preferred Stock reverted to authorized but unissued shares of Premier Preferred Stock, in accordance with the terms and conditions of the Certificate of Designation establishing the Premier Series D Perpetual Preferred Stock. As of December 31, 1995, no shares of Premier Common Stock were held in treasury. On December 31, 1995, no shares of Premier Common Stock or Premier Preferred Stock were reserved for issuance, except for (i) 397,799 shares of Premier Common Stock reserved for issuance upon the exercise of stock options pursuant to the Premier Stock Plans, (ii) 763,157 shares of Premier Common Stock reserved for issuance upon the conversion of the Series B Perpetual Preferred Stock, (iii) the shares of Premier Common Stock issuable pursuant to the Premier Option Agreement, and (iv) 200,000 shares of Premier Common Stock reserved for issuance pursuant to the Premier Benefit plans, other than the stock option plans. All of the issued and outstanding shares of Premier Common Stock and Premier Preferred Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. As of the date of this Agreement, except for the Premier Option Agreement, certain provisions of the Certificates of Designation of the Premier Series B Perpetual Preferred Stock and the Premier Series D Perpetual Preferred Stock, and the Premier Stock Plans, Premier does not have and is not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of Premier Common Stock or Premier Preferred Stock or any other equity securities of Premier or any securities representing the right to purchase or otherwise receive any shares of Premier Common Stock or Premier Preferred Stock. Assuming compliance by Northern Illinois and GPF with Article I of this Agreement, after the Effective Time, there will not be any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character by which Premier or any of the Premier Subsidiaries will be bound calling for the purchase or issuance of any shares of the capital stock of Premier. Premier has previously provided Northern Illinois with a list of the option holders, the date of each option to purchase Premier Common Stock granted, the number of shares subject to each such option, the expiration date of each such option, and the price at which each such option may be exercised under an applicable Premier Stock Plan. Since September 30, 1995, Premier has not issued any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock, other than pursuant to the exercise of employee stock options granted prior to such date. 25 34 (b) Premier owns, directly or indirectly, all of the issued and outstanding shares of capital stock of each of the Premier Subsidiaries, free and clear of any Liens, except that 100% of the capital stock of Premier Acquisition Company, First Bank North, First Bank South, First National Bank of Northbrook and First Security Bank of Cary Grove have been pledged to Firstar Bank-Milwaukee to secure Premier's obligations under a $15 million revolving credit facility maturing in January, 1999. All of the shares of capital stock of each of the Premier Subsidiaries are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. No Premier Subsidiary has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of such Premier Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Premier Subsidiary. 4.3 Certain Beneficial Owners of Premier Common Stock and Northern Illinois Common Stock. Schedule 4.3 of the Premier Disclosure Schedules sets forth the name and the number of shares of Premier Common Stock and the percentage of the outstanding shares of Premier Common Stock beneficially owned by any individual, entity or group, including any "person" within the meaning of Sections 13(d)(3) or 14(d)(2) of the Exchange Act, known to Premier to be the beneficial owner, alone or together with such person's affiliates or associates (as such terms are defined in Rule 12b-2 under the Exchange Act), of 10% or more of the outstanding shares of Premier Common Stock as of the date of this Agreement. To the best knowledge of Premier, no person listed on Schedule 4.3 beneficially owns any shares of Northern Illinois Common Stock as of the date of this Agreement. 4.4 Authority; No Violation. (a) Premier has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by the Board of Directors of Premier. The Board of Directors of Premier has directed that this Agreement and the transactions contemplated hereby be submitted to Premier's shareholders for approval at a meeting of such shareholders and, except for the adoption of this Agreement by the affirmative vote of the holders of a majority of the outstanding shares of Premier Common Stock, no other corporate proceedings on the part of Premier are necessary to approve this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Premier and (assuming due authorization, execution and delivery by Northern Illinois and GPF) constitutes a valid and binding obligation of Premier, enforceable against Premier in accordance with its terms. (b) Neither the execution and delivery of this Agreement by Premier nor the consummation by Premier of the transactions 26 35 contemplated hereby, nor compliance by Premier with any of the terms or provisions hereof, will (i) violate any provision of the Restated Certificate of Incorporation or By-Laws of Premier, or (ii) assuming that the consents and approvals referred to in Section 4.5 are duly obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Premier or any of the Premier Subsidiaries or any of their respective properties or assets, or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of Premier or any of the Premier Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Premier or any of the Premier Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except (in the case of clause (y) above) for such violations, conflicts, breaches or defaults which, either individually or in the aggregate, will not have or be reasonably likely to have a Material Adverse Effect on Premier or GPF. 4.5 Consents and Approvals. Except as set forth in Schedule 4.5, no consents or approvals of or filings or registrations with any Governmental Entity or with any third party are necessary in connection with the execution and delivery by Premier of this Agreement and the consummation by Premier of the Merger and the other transactions contemplated hereby except for (a) the filing by GPF of applications and notices, as applicable, with the Federal Reserve Board under the BHC Act and approval of such applications and notices, (b) the filing of any required applications or notices with any state or foreign agencies and the approval of such applications and notices, (c) the filing with the SEC of the Joint Proxy Statement and the S-4 in which such Joint Proxy Statement will be included as a prospectus, (d) the filing of an 8-A registering the GPF Common Stock under Section 12(g) of the Exchange Act, (e) the filing of a certificate of merger with the Delaware Secretary pursuant to the DGCL and the filing of articles of merger with, and the issuance of a certificate of merger by, the Illinois Secretary under the IBCA, (f) the filing of a consent to service of process, an appointment of the Illinois Secretary as agent for service of process, and an agreement with respect to the Dissenting Shares required to be filed by GPF with the Illinois Secretary pursuant to Section 11.35 of the IBCA, (g) such filings and approvals as are required to be made or obtained under the securities or "Blue Sky" laws of various states in connection with the issuance of the shares of GPF Common Stock and GPF Preferred Stock pursuant to this Agreement, (h) the approval of an application to list the GPF Common Stock on The Nasdaq Stock Market's National Market, subject to official notice of issuance, and (i) the approval of this 27 36 Agreement by the requisite vote of the stockholders of Northern Illinois and Premier. 4.6 Reports. Premier and each of the Premier Subsidiaries have timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file since January 1, 1994 with the Regulatory Agencies, and all other reports and statements required to be filed by them since January 1, 1994, including, without limitation, any report or statement required to be filed pursuant to the laws, rules or regulations of the United States, any state, or any Regulatory Agency, and have paid all fees and assessments due and payable in connection therewith, except where the failure to file such report, registration or statement or to pay such fees and assessments, either individually or in the aggregate, will not have a Material Adverse Effect on Premier. Except for normal examinations conducted by a Regulatory Agency in the regular course of the business of Premier or the Premier Subsidiaries, no Regulatory Agency has initiated any proceeding or, to the best knowledge of Premier, investigation into the business or operations of Premier or any of the Premier Subsidiaries since January 1, 1994. There is no unresolved written violation, written criticism, or written exception by any Regulatory Agency with respect to any report or statement relating to any examinations of Premier or any of the Premier Subsidiaries, which is likely, either individually or in the aggregate, to have a Material Adverse Effect on Premier or GPF. 4.7 Financial Statements. Premier has previously made available to Northern Illinois copies of (a) the consolidated balance sheets of Premier and its Subsidiaries as of December 31, 1993 and 1994 and the related consolidated statements of income, changes in stockholders' equity and cash flows for the fiscal years ended December 31, 1992, 1993 and 1994, inclusive, as reported in Premier's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 filed with the SEC under the Exchange Act, in each case accompanied by the audit report of KPMG Peat Marwick LLP, independent public accountants with respect to Premier, and (b) the unaudited consolidated balance sheet of Premier and its Subsidiaries as of September 30, 1995 and September 30, 1994 and the related unaudited consolidated statements of income, cash flows and changes in stockholders' equity for the three- and nine-month periods then ended as reported in Premier's Quarterly Report on Form 10-Q for the period ended September 30, 1995 filed with the SEC under the Exchange Act (the "Premier Third Quarter 10-Q"). The December 31, 1994 consolidated balance sheet of Premier (including the related notes, where applicable) fairly presents the consolidated financial position of Premier and its Subsidiaries as of the date thereof, and the other financial statements referred to in this Section 4.7 (including the related notes, where applicable) fairly present the results of the consolidated operations and changes in stockholders' equity and consolidated financial position of Premier and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth, subject, in the case of the unaudited statements, to 28 37 recurring audit adjustments normal in nature and amount; each of such statements (including the related notes, where applicable) comply in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto; and each of such statements (including the related notes, where applicable) has been prepared in all material respects in accordance with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q. The books and records of Premier and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. 4.8 Broker's Fees. Except as set forth in Schedule 4.8, neither Premier nor any Premier Subsidiary nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with the Merger or related transactions contemplated by this Agreement or the Option Agreements. 4.9 Absence of Certain Changes or Events. (a) Except as publicly disclosed in Premier Reports (as defined in Section 4.13) filed prior to the date hereof, since September 30, 1995, (i) Premier and its Subsidiaries taken as a whole have not incurred any material liability, except in the ordinary course of their business, and (ii) no event has occurred which has had, individually or in the aggregate, a Material Adverse Effect on Premier or will have a Material Adverse Effect on GPF. (b) Except as publicly disclosed in the Premier Reports filed prior to the date hereof, since September 30, 1995, Premier and its Subsidiaries have carried on their respective businesses in all material respects in the ordinary and usual course. (c) Since December 31, 1994, neither Premier nor any of its Subsidiaries has (i) except as set forth in Schedule 4.9 and except for such actions as are in the ordinary course of business consistent with past practice or required by applicable law, (A) increased the wages, salaries, compensation, pension, or other fringe benefits or perquisites payable to any executive officer, employee, or director from the amount thereof in effect as of December 31, 1994, or (B) granted any severance or termination pay, entered into any contract to make or grant any severance or termination pay, or paid any bonuses, other than customary year-end bonuses for the 1994 and 1995 fiscal years which did not exceed, in the aggregate, 5% of Premier's 1994 salary and employee benefits, or (ii) suffered any strike, work stoppage, slowdown, or other labor disturbance. 4.10 Legal Proceedings. (a) Except as set forth in Schedule 4.10, there are no pending or, to the best of Premier's knowledge, threatened, legal, administrative, arbitration or other 29 38 proceedings, claims, actions or governmental or regulatory investigations of any nature against Premier or any of the Premier Subsidiaries or challenging the validity or propriety of the transactions contemplated by this Agreement or the Premier Option Agreement. (b) There is no injunction, order, judgment, decree, or regulatory restriction (other than those that apply to similarly situated bank holding companies or banks) imposed upon Premier, any of the Premier Subsidiaries or the assets of Premier or any of the Premier Subsidiaries. 4.11 Taxes and Tax Returns. (a) Each of Premier and its Subsidiaries has duly filed all federal, state, county, foreign and, to the best of Premier's knowledge, local information returns and tax returns required to be filed by it on or prior to the date hereof (all such returns being accurate and complete in all material respects) and has duly paid or made provisions for the payment of all Taxes and other governmental charges which have been incurred or are due or claimed to be due from it by federal, state, county, foreign or local taxing authorities on or prior to the date of this Agreement (including, without limitation, if and to the extent applicable, those due in respect of its properties, income, business, capital stock, deposits, franchises, licenses, sales and payrolls) other than Taxes or other charges which are not yet delinquent or are being contested in good faith and have not been finally determined. The income tax returns of Premier and its Subsidiaries have been examined by the IRS and any liability with respect thereto has been satisfied for all years to and including 1987, and either no material deficiencies were asserted as a result of such examination for which Premier does not have adequate reserves or all such deficiencies were satisfied. There are no material disputes pending, or claims asserted for, Taxes or assessments upon Premier or any of its Subsidiaries for which Premier does not have adequate reserves, nor has Premier or any of its Subsidiaries given any currently effective waivers extending the statutory period of limitation applicable to any federal, state, county or local income tax return for any period. In addition, (A) proper and accurate amounts have been withheld by Premier and its Subsidiaries from their employees for all prior periods in compliance in all material respects with the tax withholding provisions of applicable federal, state and local laws, except where failure to do so would not have a Material Adverse Effect on Premier, (B) federal, state, county and local returns which are accurate and complete in all material respects have been filed by Premier and its Subsidiaries for all periods for which returns were due with respect to income tax withholding, Social Security and unemployment taxes, (C) the amounts shown on such federal, state, local or county returns to be due and payable have been paid in full or adequate provision therefor has been included by Premier in its consolidated financial statements as of December 31, 1994, and (D) there are no Tax liens upon any property or assets of Premier or its Subsidiaries except liens for current taxes not yet due. Neither Premier nor any of its Subsidiaries has been 30 39 required to include in income any adjustment pursuant to Section 481 of the Code by reason of a voluntary change in accounting method initiated by Premier or any of its Subsidiaries, and the IRS has not initiated or proposed any such adjustment or change in accounting method. Except as set forth in the financial statements described in Section 4.7, neither Premier nor any of its Subsidiaries has entered into a transaction which is being accounted for as an installment obligation under Section 453 of the Code. 4.12 Employees. (a) Schedule 4.12 in the Premier Disclosure Schedules sets forth a true and complete list of each employee benefit plan, arrangement, commitment, agreement or understanding that is maintained as of the date of this Agreement (the "Premier Benefit Plans") (i) by Premier or any of its Subsidiaries or (ii) by any trade or business, whether or not incorporated, which (A) is under "common control," as described in Section 414(c) of the Code, with Premier, or (B) is a member of a "controlled group," as defined in Section 414(c) of the Code, which includes Premier (a "Premier ERISA Affiliate"), all of which together with Premier would be deemed a "single employer" within the meaning of Section 4001 of ERISA. (b) Premier has heretofore delivered to Northern Illinois true and complete copies of each of the Premier Benefit Plans and certain related documents, including, but not limited to, (i) the actuarial report for such Premier Benefit Plan (if applicable) for each of the last two years, and (ii) the most recent determination letter from the IRS (if applicable) for such Premier Benefit Plan. (c) (i) Each of the Premier Benefit Plans has been operated and administered in all material respects with applicable laws, including, but not limited to, ERISA and the Code, (ii) each of the Premier Benefit Plans intended to be "qualified" within the meaning of Section 401(a) of the Code is so qualified, (iii) with respect to each Premier Benefit Plan which is subject to Title IV of ERISA, the present value of accrued benefits under such Premier Benefit Plan, based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such Premier Benefit Plan's actuary with respect to such Premier Benefit Plan, did not, as of its latest valuation date, exceed the then current value of the assets of such Premier Benefit Plan allocable to such accrued benefits, (iv) except as set forth in Schedule 4.12, no Premier Benefit Plan provides benefits, including, without limitation, death or medical benefits (whether or not insured), with respect to current or former employees of Premier, its Subsidiaries or any ERISA Affiliate beyond their retirement or other termination of service, other than (A) coverage mandated by applicable law, (B) death benefits or retirement benefits under any "employee pension plan" (as such term is defined in Section 3(2) of ERISA), (C) deferred compensation benefits accrued as liabilities on the books of Premier, its Subsidiaries or the ERISA Affiliates, or (D) benefits the full cost of which is borne by the current or former employee (or his beneficiary), (v) no material liability under Title IV of ERISA has been incurred by Premier, its 31 40 Subsidiaries or any ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to Premier, its Subsidiaries or any ERISA Affiliate of incurring a material liability thereunder, (vi) no Premier Benefit Plan is a "multiemployer pension plan" (as such term is defined in Section 3(37) of ERISA), (vii) all contributions or other amounts payable by Premier or its Subsidiaries as of the Effective Time with respect to each Premier Benefit Plan in respect of current or prior plan years have been paid or accrued in accordance with GAAP and Section 412 of the Code, (viii) neither Premier, its Subsidiaries nor any ERISA Affiliate has engaged in a transaction in connection with which Premier, its Subsidiaries or any ERISA Affiliate reasonably could be subject to either a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code, and (ix) to the best knowledge of Premier, there are no pending, threatened or anticipated claims (other than routine claims for benefits) by, on behalf of or against any of the Premier Benefit Plans or any trusts related thereto which are, in the reasonable judgment of Premier, likely, either individually or in the aggregate, to have a Material Adverse Effect on Premier. 4.13 SEC Reports. Premier has previously made available to Northern Illinois an accurate and complete copy of each (a) final registration statement, prospectus, report, schedule and definitive proxy statement filed since January 1, 1994 by Premier with the SEC pursuant to the Securities Act or the Exchange Act (the "Premier Reports") and prior to the date hereof and (b) communication mailed by Premier to its stockholders since January 1, 1994 and prior to the date hereof. None of the Premier Reports or such communications to stockholders contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, except that information as of a later date shall be deemed to modify information as of an earlier date. Since January 1, 1994, Premier has timely filed all Premier Reports and other documents required to be filed by it under the Securities Act and the Exchange Act, and, as of their respective dates, all Premier Reports complied in all material respects with the published rules and regulations of the SEC with respect thereto. 4.14 Compliance with Applicable Law. Premier and each of its Subsidiaries hold all licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses under and pursuant to all, and have complied with and are not in default under any, applicable laws, statutes, orders, rules, regulations, policies and/or guidelines of any Governmental Entity relating to Premier or any of its Subsidiaries, except where the failure to hold such license, franchise, permit or authorization or such noncompliance or default would not, individually or in the aggregate, have a Material Adverse Effect on Premier. 32 41 4.15 Certain Contracts. (a) Except as set forth in Schedule 4.15 of the Premier Disclosure Schedules, neither Premier nor any of its Subsidiaries is a party to or bound by: (i) any contract, arrangement, commitment or understanding (whether written or oral) with respect to the employment of any directors, officers or employees other than in the ordinary course of business consistent with past practice; (ii) any contract, arrangement, commitment or understanding (whether written or oral) which, upon the consummation of the transactions contemplated by this Agreement will (either alone or upon the occurrence of any additional acts or events) result in any payment (including, without limitation, severance, unemployment compensation, golden parachute or otherwise) becoming due from Premier, Northern Illinois, GPF, or any of their respective Subsidiaries to any officer, director or employee thereof; (iii) any contract, arrangement, commitment or understanding (whether written or oral) which is a "material contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement that has not been filed or incorporated by reference in the Premier Reports; (iv) any contract, arrangement, commitment or understanding (whether written or oral) which materially restricts the conduct of any line of business by Premier; (v) any contract, arrangement, commitment or understanding (whether written or oral) with a labor union or guild (including any collective bargaining agreement); or (vi) any contract, arrangement, commitment or understanding (whether written or oral), including any stock option plan, stock appreciation rights plan, restricted stock plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement, or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. Premier has previously made available to Northern Illinois true and correct copies of all employment and deferred compensation agreements which are in writing and to which Premier is a party. Each contract, arrangement, commitment or understanding of the type described in this Section 4.15(a), whether or not set forth in the Premier Disclosure Schedules, is referred to herein as a "Premier Contract", and neither Premier nor any of its Subsidiaries knows of, or has received notice of, any violation of the above by any of the other parties thereto 33 42 which, individually or in the aggregate, would have a Material Adverse Effect on Premier or GPF. (b) (i) Each Premier Contract is valid and binding on Premier or any of its Subsidiaries, as applicable, and is in full force and effect, (ii) Premier and each of its Subsidiaries has performed all obligations required to be performed by it to date under each Premier Contract, except where such noncompliance, individually or in the aggregate, would not have a Material Adverse Effect on Premier, and (iii) no event or condition exists which constitutes or, after notice or lapse of time or both, would constitute, a default on the part of Premier or any of its Subsidiaries under any such Premier Contract, except where any such default, individually or in the aggregate, would not have a Material Adverse Effect on Premier or GPF. 4.16 Agreements with Regulatory Agencies. Neither Premier nor any of its Subsidiaries is subject to any cease-and-desist or other order issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or has been since January 1, 1994, a recipient of any supervisory letter from, or since January 1, 1994, has adopted any board resolutions at the request of any Regulatory Agency or other Governmental Entity that currently restricts the conduct of its business or that relates to its capital adequacy, its credit policies, its management or its business (each, whether or not set forth in the Premier Disclosure Schedules, a "Premier Regulatory Agreement"), nor has Premier or any of its Subsidiaries been advised since January 1, 1994, by any Regulatory Agency or other Governmental Entity that it is considering issuing or requesting any such Premier Regulatory Agreement. 4.17 Other Activities of Premier and its Subsidiaries. (a) Neither Premier nor any of its Subsidiaries that is neither a bank, a bank operating subsidiary or a bank service corporation directly or indirectly engages in any activity prohibited by the Federal Reserve Board. Without limiting the generality of the foregoing, no equity investment of Premier and each Premier Subsidiary that is not a bank, a bank operating subsidiary or a bank service corporation is prohibited by the Federal Reserve Board. (b) Each Premier Subsidiary that engages in Trust Activities engages in such Trust Activities with requisite authority under the applicable law of Governmental Entities and in accordance in all material respects with the terms of the agreements and instruments governing such Trust Activities and applicable law and regulation, including applicable law governing such Premier Subsidiary's performance of its fiduciary obligations; there is no investigation or inquiry by any Governmental Entity pending, or to the best knowledge of Premier, threatened, against or affecting Premier or any Premier Subsidiary relating to the compliance by Premier or any Premier 34 43 Subsidiary with sound fiduciary principles and applicable regulations; and except where any such failure would not have a Material Adverse Effect on Premier, each employee of a Premier Subsidiary had the authority to act in the capacity in which he or she acted with respect to Trust Activities, in each case, in which such employee held himself or herself out as a representative of a Premier Subsidiary; and each Premier Subsidiary has established policies and procedures for the purpose of complying with applicable laws of Governmental Entities relating to Trust Activities, has followed such policies and procedures in all material respects and has performed appropriate internal audit reviews of, and has engaged independent accountants to perform audits of, Trust Activities, which audits since January 1, 1994 have disclosed no material violations of applicable laws of Governmental Entities or such policies and procedures. 4.18 Investment Securities. Each of Premier and its Subsidiaries has good and marketable title to all securities held by it (except securities sold under repurchase agreements or held in any fiduciary or agency capacity), free and clear of any Lien, except to the extent such securities are pledged in the ordinary course of business consistent with prudent banking practices to secure obligations of Premier or any of the Premier Subsidiaries. Such securities are valued on the books of Premier and the Premier Subsidiaries in accordance with GAAP. 4.19 Undisclosed Liabilities. Except for those liabilities that are fully reflected or reserved against on the consolidated balance sheet of Premier included in the Premier Third-Quarter 10-Q and for liabilities incurred in the ordinary course of business consistent with past practice, since September 30, 1995 neither Premier nor any of the Premier Subsidiaries has incurred any liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due) that, either alone or when combined with all similar liabilities, has had, or could reasonably be expected to have, a Material Adverse Effect on Premier. 4.20 Environmental Liability. There are no legal, administrative, arbitration or other proceedings, claims, actions, causes of action, private environmental investigations or remediation activities or governmental investigations of any nature pending or, to the best of Premier's knowledge, threatened against Premier seeking to impose, or that could reasonably result in the imposition, on Premier of any liability or obligation arising under common law or under any local, state or federal environmental statute, regulation or ordinance including, without limitation, CERCLA. To the best of Premier's knowledge, there is no reasonable basis for any such proceeding, claim, action or governmental investigation that would impose any such liability or obligation. Premier is not subject to any agreement, order, judgment, decree, letter or memorandum by or with any court, governmental authority, regulatory agency or third party imposing any such liability or obligation. 35 44 4.21 Insurance. Schedule 4.21 in the Premier Disclosure Schedules describes all policies of insurance in which Premier or any of the Premier Subsidiaries is named as an insured party or which otherwise relate to or cover any assets or properties of Premier or any of the Premier Subsidiaries. Each of such policies is in full force and effect, and the coverage provided under such properties complies with the requirements of any contracts binding on Premier or any of the Premier Subsidiaries relating to such assets or properties. 4.22 Loan Loss Reserves. The reserve for possible loan losses shown on the September 30, 1995 call reports filed for each of the Premier Subsidiaries which is a Subsidiary bank is adequate in all material respects under the requirements of GAAP to provide for possible losses, net of recoveries relating to loans previously charged off, on loans outstanding (including accrued interest receivable) as of September 30, 1995. The aggregate loan balances at such date in excess of such reserves of each of the Premier Subsidiaries which is a bank Subsidiary are, to the best knowledge and belief of Premier, collectible in accordance with their terms. 4.23 Approval Delays. Premier knows of no reason why any of the Requisite Regulatory Approvals (as defined in Section 7.1(c)) should be denied or unduly delayed. 4.24 State Takeover Laws. The Board of Directors of Premier has approved the transactions contemplated by this Agreement and the Option Agreements such that the provisions of Section 203 of the DGCL will not apply to this Agreement or the Option Agreements or any of the transactions contemplated hereby or thereby. 4.25 Pooling of Interests. As of the date of this Agreement, Premier has no reason to believe that the Merger will not qualify as a "pooling of interests" for accounting purposes. ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS 5.1 Conduct of Businesses Prior to the Effective Time. During the period from the date of this Agreement to the Effective Time, except as expressly contemplated or permitted by this Agreement (including the Premier Disclosure Schedules and the Northern Illinois Disclosure Schedules) or the Option Agreements, each of Premier and Northern Illinois shall, and shall cause each of their respective Subsidiaries to, (a) conduct its business in the usual, regular and ordinary course consistent with past practice, (b) use reasonable efforts to maintain and preserve intact its business organization, employees and advantageous business relationships and retain the services of its key officers and key employees, and (c) take no action which would adversely affect or delay the ability of either Premier or Northern Illinois to obtain any necessary approvals of any Regulatory Agency or other governmental authority required for the transactions 36 45 contemplated hereby or to perform its covenants and agreements under this Agreement or the Option Agreements. 5.2 Forbearances. During the period from the date of this Agreement to the Effective Time, except as set forth in the Premier Disclosure Schedules or the Northern Illinois Disclosure Schedules, as the case may be, and, except as expressly contemplated or permitted by this Agreement or the Option Agreements, neither Premier nor Northern Illinois shall, or shall permit any of their respective Subsidiaries to, without the prior written consent of the other: (a) other than in the ordinary course of business consistent with past practice, (i) incur any indebtedness for borrowed money (other than short-term indebtedness incurred in the ordinary course of business consistent with past practice, indebtedness of Premier to any of the Premier Subsidiaries or of any of the Premier Subsidiaries to Premier, or indebtedness of Northern Illinois to any of the Northern Illinois Subsidiaries or of any of the Northern Illinois Subsidiaries to Northern Illinois, it being understood and agreed that incurrence of indebtedness in the ordinary course of business shall include, without limitation, the creation of deposit liabilities, purchases of Federal funds, sales of certificates of deposit and entering into repurchase agreements), (ii) assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other individual, corporation or other entity, or (iii) make any loan or advance; (b) (i) adjust, split, combine or reclassify any capital stock, (ii) make, declare or pay any dividend or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock (except, (A) in the case of Northern Illinois, for regular quarterly cash dividends for the first three calendar quarters at a rate not in excess of $0.17 per share, and for the fourth calendar quarter at a rate not in excess of $0.29 per share, of Northern Illinois Common Stock, (B) in the case of Premier Common Stock, for regular quarterly cash dividends on Premier Common Stock at a rate not in excess of $0.06 per share of Premier Common Stock, (C) in the case of Premier Preferred Stock, for regular quarterly cash dividends thereon at the rates set forth in the applicable certificate of designation for such securities, and (D) dividends paid by any of the Subsidiaries of each of Northern Illinois and Premier to Northern Illinois or Premier or any of their Subsidiaries, respectively); provided, however, that in the event that the Effective Time occurs later than July 16, 1996 (the "Series A Redemption Date"), Premier shall have the right to redeem all of the shares of Premier Series A Perpetual Preferred Stock for a redemption price per share equal to the stated value, per share, of the Series A Perpetual Preferred Stock, together with all 37 46 accrued and unpaid dividends due thereon to and including the Series A Redemption Date, in accordance with the terms and conditions of the Certificate of Designation establishing the Premier Series A Perpetual Preferred Stock, (iii) grant any stock appreciation rights or grant any individual, corporation or other entity any right to acquire any shares of its capital stock (except for options to purchase stock granted in the ordinary course of business consistent with past practice pursuant to the Premier Stock Plans) or (iv) issue any additional shares of capital stock except pursuant to (A) the exercise of stock options or warrants outstanding as of the date hereof, (B) the conversion of shares of Premier Series B Perpetual Preferred Stock in accordance with its terms, or (C) the Option Agreements; (c) sell, transfer, mortgage, encumber or otherwise dispose of any of its properties or assets to any individual, corporation or other entity other than a Subsidiary, or cancel, release or assign any indebtedness to any such person or any claims held by any such person, except in the ordinary course of business consistent with past practice or pursuant to contracts or agreements in force at the date of this Agreement; (d) except for transactions in the ordinary course of business consistent with past practice or pursuant to contracts or agreements in force at the date of this Agreement, make any material investment either by purchase of stock or securities, contributions to capital, property transfers, or purchase of any property or assets of any other individual, corporation or other entity other than a Subsidiary thereof; (e) except for transactions in the ordinary course of business consistent with past practice, enter into or terminate any material contract or agreement, or make any change in any of its material leases or contracts, other than renewals of contracts and leases without material adverse changes of terms; (f) other than in the ordinary course of business consistent with past practice, increase in any manner the compensation or fringe benefits of any of its employees or pay any pension or retirement allowance not required by any existing plan or agreement to any such employees or become a party to, amend or commit itself to any pension, retirement, profit-sharing or welfare benefit plan or agreement or employment agreement with or for the benefit of any employee; (g) accelerate the vesting of any stock options or other stock-based compensation, except in accordance with the terms of an applicable Premier Stock Plan and in a manner consistent with past practice; 38 47 (h) settle any claim, action or proceeding involving money damages, except in the ordinary course of business consistent with past practice; (i) take any action that would prevent or impede the Merger from qualifying (i) for "pooling of interests" accounting treatment or (ii) as a reorganization within the meaning of Section 368 of the Code; provided, however, that nothing contained herein shall limit the ability of Premier or Northern Illinois to exercise its rights under the Northern Illinois Option Agreement or the Premier Option Agreement, as the case may be; (j) amend its certificate of incorporation or articles of incorporation, as the case may be, or its bylaws, except, in the case of the Northern Illinois Subsidiaries, in connection with the Northern Illinois Subsidiary Bank Merger; (k) other than in prior consultation with the other party to this Agreement, restructure or materially change its investment securities portfolio or its gap position, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported; (l) take any action that is intended or may reasonably be expected to result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time prior to the Effective Time, or in any of the conditions to the Merger set forth in Article VII not being satisfied or in a violation of any provision of this Agreement, except, in every case, as may be required by applicable law; or (m) agree to, or make any commitment to, take any of the actions prohibited by this Section 5.2. ARTICLE VI ADDITIONAL AGREEMENTS 6.1 Regulatory Matters; Cooperation with Respect to Filing. (a) Premier and Northern Illinois shall promptly prepare and file with the SEC the Joint Proxy Statement, and shall cause GPF promptly (i) to prepare and file with the SEC the S-4, in which the Joint Proxy Statement will be included as a prospectus, and the 8-A, and (ii) to prepare and file an application with the Federal Reserve Board under the BHC Act for approval to consummate the transactions contemplated by this Agreement. Each of GPF, Premier and Northern Illinois shall use all reasonable efforts to have the S-4 and the 8-A declared effective under the Securities Act and the Exchange Act as promptly as practicable after such filing and to have the application filed with the Federal Reserve Board approved, and Premier and Northern Illinois shall mail or deliver the Joint Proxy Statement to their respective 39 48 stockholders. Premier and Northern Illinois shall also cause GPF to use all reasonable efforts to obtain all necessary state securities law or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement, and Premier and Northern Illinois shall furnish all information concerning Premier and the holders of the Premier Common Stock and Premier Preferred Stock, and Northern Illinois and the holders of the Northern Illinois Common Stock, respectively, as may be reasonably requested in connection with any such action. (b) The parties hereto shall cooperate with each other and shall each use reasonable efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and Governmental Entities which are necessary or advisable to consummate the transactions contemplated by this Agreement (including, without limitation, the Merger), and to comply with the terms and conditions of all such permits, consents, approvals and authorizations of all such Governmental Entities. Premier and Northern Illinois shall have the right to review in advance, and, to the extent practicable, each will consult the other on, in each case subject to applicable laws relating to the exchange of information, all the information relating to Premier or Northern Illinois, as the case may be, and any of their respective Subsidiaries, which appears in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the parties hereto shall act reasonably and as promptly as practicable. The parties hereto agree that they will consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this Agreement, and each party will keep the other apprised of the status of matters relating to completion of the transactions contemplated herein. (c) Premier and Northern Illinois shall, upon request, furnish each other and GPF with all information concerning themselves, their Subsidiaries, directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with the Joint Proxy Statement, the S-4 or any other statement, filing, notice or application made by or on behalf of Premier, Northern Illinois or GPF or any of their respective Subsidiaries to any Governmental Entity in connection with the Merger and the other transactions contemplated by this Agreement. Premier covenants and agrees that none of the information which is furnished by Premier for inclusion, or which is included, in the S-4, the Joint Proxy Statement or any other statement, filing, notice or application made by or on behalf of Premier, Northern Illinois or GPF or any of their respective Subsidiaries to any Governmental Entity in connection with the Merger and the other transactions contemplated by this 40 49 Agreement will, at the respective times such documents are filed and, in the case of the S-4, when it becomes effective and, with respect to the Joint Proxy Statement, when mailed or at the time of the meetings of the stockholders of Premier and Northern Illinois, be false or misleading with respect to any material fact or shall omit to state any material fact necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading. Northern Illinois covenants and agrees that none of the information which is furnished by Northern Illinois for inclusion, or which is included, in the S-4, the Joint Proxy Statement or any other statement, filing, notice or application made by or on behalf of Premier, Northern Illinois or GPF or any of their respective Subsidiaries to any Governmental Entity in connection with the Merger and the other transactions contemplated by this Agreement will, at the respective times such documents are filed and, in the case of the S-4, when it becomes effective and, with respect to the Joint Proxy Statement, when mailed or at the time of the meetings of the stockholders of Premier and Northern Illinois, be false or misleading with respect to any material fact or shall omit to state any material fact necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading. Notwithstanding the foregoing, Premier shall have no responsibility for the truth or accuracy of any information with respect to Northern Illinois or the Northern Illinois Subsidiaries included in the S-4, the Joint Proxy Statement, or any other statement, filing, notice or application filed with any Governmental Entity in connection with the Merger and the other transactions contemplated by this Agreement, and Northern Illinois shall have no responsibility for the truth or accuracy of any information with respect to Premier or the Premier Subsidiaries included in the S-4, the Joint Proxy Statement, or any other statement, filing, notice or application filed with any Governmental Entity in connection with the Merger and the other transactions contemplated by this Agreement. (d) Premier, Northern Illinois and GPF shall promptly advise one another upon receiving any communication from any Governmental Entity whose consent or approval is required for consummation of the transactions contemplated by this Agreement which causes such party to believe that there is a reasonable likelihood that any Requisite Regulatory Approval will not be obtained or that the receipt of any such approval will be materially delayed. 6.2 Access to Information. (a) Upon reasonable notice and subject to applicable laws relating to the exchange of information, each of Premier and Northern Illinois shall, and shall cause each of their respective Subsidiaries to, afford to the officers, employees, accountants, counsel and other representatives of the other party, access, during normal business hours during the period prior to the Effective Time, to all its properties, books, contracts, commitments and records and, during such period, each of Premier and Northern Illinois shall, and shall cause their respective Subsidiaries to, make available to the other party (i) a copy of each report, schedule, 41 50 registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities laws or federal or state banking laws (other than reports or documents which Premier or Northern Illinois, as the case may be, is not permitted to disclose under applicable law) and (ii) all other information concerning its business, properties and personnel as such party may reasonably request. Neither Premier nor Northern Illinois nor any of their respective Subsidiaries shall be required to provide access to or to disclose information where such access or disclosure would violate or prejudice the rights of Premier's or Northern Illinois', as the case may be, customers, jeopardize the attorney- client privilege of the institution in possession or control of such information or contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or binding agreement entered into prior to the date of this Agreement. The parties hereto will make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply. (b) Each of Premier and Northern Illinois shall hold all information furnished by or on behalf of the other party or any of such party's Subsidiaries or representatives pursuant to Section 6.2(a) in confidence and shall return all documents containing any information concerning the properties, business and assets of each other party that may have been obtained in the course of negotiations or examination of the affairs of each other party either prior or subsequent to the execution of this Agreement (other than such information as shall be in the public domain or otherwise ascertainable from public or outside sources). Each of Premier and Northern Illinois shall use such information solely for the purpose of conducting business, legal and financial reviews of the other party and for such other purposes as may be related to this Agreement. (c) No investigation by either of the parties or their respective representatives shall affect the representations and warranties of the other set forth herein. Without limitation of the foregoing, each party shall promptly notify the other party of any information obtained by such party during the course of any due diligence conducted by such party or its representatives in accordance with Section 8.1(b) or (c) which is materially inconsistent with any representation or warranty made by the other party under this Agreement; provided, however, that either party's failure to provide such notice to the other party shall not, in turn, be deemed to constitute a material breach of such party's obligations under this Agreement. 6.3 Stockholders' Approvals. Each of Premier and Northern Illinois shall call a meeting of its stockholders to be held as soon as reasonably practicable for the purpose of voting upon this Agreement, and each shall use reasonable efforts to cause such meetings to occur on the same date. 42 51 6.4 Legal Conditions to Merger. Each of Premier and Northern Illinois shall, and shall cause its Subsidiaries to, use reasonable efforts (a) to take, or cause to be taken, all actions necessary, proper or advisable to comply promptly with all legal requirements which may be imposed on such party or its Subsidiaries with respect to the Merger and, subject to the conditions set forth in Article VII hereof, to consummate the transactions contemplated by this Agreement and (b) to obtain (and to cooperate with the other party to obtain) any consent, authorization, order or approval of, or any exemption by, any Governmental Entity and any other third party which is required to be obtained by Premier or Northern Illinois or any of their respective Subsidiaries in connection with the Merger and the other transactions contemplated by this Agreement. 6.5 Affiliates; Publication of Combined Financial Results. (a) Each of Premier and Northern Illinois shall use reasonable efforts to cause each director, executive officer and other person who is an "affiliate" (for purposes of Rule 145 under the Securities Act and for purposes of qualifying the Merger for "pooling of interests" accounting treatment) of such party to deliver to the other party hereto, not later than 30 days after the date of this Agreement, a written agreement, in the form of Exhibit F, providing that such person will not sell, pledge, transfer or otherwise dispose of (i) any shares of Premier Common Stock or Northern Illinois Common Stock held by such "affiliate," except to the extent and under the conditions permitted therein, during the period commencing 30 days prior to the Merger and ending at the time of the publication of financial results covering at least 30 days of combined operations of Premier and Northern Illinois, and (ii) any shares of GPF Common Stock to be received by such "affiliate" in the Merger, except in compliance with the applicable provisions of the Securities Act and the rules and regulations thereunder. (b) GPF shall use reasonable efforts to publish as promptly as reasonably practical but in no event later than 90 days after the end of the first month after the Effective Time in which there are at least 30 days of post-Merger combined operations (which month may be the month in which the Effective Time occurs), combined sales and net income figures as contemplated by and in accordance with the terms of SEC Accounting Series Release No. 135. 6.6 Listing of GPF Common Stock. GPF shall file an application with The Nasdaq Stock Market for approval to list the shares of GPF Common Stock on The Nasdaq Stock Market's National Market, subject to official notice of issuance, and the parties shall each use reasonable efforts to have such application approved prior to the Effective Time. 6.7 Employee Benefit Plans. (a) From and after the Effective Time, unless otherwise mutually determined, the Premier Benefit Plans and Northern Illinois Benefit Plans in effect as of the date of this Agreement shall remain in effect with respect to 43 52 employees of Premier or Northern Illinois (or their Subsidiaries) covered by such plans at the Effective Time until such time as GPF shall, subject to applicable law, the terms of this Agreement and the terms of such plans, adopt new benefit plans with respect to employees of GPF and its Subsidiaries (the "New Benefit Plans"). Prior to the Closing Date, Premier and Northern Illinois shall cooperate in reviewing, evaluating and analyzing the Premier Benefit Plans and Northern Illinois Benefit Plans with a view towards developing appropriate New Benefit Plans for the employees covered thereby subsequent to the Merger. It is the intention of Premier and Northern Illinois to develop New Benefit Plans, effective as of the Effective Time, which, among other things, (i) treat similarly situated employees on a substantially equivalent basis, taking into account all relevant factors, including, without limitation, duties, geographic location, tenure, qualifications and abilities, and (ii) do not discriminate between employees of GPF who were covered by Premier Benefit Plans, on the one hand, and those covered by Northern Illinois Benefit Plans, on the other, at the Effective Time. (b) The foregoing notwithstanding, GPF agrees to honor in accordance with their terms all benefits vested as of the date hereof under the Premier Benefit Plans or the Northern Illinois Benefit Plans or under other contracts, arrangements, commitments, or understandings described in the Premier Disclosure Schedules and the Northern Illinois Disclosure Schedules. (c) Nothing in this Section 6.7 shall be interpreted as preventing GPF from amending, modifying or terminating any Premier Benefit Plans, Northern Illinois Benefit Plans, or other contracts, arrangements, commitments or understandings, in accordance with their terms and applicable law, following the Effective Time. 6.8 Indemnification; Directors' and Officers' Insurance. (a) In the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative, including, without limitation, any such claim, action, suit, proceeding or investigation in which any individual who is now, or has been at any time prior to the date of this Agreement, or who becomes prior to the Effective Time, a director or officer or employee of Premier, Northern Illinois or any of their Subsidiaries (the "Indemnified Parties"), is, or is threatened to be, made a party based in whole or in part on, or arising in whole or in part out of, or pertaining to (i) the fact that he or she is or was a director, officer or employee of Premier, Northern Illinois or any of their Subsidiaries or any of their respective predecessors, or (ii) this Agreement, the Option Agreements or any of the transactions contemplated hereby or thereby, whether in any case asserted or arising before or after the Effective Time, the parties hereto agree to cooperate and use reasonable efforts to defend against and respond thereto. It is understood and agreed that after the Effective Time, GPF shall indemnify and hold harmless, as and to the fullest extent permitted by law, each such Indemnified Party against any losses, 44 53 claims, damages, liabilities, costs, expenses (including reasonable attorney's fees and expenses in advance of the final disposition of any claim, suit, proceeding or investigation incurred by each Indemnified Party to the fullest extent permitted by law upon receipt of any undertaking required by applicable law), judgments, fines and amounts paid in settlement in connection with any such threatened or actual claim, action, suit, proceeding or investigation, and in the event of any such threatened or actual claim, action, suit, proceeding or investigation (whether asserted or arising before or after the Effective Time), the Indemnified Parties may retain counsel reasonably satisfactory to them after consultation with GPF; provided, however, that (A) GPF shall have the right to assume the defense thereof and upon such assumption GPF shall not be liable to any Indemnified Party for any legal expenses of other counsel or any other expenses subsequently incurred by any Indemnified Party in connection with the defense thereof, except that if GPF elects not to assume such defense or counsel for the Indemnified Parties reasonably advises the Indemnified Parties that there are issues which raise conflicts of interest between GPF and the Indemnified Parties, the Indemnified Parties may retain counsel reasonably satisfactory to them after consultation with GPF, and GPF shall pay the reasonable fees and expenses of such counsel for the Indemnified Parties, (B) GPF shall be obligated pursuant to this paragraph to pay for only one firm of counsel for all Indemnified Parties, unless an Indemnified Party shall have reasonably concluded, based on the advice of counsel, that there is a material conflict of interest between the interests of such Indemnified Party and the interests of one or more other Indemnified Parties and that the interests of such Indemnified Party will not be adequately represented unless separate counsel is retained, in which case, GPF shall be obligated to pay for such separate counsel, (C) GPF shall not be liable for any settlement effected without its prior written consent (which consent shall not be unreasonably withheld) and (D) GPF shall have no obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall ultimately determine, and such determination shall have become final and nonappealable, that indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. Any Indemnified Party wishing to claim Indemnification under this Section 6.8, upon learning of any such claim, action, suit, proceeding or investigation, shall notify GPF thereof, provided that the failure to so notify shall not affect the obligations of GPF under this Section 6.8 except to the extent such failure to notify materially prejudices GPF. GPF's obligations under this Section 6.8 continue in full force and effect for a period of three years from the Effective Time (or the period of the applicable statute of limitations, if longer); provided, however, that all rights to indemnification in respect of any claim (a "Claim") asserted or made within such period shall continue until the final disposition of such Claim. (b) Premier and Northern Illinois shall each use reasonable efforts (i) to obtain, after the Effective Time, directors' and officers' liability insurance coverage for the officers and directors 45 54 of GPF, to the extent that the same is economically practicable, and (ii) either to cause the individuals serving as officers and directors of Premier, Northern Illinois or their Subsidiaries immediately prior to the Effective Time to be covered for a period of three years from the Effective Time (or the period of the applicable statute of limitations, if longer) by the directors' and officers' liability insurance policies maintained by Premier and Northern Illinois, respectively, or to substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are not less advantageous than the policies previously maintained by Premier and Northern Illinois, respectively) with respect to acts or omissions occurring prior to the Effective Time which were committed by such officers and directors in their capacity as such; provided, however, that in no event shall GPF be required to expend more than $50,000 per year (the "Insurance Amount") to maintain or procure insurance coverage pursuant to clause (ii) of this sentence, and provided further that if GPF is unable to maintain or obtain the insurance called for by clause (ii) of this sentence, GPF shall use reasonable efforts to obtain as much comparable insurance as available for the Insurance Amount. (c) In the event GPF or any of its successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of GPF assume the obligations set forth in this section. (d) The provisions of this Section 6.8 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives. 6.9 Additional Agreements. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement or to vest GPF with full title to all properties, assets, rights, approvals, immunities and franchises of any of the parties to the Merger, the proper officers and directors of each party to this Agreement and their respective Subsidiaries shall take all such necessary action as may be reasonably requested by, and at the sole expense of, GPF. 6.10 Advice of Changes. Premier and Northern Illinois shall promptly advise the other party of any change or event having a Material Adverse Effect on it or which it believes would or would be reasonably likely to cause or constitute a material breach of any of its representations, warranties or covenants contained herein. 6.11 Dividends. After the date of this Agreement, each of Premier and Northern Illinois shall coordinate with the other the declaration of any dividends in respect of Premier Common Stock and 46 55 Northern Illinois Common Stock and the record dates and payment dates relating thereto, it being the intention of the parties hereto that holders of Premier Common Stock or Northern Illinois Common Stock shall not receive two dividends, or fail to receive one dividend, for any quarter with respect to their shares of Premier Common Stock and/or Northern Illinois Common Stock and any shares of GPF Common Stock any such holder receives in exchange therefor in the Merger. 6.12 No Conduct Inconsistent with this Agreement. Neither Premier nor Northern Illinois shall (a) solicit, encourage or authorize any individual, corporation or other entity to solicit from any third party any inquiries or proposals relating to the disposition of the business or assets, or the acquisition of its capital stock, or the merger of it or any of its Subsidiaries with any corporation or other entity other than as provided by this Agreement, except pursuant to a written direction from a regulatory authority, or (b) negotiate with or entertain any proposals from any other person for any such transaction wherein the business, assets or capital stock of it or any of its Subsidiaries would be acquired, directly or indirectly, by any party other than GPF, except pursuant to a written direction from any regulatory authority or upon the receipt of an unsolicited offer from a third party where the Board of Directors of the party receiving such offer reasonably believes, upon the written advice of counsel, that its fiduciary duties require it to enter into discussions with such party. Each party shall promptly notify the other of all of the relevant details relating to all inquiries and proposals which it may receive relating to any proposed disposition of the business or assets, or the acquisition of its capital stock, or the merger of it or any of its Subsidiaries with any corporation or other entity other than as provided by this Agreement. ARTICLE VII CONDITIONS PRECEDENT 7.1 Conditions to Each Party's Obligation To Effect the Merger. The respective obligation of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) Stockholder Approval. This Agreement and the transactions contemplated hereby shall have been approved and adopted by the respective requisite affirmative votes of the holders of Northern Illinois Common Stock and Premier Common Stock entitled to vote thereon. (b) Nasdaq-NMS Listing. The shares of GPF Common Stock which shall be issued to the stockholders of Northern Illinois and Premier upon consummation of the Merger shall have been authorized for listing on The Nasdaq Stock Market's National Market, subject to official notice of issuance. 47 56 (c) Other Approvals. All regulatory approvals required to consummate the transactions contemplated hereby shall have been obtained, on terms and conditions reasonably satisfactory to each of Northern Illinois and Premier, and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired (all such approvals and the expiration of all such waiting periods being referred to herein as the "Requisite Regulatory Approvals"). (d) Registration Statements. The S-4 and the 8-A shall have become effective under the Securities Act and the Exchange Act, respectively, and no stop order suspending the effectiveness of the S-4 or the 8-A shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. (e) No Injunctions or Restraints; Illegality. No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition (an "Injunction") preventing the consummation of the Merger or any of the other transactions contemplated by this Agreement shall be in effect. No statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits, materially restricts or makes illegal consummation of the Merger. (f) Federal Tax Opinion. Northern Illinois and Premier shall each have received an opinion of their respective counsel, in form and substance reasonably satisfactory to each, dated as of the Effective Time, substantially to the effect that, on the basis of facts, representations and assumptions set forth in such opinion which are consistent with the state of facts existing at the Effective Time: (i) The Merger will constitute a tax free reorganization under Section 368(a)(i)(A) of the Code, and Northern Illinois and Premier will each be a party to the reorganization; (ii) No gain or loss will be recognized by Northern Illinois or Premier, as the case may be, as a result of the Merger; (iii) No gain or loss will be recognized by the stockholders of Northern Illinois or Premier, as the case may be, who exchange their Northern Illinois Common Stock or Premier Common Stock or Premier Preferred Stock, as the case may be, solely for GPF Common Stock or GPF Preferred Stock pursuant to the Merger (except with respect to cash received in lieu of a fractional share interest in GPF Common Stock); 48 57 (iv) The tax basis of the GPF Common Stock or GPF Preferred Stock received by stockholders who exchange all of their Northern Illinois Common Stock or all of their Premier Common Stock or Premier Preferred Stock, as the case may be, solely for GPF Common Stock or GPF Preferred Stock in the Merger will be the same as the tax basis of the Northern Illinois Common Stock or the Premier Common Stock or Premier Preferred Stock, as the case may be, surrendered in exchange therefor (reduced by any amount allocable to a fractional share interest for which cash is received); and (v) The holding period of the GPF Common Stock or GPF Preferred Stock received by stockholders of Northern Illinois or Premier, as the case may be, in the Merger will include the period during which the shares of Northern Illinois Common Stock or Premier Common Stock or Premier Preferred Stock, as the case may be, surrendered in exchange therefor were held; provided, such Northern Illinois Common Stock or Premier Common Stock or Premier Preferred Stock, as the case may be, was held as a capital asset by the holder of such Northern Illinois Common Stock or Premier Common Stock or Premier Preferred Stock, as the case may be, at the Effective Time. In rendering such opinion, counsel may require and rely upon representations contained in certificates of officers of Northern Illinois or Premier, as the case may be, and others. (g) Pooling of Interests. Northern Illinois and Premier shall each have received a letter from their respective independent accountants addressed to Northern Illinois or Premier, as the case may be, to the effect that the Merger will qualify for "pooling of interests" accounting treatment. (h) Right of First Refusal. GPF and Howard A. McKee shall have entered into an agreement, substantially in the form of Exhibit G, pursuant to which Mr. McKee shall have granted GPF a right of first refusal to acquire shares of GPF Common Stock beneficially owned by Mr. McKee, under the circumstances and subject to the terms and conditions set forth therein. 7.2 Conditions to Obligations of Northern Illinois. The obligation of Northern Illinois to effect the Merger is also subject to the satisfaction, or waiver by Northern Illinois, at or prior to the Effective Time of the following conditions: (a) Representations and Warranties. The representations and warranties of Premier set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date. Northern Illinois 49 58 shall have received a certificate signed on behalf of Premier by the Chief Executive Officer and the Chief Financial Officer of Premier to the foregoing effect. (b) Performance of Obligations of Premier. Premier shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Northern Illinois shall have received a certificate signed on behalf of Premier by the Chief Executive Officer and the Chief Financial Officer of Premier to such effect. (c) No Material Adverse Change. Since the date of this Agreement, (i) no event shall have occurred which has had a Material Adverse Effect on Premier, and (ii) no condition (other than general economic or competitive conditions generally affecting bank holding companies and banks of a size or in locations comparable to those of Premier and the Premier Subsidiaries), event, circumstances, fact or other occurrence shall have occurred that may reasonably be expected to have or result in such a Material Adverse Effect on Premier. (d) Changes in Ownership of Premier Common Stock; Acquisition of Northern Illinois Common Stock. Since the date of this Agreement, no individual, entity or group identified in Schedule 4.3 of the Premier Disclosure Schedules shall have acquired beneficial ownership of (i) any additional shares of Premier Common Stock, other than shares acquired by a Premier Subsidiary in a fiduciary capacity for the benefit of third parties or shares acquired pursuant to the terms and conditions of any Premier Stock Plan, or (ii) any shares of Northern Illinois Common Stock. (e) Opinion of Counsel to Premier. Northern Illinois shall have received from Schiff Hardin & Waite, counsel to Premier, an opinion, dated the Closing Date, in substantially the form of Exhibit H. (f) Comfort Letter. Northern Illinois shall have received from KPMG Peat Marwick "comfort letters" dated the date of mailing of the Joint Proxy Statement and the Closing Date, covering matters customary to transactions such as the Merger and in form and substance reasonably satisfactory to Northern Illinois. (g) Fairness Opinion. Northern Illinois shall have received from Prairie Capital Services, Inc., a fairness opinion, dated the date of mailing of the Joint Proxy Statement and in form and substance reasonably satisfactory to Northern Illinois, to the effect that the consideration to be received in the Merger by the stockholders of Northern Illinois is fair, from a 50 59 financial point of view, to the stockholders of Northern Illinois. 7.3 Conditions to Obligations of Premier. The obligation of Premier to effect the Merger is also subject to the satisfaction, or waiver by Premier, at or prior to the Effective Time of the following conditions: (a) Representations and Warranties. The representations and warranties of Northern Illinois set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date. Premier shall have received a certificate signed on behalf of Northern Illinois by the Chief Executive Officer and the Chief Financial Officer of Northern Illinois to the foregoing effect. (b) Performance of Obligations of Northern Illinois. Northern Illinois shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Premier shall have received a certificate signed on behalf of Northern Illinois by the Chief Executive Officer and the Chief Financial Officer of Northern Illinois to such effect. (c) No Material Adverse Change. Since the date of this Agreement, (i) no event shall have occurred which has had a Material Adverse Effect on Northern Illinois, and (ii) no condition (other than general economic or competitive conditions generally affecting bank holding companies and banks of a size or in locations comparable to those of Northern Illinois and the Northern Illinois Subsidiaries), event, circumstances, fact or other occurrence shall have occurred that may reasonably be expected to have or result in such a Material Adverse Effect on Northern Illinois. (d) Changes in Ownership of Northern Illinois Common Stock; Acquisition of Premier Common Stock. Since the date of this Agreement, no individual, entity or group identified in Schedule 3.3 of the Northern Illinois Disclosure Schedules shall have acquired beneficial ownership of (i) any additional shares of Northern Illinois Common Stock or (ii) any shares of Premier Common Stock. (e) Opinion of Counsel to Northern Illinois. Premier shall have received from Crowley Barrett & Karaba Ltd., counsel to Northern Illinois, an opinion, dated the Closing Date, in substantially the form of Exhibit I. (f) Comfort Letter. Premier shall have received from Hutton, Nelson and McDonald LLP "comfort letters" dated the date 51 60 of mailing of the Joint Proxy Statement and the Closing Date, covering matters customary to transactions such as the Merger and in form and substance reasonably satisfactory to Northern Illinois. (g) Fairness Opinion. Premier shall have received from The Chicago Corporation a fairness opinion, dated the date of mailing of the Joint Proxy Statement and in form and substance reasonably satisfactory to Premier, to the effect that the consideration to be received in the Merger by the stockholders of Premier is fair, from a financial point of view, to the stockholders of Premier. ARTICLE VIII TERMINATION AND AMENDMENT 8.1 Termination. This Agreement may be terminated prior to the Effective Time: (a) at any time, whether before or after approval of the matters presented in connection with the Merger by the stockholders of Premier or Northern Illinois, by written agreement between Premier and Northern Illinois, if the Board of Directors of each so determines; (b) by Premier, by written notice to Northern Illinois, within 35 days of the date of this Agreement, provided that: (i) such notice is given prior to the occurrence of an "Initial Triggering Event," as such term is defined in the Premier Option Agreement, and Premier determines, in its sole discretion, in the light of information discovered in the course of its investigation of Northern Illinois and the Northern Illinois Subsidiaries, that the transactions contemplated by this Agreement would not be in the best interests of Premier; or (ii) such notice is given after a "Third-Party Initial Triggering Event" (as defined below) and Premier is able to demonstrate (A) that the occurrence of such Third-Party Initial Triggering Event was not due, in whole or in part, to a breach of Premier's obligations under Section 6.12. of this Agreement, and (B) that the occurrence of such Third- Party Initial Triggering Event was not a material factor in its decision to provide such notice. A "Third-Party Initial Triggering Event" shall mean any of the events described in Section 2(b)(iii)(A) or (B) (other than the formation of a group that includes an "Existing 15% Shareholder"), Section 2(b)(iv), or Section 2(b)(vi) of the Option Agreements. (c) by Northern Illinois, by written notice to Premier, within 35 days of the date of this Agreement, provided that: 52 61 (i) such notice is given prior to the occurrence of an "Initial Triggering Event," as such term is defined in the Northern Illinois Option Agreement, and Northern Illinois determines, in its sole discretion, in the light of information discovered in the course of its investigation of Premier and the Premier Subsidiaries, that the transactions contemplated by this Agreement would not be in the best interests of Northern Illinois; or (ii) such notice is given after a Third-Party Initial Triggering Event and Northern Illinois is able to demonstrate (A) that the occurrence of such Third-Party Initial Triggering Event was not due, in whole or in part, to a breach of Northern Illinois' obligations under Section 6.12. of this Agreement, and (B) that the occurrence of such Third-Party Initial Triggering Event was not a material factor in its decision to provide such notice. (d) at any time, whether before or after approval of the matters presented in connection with the Merger by the stockholders of Premier or Northern Illinois, by either the Board of Directors of Premier or the Board of Directors of Northern Illinois if (i) any Governmental Entity which must grant a Requisite Regulatory Approval (A) has denied approval of the Merger and such denial has become final and nonappealable or (B) has advised the parties of its unwillingness to grant such a Requisite Regulatory Approval on terms and conditions reasonably acceptable to the parties, notwithstanding the parties' fulfillment of their obligations to take reasonable efforts to obtain such Requisite Regulatory Approval, or (ii) any Governmental Entity of competent jurisdiction shall have issued a final nonappealable order permanently enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement; (e) by either the Board of Directors of Premier or the Board of Directors of Northern Illinois if the Merger shall not have been consummated on or before the first anniversary of the date of this Agreement, unless the failure of the Closing to occur by such date shall be due to the failure of the party seeking to terminate this Agreement to perform or observe the covenants and agreements of such party set forth herein; (f) by either the Board of Directors of Premier or the Board of Directors of Northern Illinois (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a material breach of any of the covenants or agreements or any of the representations or warranties set forth in this Agreement on the part of the other party, which breach is not cured within 45 days following written notice to the party committing such breach, or which breach, by 53 62 its nature or timing, cannot be cured prior to the Closing Date; or (g) by either Premier or Northern Illinois if any approval of the stockholders of Premier or Northern Illinois required for the consummation of the Merger shall not have been obtained by reason of the failure to obtain the required vote at a duly held meeting of stockholders or at any adjournment or postponement thereof. 8.2 Effect of Termination. In the event of termination of this Agreement by either Premier or Northern Illinois as provided in Section 8.1, this Agreement shall forthwith become void and have no effect, and none of Premier, Northern Illinois, any of their respective Subsidiaries or any of the officers or directors of any of them shall have any liability of any nature whatsoever hereunder, or in connection with the transactions contemplated hereby, except that (i) Sections 6.2(b), 8.2, 9.2 and 9.3, shall survive any termination of this Agreement, and (ii) notwithstanding anything to the contrary contained in this Agreement, neither Premier nor Northern Illinois shall be relieved or released from any liabilities or damages arising out of its willful breach of any provision of this Agreement. 8.3 Amendment. Subject to compliance with applicable law, this Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Merger by the stockholders of Premier or Northern Illinois; provided, however, that after any approval of the transactions contemplated by this Agreement by the respective stockholders of Premier or Northern Illinois there may not be, without further approval of such stockholders, any amendment of this Agreement which changes the amount or the form of the consideration to be delivered to the holders of Premier Common Stock or Northern Illinois Common Stock hereunder other than as contemplated by this Agreement. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 8.4 Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Board of Directors, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, and (c) waive compliance with any of the agreements or conditions contained herein; provided, however, that after any approval of the transactions contemplated by this Agreement by the respective stockholders of Premier or Northern Illinois, there may not be, without further approval of such stockholders, any extension or waiver of this Agreement or any portion thereof which reduces the amount or changes the form of the consideration to be delivered to the holders of Premier Common Stock or Northern Illinois 54 63 Common Stock hereunder other than as contemplated by this Agreement. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. ARTICLE IX GENERAL PROVISIONS 9.1 Non-survival of Representations, Warranties and Agreements. None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement (other than pursuant to the Option Agreements, which shall terminate in accordance with their terms) shall survive the Effective Time, except for those covenants and agreements contained herein and therein which by their terms apply in whole or in part after the Effective Time. 9.2 Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expense, provided, however, that (i) all attorneys' fees incurred by the parties in connection with the preparation and negotiation of this Agreement, the related agreements and documents contemplated hereby and the transactions contemplated herein, including any attorneys' fees incurred in connection with the preparation and filing of the Joint Proxy Statement, the S-4, the 8-A, or any other notice, filing, or application with any Governmental Entity, Regulatory Agency or SRO to be made by GPF or jointly by Northern Illinois and Premier, (ii) the costs and expenses of printing and mailing the Joint Proxy Statement, (iii) all filing and other fees paid to the SEC, the Federal Reserve Board, or any State Regulatory Agency in connection with the Merger and the transactions contemplated by this Agreement, and (iv) all filing and other fees relating to the listing of the GPF Common Stock on The Nasdaq Stock Market's National Market, shall constitute expenses of GPF and shall be borne equally by Northern Illinois and Premier in the event that this Agreement is terminated prior to the Effective Time. 9.3 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): 55 64 (a) if to Northern Illinois, to: Northern Illinois Financial Corporation 486 West Liberty Street Wauconda, Illinois 60084-2489 Attention: Robert W. Hinman President and Chief Executive Officer Telephone: 708-487-1818 Telecopier: 708-487-1896 with a copy to: Crowley Barrett & Karaba, Ltd. 20 South Clark Street Suite 2310 Chicago, Illinois 60603 Attention: Thomas F. Karaba Telephone: 312-726-2468 Telecopier: 312-726-2741 and (b) if to Premier, to: Premier Financial Services, Inc. 27 West Main Street Suite 101 Freeport, Illinois 61032 Attention: Richard L. Geach President and Chief Executive Officer Telephone: 815-233-3770 Telecopier: 815-233-3697 with a copy to: Schiff Hardin & Waite 7200 Sears Tower Chicago, Illinois 60606 Attention: Gary L. Mowder Telephone: 312-258-5514 Telecopier: 312-258-5600 9.4 Interpretation. When a reference is made in this Agreement to Sections, Exhibits or Schedules, such reference shall be to a section of or exhibit or schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". No provision of this Agreement shall be construed to require Northern Illinois, Premier or any of their respective Subsidiaries or 56 65 affiliates to take any action which would violate any applicable law, rule or regulation. 9.5 Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. 9.6 Entire Agreement. This Agreement (including the documents and the instruments referred to herein) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof other than the Option Agreements. 9.7 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Illinois, without regard to any applicable conflicts of law, except to the extent that the law of the state of Delaware shall apply to certain matters of corporate law relating to Premier, GPF and the Merger and except to the extent superseded by federal law. 9.8 Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. 9.9 Publicity. Except as otherwise required by applicable law or the rules of The Nasdaq Stock Market, neither Northern Illinois nor Premier shall, or shall permit any of its Subsidiaries to, issue or cause the publication of any press release or other public announcement with respect to, or otherwise make any public statement concerning, the transactions contemplated by this Agreement without the consent of the other party, which consent shall not be unreasonably withheld. 9.10 Assignment; Third Party Beneficiaries. Neither this Agreement nor any of the rights, interests or obligations of the parties under this Agreement shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Except as otherwise specifically provided in Section 6.8, this Agreement (including the documents and instruments referred to herein) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. 57 66 IN WITNESS WHEREOF, Premier, Northern Illinois and GPF have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written. PREMIER FINANCIAL SERVICES, INC. NORTHERN ILLINOIS FINANCIAL CORPORATION By: /s/ Richard L. Geach By: /s/ Robert W. Hinman ---------------------------- ---------------------------- Richard L. Geach Robert W. Hinman President and Chief President and Chief Executive Officer Executive Officer GRAND PREMIER FINANCIAL, INC. By: /s/ Richard L. Geach ---------------------------- Richard L. Geach Chief Executive Officer By: /s/ Robert W. Hinman ---------------------------- Robert W. Hinman President 58 EX-10 3 EXHIBIT 10.1 EXECUTION COPY STOCK OPTION AGREEMENT, dated January 22, 1996, between Northern Illinois Financial Corporation, an Illinois corporation ("Issuer"), and Premier Financial Services, Inc., a Delaware corporation ("Grantee"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Grantee, Issuer and Grand Premier Financial, Inc., a Delaware corporation ("GPF"), have entered into an Agreement and Plan of Reorganization of even date herewith (the "Merger Agreement"), which agreement has been executed by the parties hereto immediately prior to this Stock Option Agreement (the "Agreement"); and WHEREAS, as a condition to Grantee's entering into the Merger Agreement and in consideration therefor, Issuer has agreed to grant Grantee the Option (as hereinafter defined): NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth herein and in the Merger Agreement, the parties hereto agree as follows: 1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option (the "Option") to purchase, subject to the terms hereof, up to 588,400 fully paid and nonassessable shares of Issuer's Common Stock, without par value ("Common Stock"), at a price of $30 per share (the "Option Price"); provided, however, that in no event shall the number of shares of Common Stock for which this Option is exercisable exceed 19.9% of the Issuer's issued and outstanding shares of Common Stock without giving effect to any shares subject to or issued pursuant to the Option. The number of shares of Common Stock that may be received upon the exercise of the Option and the Option Price are subject to adjustment as herein set forth. (b) In the event that any additional shares of Common Stock are either (i) issued or otherwise become outstanding after the date of this Agreement (other than pursuant to this Agreement) or (ii) redeemed, repurchased, retired or otherwise cease to be outstanding after the date of the Agreement (such event a "Change in Shares Outstanding Event"), the number of shares of Common Stock subject to the Option shall be increased or decreased, as appropriate, so that, after such Change in Shares Outstanding Event, such number equals 19.9% of the number of shares of Common Stock then issued and outstanding without giving effect to any shares subject or issued pursuant to the Option. Nothing contained in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize Issuer to issue or redeem, repurchase, or retire shares of Common Stock or to 68 authorize either the Issuer or the Grantee otherwise to breach any provision of the Merger Agreement. 2. (a) The Holder (as hereinafter defined) may exercise the Option, in whole or part, and from time to time, if, but only if, both an Initial Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as hereinafter defined) shall have occurred prior to the occurrence of an Exercise Termination Event (as hereinafter defined), provided that the Holder shall have sent written notice of such exercise (as provided in subsection (e) of this Section 2) prior to the date that is 90 days after the date that Holder is notified of such Subsequent Triggering Event pursuant to section 2(d) herein. Each of the following shall be an Exercise Termination Event: (i) the Effective Time (as defined in the Merger Agreement); (ii) termination of the Merger Agreement in accordance with its terms if such termination occurs pursuant to Section 8.1(c) or prior to the occurrence of an Initial Triggering Event, other than a termination by Grantee pursuant to Section 8.1(f) of the Merger Agreement, or (iii) the passage of 12 months after termination of the Merger Agreement (other than pursuant to Section 8.1(c)) if such termination follows, or occurs at the same time as, the occurrence of an Initial Triggering Event or is a termination by Grantee pursuant to Section 8.1(f) of the Merger Agreement; provided, however, that if an Initial Triggering Event (or an additional Initial Triggering Event) shall occur following termination of the Merger Agreement in accordance with this clause (iii), the Exercise Termination Event shall be the passage of 12 months from the occurrence of the Last Initial Triggering Event, but in no event the passage of more than 18 months from the date of termination of the Merger Agreement. The "Last Initial Triggering Event" shall mean the last Initial Triggering Event to occur. The term "Holder" shall mean the holder or holders of the Option. (b) The term "Initial Triggering Event" shall mean any of the following events or transactions occurring after the date hereof: (i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"), without having received Grantee's prior written consent, shall have entered into an agreement to engage in an Acquisition Transaction (as hereinafter defined) with any person (the term "person" for purposes of this Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules and regulations thereunder) other than GPF, Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or the Board of Directors of Issuer shall have recommended that the stockholders of Issuer approve or accept any Acquisition Transaction. For purposes of this Agreement, "Acquisition Transaction" shall mean (w) a merger or consolidation, or any similar transaction, involving Issuer or any Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange Commission (the "SEC")) of Issuer, (x) a purchase, lease or other acquisition or assumption of 2 69 all or a substantial portion of the assets or deposits of Issuer or any Significant Subsidiary of Issuer, (y) a purchase or other acquisition (including by way of merger, consolidation, share exchange or otherwise) of securities representing 15% or more of the voting power of Issuer or any Significant Subsidiary of Issuer, or (z) any substantially similar transaction; provided, however, that any transaction described in this sentence that is expressly permitted by the Merger Agreement shall not be deemed to be an Acquisition Transaction; (ii) Issuer or any Issuer Subsidiary, without having received Grantee's prior written consent, shall have authorized, recommended, proposed or publicly announced its intention to authorize, recommend or propose, to engage in an Acquisition Transaction with any person other than GPF, Grantee or a Grantee Subsidiary, or the Board of Directors of Issuer shall have publicly withdrawn or modified, or publicly announced its intent to withdraw or modify, in any manner adverse to Grantee, its recommendation that the stockholders of Issuer approve the transactions contemplated by the Merger Agreement; (iii) (A) Any person, other than an Excluded Person (as hereinafter defined) or an Existing 15% Shareholder (as hereinafter defined), alone or together with such person's affiliates and associates (such terms for purposes of this Agreement having the meanings assigned thereto in Rule 12b-2 under the 1934 Act) shall have acquired beneficial ownership or the right to acquire beneficial ownership of 15% or more of the shares of Common Stock then outstanding (the term "beneficial ownership" for purposes of this Agreement having the meaning assigned thereto in Section 13(d) of the 1934 Act and the rules and regulations thereunder); (B) any group (such term for purposes of this Agreement having the meaning assigned thereto in Section 13(d)(3) of the 1934 Act), other than a group of which any Excluded Person is a member, shall have acquired beneficial ownership or the right to acquire beneficial ownership of 15% or more of the shares of Common Stock then outstanding; (C) any Existing 15% Shareholder, alone or together with such person's affiliates and associates, shall have acquired beneficial ownership or the right to acquire beneficial ownership of shares of Common Stock in addition to the shares of Common Stock beneficially owned by such Existing 15% Shareholder as of the date hereof; provided, however, that in the event that an Existing 15% Shareholder or any associate or affiliate thereof inadvertently acquires beneficial ownership of shares of Common Stock in addition to the shares of Common Stock beneficially owned by such Existing 15% Shareholder as of the date hereof and such Existing 15% Shareholder or associate or affiliate thereof divests such additional shares as promptly as practicable upon written notice by the Grantee, such inadvertent acquisition shall not be deemed to constitute an Initial Triggering Event pursuant to this Section 2(b)(iii)(C). For purposes of this Agreement, "Excluded Person" shall mean GPF, Grantee, any Grantee Subsidiary, any employee benefit plan maintained by the Issuer or an Issuer Subsidiary as of the date of 3 70 this Agreement, or any Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of its business. "Existing 15% Shareholder" shall mean any person, other than an Excluded Person, who as of the date hereof beneficially owns 15% or more of the outstanding Common Stock. (iv) Any person other than GPF, Grantee or any Grantee Subsidiary shall have made a bona fide proposal to Issuer or its stockholders by public announcement or written communication that is or becomes the subject of public disclosure to (A) engage in an Acquisition Transaction or (B) commence a tender or exchange offer the consummation of which would result in such person acquiring beneficial ownership of securities representing 15% or more of Issuer's voting power; (v) After an overture is made by a third party (other than an Excluded Person) to Issuer or its stockholders to engage in an Acquisition Transaction, Issuer shall have breached any covenant or obligation contained in the Merger Agreement and such breach (x) would entitle Grantee to terminate the Merger Agreement and (y) shall not have been cured prior to the Notice Date (as defined below); or (vi) Any person other than GPF, Grantee or any Grantee Subsidiary, other than in connection with a transaction to which Grantee has given its prior written consent, shall have filed an application or notice with the Federal Reserve Board, or other federal or state bank regulatory authority, which application or notice has been accepted for processing, for approval to engage in an Acquisition Transaction. (c) The term "Subsequent Triggering Event" shall mean either of the following events or transactions occurring after the date hereof: (i) The acquisition (A) by an person (other than an Excluded Person or Existing 15% Shareholder) or group (other than a group of which an Excluded Person is a member) of beneficial ownership of 20% or more of the then outstanding Common Stock or (B) by an Existing 15% Shareholder of any shares of Common Stock in addition to the shares of Common Stock beneficially owned by such Existing 15% Shareholder on the date hereof; provided, however, that in the event that an Existing 15% Shareholder or any associate or affiliate thereof inadvertently acquires beneficial ownership of shares of Common Stock in addition to the shares of Common Stock beneficially owned by such Existing 15% Shareholder as of the date hereof and such Existing 15% Shareholder or associate or affiliate thereof divests such additional shares as promptly as practicable upon written notice by the Grantee, such inadvertent acquisition shall not be deemed to constitute a Subsequent Triggering Event pursuant to this Section 2(c)(i)(B); 4 71 (ii) The occurrence of the Initial Triggering Event described in paragraph (i) of subsection (b) of this Section 2, except that the percentage referred to in clause (y) shall be 20%. (d) Issuer shall notify Grantee promptly in writing of the occurrence of any Initial Triggering Event or Subsequent Triggering Event of which it has notice (together, a "Triggering Event"), it being understood that the giving of such notice by Issuer shall not be a condition to the right of the Holder to exercise the Option. (e) In the event the Holder is entitled to and wishes to exercise the Option, it shall send to Issuer a written notice (the date of which being herein referred to as the "Notice Date") specifying (i) the total number of shares it will purchase pursuant to such exercise and (ii) a place and date not earlier than three business days nor later than 60 business days from the Notice Date for the closing of such purchase (the "Closing Date"); provided that if prior notification to or approval of the Federal Reserve Board or any other regulatory agency is required in connection with such purchase, the Holder shall promptly file the required notice or application for approval and shall expeditiously process the same and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which any required notification periods have expired or been terminated or such approvals have been obtained and any requisite waiting period or periods shall have passed. Any exercise of the Option shall be deemed to occur on the Notice Date relating thereto. (f) At the closing referred to in subsection (e) of this Section 2, the Holder shall pay to Issuer the aggregate purchase price for the shares of Common Stock purchased pursuant to the exercise of the Option in immediately available funds by wire transfer to a bank account designated by Issuer, provided that failure or refusal of Issuer to designate such a bank account shall not preclude the Holder from exercising the Option. (g) At such closing, simultaneously with the delivery of immediately available funds as provided in subsection (f) of this Section 2, Issuer shall deliver to the Holder a certificate or certificates representing the number of shares of Common Stock purchased by the Holder and, if the Option should be exercised in part only, a new Option evidencing the rights of the Holder thereof to purchase the balance of the shares purchasable hereunder, and the Holder shall deliver to Issuer a copy of this Agreement and a letter agreeing that the Holder will not offer to sell or otherwise dispose of such shares in violation of applicable law or the provisions of this Agreement. (h) Certificates for Common Stock delivered at a closing hereunder may be endorsed with a restrictive legend that shall read substantially as follows: 5 72 "The transfer of the shares represented by this certificate is subject to certain provisions of an agreement between the registered holder hereof and Issuer and to resale restrictions arising under the Securities Act of 1933, as amended. A copy of such agreement is on file at the principal office of Issuer and will be provided to the holder hereof without charge upon receipt by Issuer of a written request therefor." It is understood and agreed that: (i) the reference to the resale restrictions of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend shall be removed by delivery of substitute certificate(s) without such reference if the Holder shall have delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel, in form and substance reasonably satisfactory to Issuer, to the effect that such legend is not required for purposes of the 1933 Act; (ii) the reference to the provisions to this Agreement in the above legend shall be removed by delivery of substitute certificate(s) without such reference if the shares have been sold or transferred in compliance with the provisions of this Agreement and under circumstances that do not require the retention of such reference; and (iii) the legend shall be removed in its entirety if the conditions in the preceding clauses (i) and (ii) are both satisfied. In addition, such certificates shall bear any other legend as may be required by law. (i) Upon the giving by the Holder to Issuer of the written notice of exercise of the Option provided for under subsection (e) of this Section 2 and the tender of the applicable purchase price in immediately available funds, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of Issuer shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. Issuer shall pay all expenses, and any and all United States federal, state and local taxes and other charges that may be payable in connection with the preparation, issue and delivery of stock certificates under this Section 2 in the name of the Holder or its assignee, transferee or designee. 3. Issuer agrees: (i) that it shall at all times maintain, free from preemptive rights, sufficient authorized but unissued or treasury shares of Common Stock so that the Option may be exercised without additional authorization of Common Stock after giving effect to all other options, warrants, convertible securities and other rights to purchase Common Stock; (ii) that it will not, by charter amendment or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by Issuer; (iii) promptly to take all action as may from time to time be required (including (x) complying with all premerger notification, 6 73 reporting and waiting period requirements specified in 15 U.S.C. Section 18a and regulations promulgated thereunder and (y) in the event, under the Bank Holding Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as amended, or any state banking law, prior approval of or notice to the Federal Reserve Board or to any state regulatory authority is necessary before the Option may be exercised, cooperating fully with the Holder in preparing such applications or notices and providing such information to the Federal Reserve Board or such state regulatory authority as they may require) in order to permit the Holder to exercise the Option and Issuer duly and effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly to take all action provided herein to protect the rights of the Holder against dilution. 4. This Agreement (and the Option granted hereby) are exchangeable, without expense, at the option of the Holder, upon presentation and surrender of this Agreement at the principal office of Issuer, for other Agreements providing for Options of different denominations entitling the holder thereof to purchase, on the same terms and subject to the same conditions as are set forth herein, in the aggregate the same number of shares of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein include any Stock Option Agreements and related Options for which this Agreement (and the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Agreement, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like tenor and date. Any such new Agreement executed and delivered shall constitute an additional contractual obligation on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed or mutilated shall at any time be enforceable by anyone. 5. In addition to the adjustment in the number of shares of Common Stock that are purchasable upon exercise of the Option pursuant to Section 1 of this Agreement, the number of shares of Common Stock purchasable upon the exercise of the Option and the Option Price shall be subject to adjustment from time to time as provided in this Section 5. In the event of any change in, or distributions in respect of, the Common Stock by reason of stock dividends, split-ups, mergers, recapitalizations, combinations, subdivisions, conversions, exchanges of shares, distributions on or in respect of the Common Stock that would be prohibited under the terms of the Merger Agreement, or the like, the type and number of shares of Common Stock purchasable upon exercise hereof and the Option Price shall be appropriately adjusted in such manner as shall fully preserve the economic benefits provided hereunder and proper provision shall be made in any agreement governing any such transaction to provide for such proper adjustment and the full satisfaction of the Issuer's obligations hereunder. 7 74 6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to an Exercise Termination Event, Issuer shall, at the request of Grantee delivered within 90 days of such Subsequent Triggering Event (whether on its own behalf or on behalf of any subsequent holder of this Option (or part thereof) or any of the shares of Common Stock issued pursuant hereto), promptly prepare and file a registration statement under the 1933 Act covering this Option and any shares issued and issuable pursuant to this Option and shall use reasonable efforts to cause such registration statement to become effective in order to permit the sale or other disposition of this Option and any shares of Common Stock issued upon total or partial exercise of this Option ("Option Shares") in accordance with any plan of disposition requested by Grantee. Issuer will use reasonable efforts to cause such registration statement to become effective. Grantee shall have the right to demand two such registrations. The foregoing notwithstanding, if, at the time of any request by Grantee for registration of the Option or Option Shares as provided above, Issuer is in registration with respect to an underwritten public offering of shares of Common Stock, and if in the good faith judgment of the managing underwriter or managing underwriters, or, if none, the sole underwriter or underwriters, of such offering, the inclusion of the Holder's Option or Option Shares would interfere with the successful marketing of the shares of Common Stock offered by Issuer, the number of Option Shares otherwise to be covered in the registration statement contemplated hereby may be reduced; and provided, however, that after any such required reduction the number of Option Shares to be included in such offering for the account of the Holder shall constitute at least 25% of the total number of shares to be sold by the Holder and Issuer in the aggregate; and provided further, however, that if such reduction occurs, then the Issuer shall file a registration statement for the balance as promptly as practical and no reduction shall thereafter occur. Each such Holder shall provide all information reasonably requested by Issuer for inclusion in any registration statement to be filed hereunder. If requested by any such Holder in connection with such registration, Issuer shall become a party to any underwriting agreement relating to the sale of such shares, but only to the extent of obligating itself in respect of representations, warranties, indemnities and other agreements customarily included in secondary offering underwriting agreements for the Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer agrees to send a copy thereof to any other person known to Issuer to be entitled to registration rights under this Section 6, in each case by promptly mailing the same, postage prepaid, to the address of record of the persons entitled to receive such copies. Notwithstanding anything to the contrary contained herein, in no event shall Issuer be obligated to effect more than two registrations pursuant to this Section 6 by reason of the fact that there shall be more than one Grantee as a result of any assignment or division of this Agreement. 7. (a) Immediately prior to the occurrence of a Repurchase Event (as defined below), (i) following a request of the 8 75 Holder, delivered prior to an Exercise Termination Event, Issuer (or any successor thereto) shall repurchase the Option from the Holder at a price (the "Option Repurchase Price") equal to the amount by which (A) the Market/Offer price (as defined below) exceeds (B) the Option Price, multiplied by the number of shares for which this Option may then be exercised and (ii) at the request of the owner of Option Shares from time to time (the "Owner"), delivered within 90 days of such occurrence (or such later period as provided in Section 10), Issuer shall repurchase such number of the Option Shares from the Owner as the Owner shall designate at a price (the "Option Share Repurchase Price") equal to the Market/Offer Price multiplied by the number of Option Shares so designated. The term "Market/Offer Price" shall mean the highest of (i) the price per share of Common Stock at which a tender offer or exchange offer therefor has been made, (ii) the price per share of Common Stock to be paid by any third party pursuant to an agreement with Issuer, (iii) the highest known sale price for shares of Common Stock within the six-month period immediately preceding the date the Holder gives notice of the required repurchase of this Option or the Owner gives notice of the required repurchase of Option Shares, taking into account the sale prices, if any, for shares of Common Stock reported in the National Association of Securities Dealers' Electronic Bulletin Board Service or the National Quotation Bureau's "pink sheets" during such six-month period, or (iv) in the event of a sale of all or a substantial portion of Issuer's assets, the sum of the price paid in such sale for such assets and the current market value of the remaining assets of Issuer as determined by a nationally recognized investment banking firm mutually selected by the Holder or the Owner, as the case may be, on the one hand, and the Issuer, on the other, divided by the number of shares of Common Stock of Issuer outstanding at the time of such sale. In determining the Market/Offer Price, the value of consideration other than cash shall be determined by a nationally recognized investment banking firm mutually selected by the Holder or Owner, as the case may be, on the one hand, and the Issuer, on the other. (b) The Holder and the Owner, as the case may be, may exercise its right to require Issuer to repurchase the Option and any Option Shares pursuant to this Section 7 by surrendering for such purpose to Issuer, at its principal office, a copy of this Agreement or certificates for Option Shares, as applicable, accompanied by a written notice or notices stating that the Holder or the Owner, as the case may be, elects to require Issuer to repurchase this Option and/or the Option Shares in accordance with the provisions of this Section 7. Within the later to occur of (x) five business days after the surrender of the Option and/or certificates representing Option Shares and the receipt of such notice or notices relating thereto and (y) the time that is immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver or cause to be delivered to the Holder the Option Repurchase Price and/or to the Owner the Option Share Repurchase Price therefor or the portion thereof that Issuer is not then prohibited under applicable law and regulation from so delivering. 9 76 (c) To the extent that Issuer is prohibited under applicable law or regulation from repurchasing the Option and/or the Option Shares in full, Issuer shall immediately so notify the Holder and/or the Owner and thereafter deliver or cause to be delivered, from time to time, to the Holder and/or the Owner, as appropriate, the portion of the Option Repurchase Price and the Option Share Repurchase price, respectively, that it is no longer prohibited from delivering, within five business days after the date on which Issuer is no longer so prohibited; provided, however, that if Issuer at any time after delivery of a notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited under applicable law or regulation from delivering to the Holder and/or the Owner, as appropriate, the Option Repurchase Price and the Option Share Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its best efforts to obtain all required regulatory and legal approvals and to file any required notices as promptly as practicable in order to accomplish such repurchase), the Holder or Owner may revoke its notice of repurchase of the Option or the Option Shares either in whole or to the extent of the prohibition, whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder and/or the Owner, as appropriate, that portion of the Option Repurchase Price or the Option Share Repurchase Price that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the Holder, a new Stock Option Agreement evidencing the right of the Holder to purchase that number of shares of Common Stock obtained by multiplying the number of shares of Common Stock for which the surrendered Stock Option Agreement was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Option Repurchase Price less the portion thereof theretofore delivered to the Holder and the denominator of which is the Option Repurchase Price, or (B) to the Owner, a certificate for the Option Shares it is then so prohibited from repurchasing. (d) For purposes of this Section 7, a Repurchase Event shall be deemed to have occurred (i) upon the consummation of any merger, consolidation or similar transaction involving Issuer or any purchase, lease or other acquisition of all or a substantial portion of the assets of Issuer, other than any such transaction which would not constitute an Acquisition Transaction pursuant to the provisos to Section 2(b)(i) hereof or (ii) upon the acquisition by any person of beneficial ownership of 50% or more of the then outstanding shares of Common Stock, provided that no such event shall constitute a Repurchase Event unless a Subsequent Triggering Event shall have occurred prior to an Exercise Termination Event. The parties hereto agree that Issuer's obligations to repurchase the Option or Option Shares under this Section 7 shall not terminate upon the occurrence of an Exercise Termination Event unless no Subsequent Triggering Event shall have occurred prior to the occurrence of an Exercise Termination Event. 8. (a) In the event that prior to an Exercise Termination Event, Issuer shall enter into an agreement (i) to consolidate with or 10 77 merge into any person, other than Grantee or one of its Subsidiaries, and shall not be the continuing or surviving corporation of such consolidation or merger, (ii) to permit any person, other than Grantee or one of its Subsidiaries, to merge into Issuer and Issuer shall be the continuing or surviving corporation, but, in connection with such merger, the then outstanding shares of Common Stock shall be changed into or exchanged for stock or other securities of any other person or cash or any other property or the then outstanding shares of Common Stock shall after such merger represent less than 50% of the outstanding voting shares and voting share equivalents of the merged company, or (iii) to sell or otherwise transfer all or substantially all of its assets to any person, other than Grantee or one of its Subsidiaries, then, and in each such case, the agreement governing such transaction shall make proper provision so that the Option shall, upon the consummation of any such transaction and upon the terms and conditions set forth herein, be converted into, or exchanged for, an option (the "Substitute Option"), at the election of the Holder, of either (x) the Acquiring Corporation (as hereinafter defined) or (y) any person that controls the Acquiring Corporation. (b) The following terms have the meanings indicated: (1) "Acquiring Corporation" shall mean (i) the continuing or surviving corporation of a consolidation or merger with Issuer (if other than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or surviving person, and (iii) the transferee of all or substantially all of Issuer's assets. (2) "Substitute Common Stock" shall mean the common stock issued by the issuer of the Substitute Option upon exercise of the Substitute Option. (3) "Assigned Value" shall mean the Market/Offer Price, as defined in Section 7. (4) "Average Price" shall mean the average closing price of a share of the Substitute Common Stock for the one year immediately preceding the consolidation, merger or sale in question, but in no event higher than the closing price of the shares of Substitute Common Stock on the day preceding such consolidation, merger or sale; provided that if Issuer is the issuer of the Substitute Option, the Average Price shall be computed with respect to a share of common stock issued by the person merging into Issuer or by any company which controls or is controlled by such person, as the Holder may elect; provided, further, that in the event that the Substitute Common Stock is not listed on a national securities exchange or the Nasdaq Stock Market, the term "Average Price" shall mean the weighted average of the known sale prices per share for shares of Substitute Common Stock within the one-year period immediately preceding the consolidation, merger or sale in question, taking into account the sale prices, if any, for shares of Substitute Common Stock 11 78 reported in the National Association of Securities Dealers' Electronic Bulletin Board Service or the National Quotation Bureau's "pink sheets" during such one-year period. (c) The Substitute Option shall have the same terms as the Option, provided, that if the terms of the Substitute Option cannot, for legal reasons, be the same as the Option, such terms shall be as similar as possible and in no event less advantageous to the Holder. The issuer of the Substitute Option shall also enter into an agreement with the then Holder or Holders of the Substitute Option in substantially the same form as this Agreement, which shall be applicable to the Substitute Option. (d) The Substitute Option shall be exercisable for such number of shares of Substitute Common Stock as is equal to the Assigned Value multiplied by the number of shares of Common Stock for which the Option is then exercisable, divided by the Average Price. The exercise price of the Substitute Option per share of Substitute Common Stock shall then be equal to the Option Price multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock for which the Option is then exercisable and the denominator of which shall be the number of shares of Substitute Common Stock for which the Substitute Option is exercisable. (e) In no event, pursuant to any of the foregoing paragraphs, shall the Substitute Option be exercisable for more than 19.9% of the shares of common stock of the issuer of the Substitute Option (the "Substitute Option Issuer") outstanding prior to exercise of the Substitute Option. In the event that the Substitute Option would be exercisable for more than 19.9% of the shares of common stock of the Substitute Option Issuer outstanding prior to exercise but for this clause (e), the Substitute Option Issuer shall make a cash payment to Holder equal to the excess of (i) the value of the Substitute Option without giving effect to the limitation in this clause (e) over (ii) the value of the Substitute Option after giving effect to the limitation in this clause (e). This difference in value shall be determined by a nationally recognized investment banking firm selected by the Holder or the Owner, as the case may be, and reasonably acceptable to the Acquiring Corporation. (f) Issuer shall not enter into any transaction described in subsection (a) of this Section 8 unless the Acquiring Corporation and any person that controls the Acquiring Corporation assume in writing all the obligations of Issuer hereunder. 9. (a) At the request of the holder of the Substitute Option (the "Substitute Option Holder"), the Substitute Option Issuer shall repurchase the Substitute Option from the Substitute Option Holder at a price (the "Substitute Option Repurchase Price") equal to (x) the amount by which (i) the Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by the number of shares of Substitute Common Stock for 12 79 which the Substitute Option may then be exercised plus (y) Grantee's reasonable out-of-pocket expenses (to the extent not previously reimbursed), and at the request of the owner (the "Substitute Share Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall repurchase the Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to (x) the Highest Closing Price multiplied by the number of Substitute Shares so designated plus (y) Grantee's reasonable Out-of-Pocket Expenses (to the extent not previously reimbursed). The term "Highest Closing Price" shall mean the highest closing price for shares of Substitute Common Stock within the six-month period immediately preceding the date the Substitute Option Holder gives notice of the required repurchase of the Substitute Option or the Substitute Share Owner gives notice of the required repurchase of the Substitute Shares, as applicable; provided, however, that in the event that the Substitute Common Stock is not listed on a national securities exchange or the Nasdaq Stock Market, the term "Highest Closing Price" shall mean the highest known sale price for shares of Substitute Common Stock within the six-month period immediately preceding the date that the Substitute Option Holder gives notice of the required repurchase of the Substitute Option or the Substitute Share Owner gives notice of the required repurchase of the Substitute Shares, as applicable, taking into account the sale prices, if any, for shares of Substitute Common Stock reported in the National Association of Securities Dealers' Electronic Bulletin Board Service or the National Quotation Bureau's "pink sheets" during such six-month period. (b) The Substitute Option Holder and the Substitute Share Owner, as the case may be, may exercise its respective right to require the Substitute Option Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to this Section 9 by surrendering for such purpose to the Substitute Option Issuer, at its principal office, the agreement for such Substitute Option (or, in the absence of such an agreement, a copy of this Agreement) and certificates for Substitute Shares accompanied by a written notice or notices stating that the Substitute Option Holder or the Substitute Share Owner, as the case may be, elects to require the Substitute Option Issuer to repurchase the Substitute Option and/or the Substitute Shares in accordance with the provisions of this Section 9. As promptly as practicable, and in any event within five business days after the surrender of the Substitute Option and/or certificates representing Substitute Shares and the receipt of such notice or notices relating thereto, the Substitute Option Issuer shall deliver or cause to be delivered to the Substitute Option Holder the Substitute Option Repurchase Price and/or to the Substitute Share Owner the Substitute Share Repurchase Price therefor or, in either case, the portion thereof which the Substitute Option Issuer is not then prohibited under applicable law and regulation from so delivering. (c) To the extent that the Substitute Option Issuer is prohibited under applicable law or regulation from repurchasing the 13 80 Substitute Option and/or the Substitute Shares in part or in full, the Substitute Option Issuer following a request for repurchase pursuant to this Section 9 shall immediately so notify the Substitute Option Holder and/or the Substitute Share Owner and thereafter deliver or cause to be delivered, from time to time, to the Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the portion of the Substitute Share Repurchase Price, respectively, which it is no longer prohibited from delivering, within five business days after the date on which the Substitute Option Issuer is no longer so prohibited; provided, however, that if the Substitute Option Issuer is at any time after delivery of a notice of repurchase pursuant to subsection (b) of this Section 9 prohibited under applicable law or regulation from delivering to the Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option Repurchase Price and the Substitute Share Repurchase Price, respectively, in full (and the Substitute Option Issuer shall use its best efforts to receive all required regulatory and legal approvals as promptly as practicable in order to accomplish such repurchase), the Substitute Option Holder or Substitute Share Owner may revoke its notice of repurchase of the Substitute Option or the Substitute Shares either in whole or to the extent of the prohibition, whereupon, in the latter case, the Substitute Option Issuer shall promptly (i) deliver to the Substitute Option Holder or Substitute Share Owner, as appropriate, that portion of the Substitute Option Repurchase Price or the Substitute Share Repurchase Price that the Substitute Option Issuer is not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new Substitute Option evidencing the right of the Substitute Option Holder to purchase that number of shares of the Substitute Common Stock obtained by multiplying the number of shares of the Substitute Common Stock for which the surrendered Substitute Option was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Substitute Option Repurchase Price less the portion thereof theretofore delivered to the Substitute Option Holder and the denominator of which is the Substitute Option Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the Substitute Common Shares it is then so prohibited from repurchasing. 10. The 90-day period for exercise of certain rights under Sections 2, 6, 7 and 13 shall be extended: (i) to the extent necessary to obtain all regulatory approvals for the exercise of such rights, and for the expiration of all statutory waiting periods; and (ii) to the extent necessary to avoid liability under Section 16(b) of the 1934 Act by reason of such exercise. 11. Issuer hereby represents and warrants to Grantee as follows: (a) Issuer has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been 14 81 duly and validly authorized by the Board of Directors of Issuer and no other corporate proceedings on the part of Issuer are necessary to authorize this Agreement or to consummate the transactions so contemplated. This Agreement has been duly and validly executed and delivered by Issuer. (b) Issuer has taken all necessary corporate action to authorize and reserve and to permit it to issue, and at all times from the date hereof through the termination of this Agreement in accordance with its terms will have reserved for issuance upon the exercise of the Option, that number of shares of Common Stock equal to the maximum number of shares of Common Stock at any time and from time to time issuable hereunder, and all such shares, upon issuance pursuant hereto, will be duly authorized, validly issued, fully paid, nonassessable, and will be delivered free and clear of all claims, liens, encumbrance and security interests and not subject to any preemptive rights. (c) Neither the execution and delivery of this Agreement by Issuer nor the consummation by Issuer of the transactions contemplated hereby, nor compliance by Issuer with any of the terms or provisions hereof, will (i) violate any provision of the Articles of Incorporation or By-Laws of Issuer or (ii) assuming that the consents and approvals referred to in Section 3.5 of the Merger Agreement are duly obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Issuer or any of the Issuer Subsidiaries or any of their respective properties or assets, or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of Issuer or any of the Issuer Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Issuer or any of the Issuer Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected. 12. Grantee hereby represents and warrants to Issuer that: (a) Grantee has all requisite corporate power and authority to enter into this Agreement and, subject to any approvals or consents referred to herein, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Grantee. This Agreement has been duly executed and delivered by Grantee. 15 82 (b) The Option is not being, and any shares of Common Stock or other securities acquired by Grantee upon exercise of the Option will not be, acquired with a view to the public distribution thereof and will not be transferred or otherwise disposed of except in a transaction registered or exempt from registration under the Securities Act. 13. Neither of the parties hereto may assign any of its rights or obligations under this Option Agreement or the Option created hereunder to any other person, without the express written consent of the other party, except that in the event a Subsequent Triggering Event shall have occurred prior to an Exercise Termination Event, Grantee, subject to the express provisions hereof, may assign in whole or in part its rights and obligations hereunder within 90 days following such Subsequent Triggering Event (or such later period as provided in Section 10); provided, however, that until the date 15 days following the date on which the Federal Reserve Board approves an application by Grantee under the BHCA to acquire the shares of Common Stock subject to the Option, Grantee may not assign its rights under the Option except in (i) a widely dispersed public distribution, (ii) a private placement in which no one party acquires the right to purchase in excess of 2% of the voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker or investment banker) for the purpose of conducting a widely dispersed public distribution on Grantee's behalf, or (iv) any other manner approved by the Federal Reserve Board. 14. Each of Grantee and Issuer will use its best efforts to make all filings with, and to obtain consents of, all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement, including without limitation making application to list or quote the shares of Common Stock issuable hereunder on any stock exchange or interdealer quotation system on which the Common Stock is listed or quoted and applying to the Federal Reserve Board under the BHCA for approval to acquire the shares issuable hereunder, but Grantee shall not be obligated to apply to state banking authorities for approval to acquire the shares of Common Stock issuable hereunder until such time, if ever, as it deems appropriate to do so. 15. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement by either party hereto and that the obligations of the parties hereto shall be enforceable by either party hereto through injunctive or other equitable relief. 16. If any term, provision, covenant or restriction contained in this Agreement is held by a court or a federal or state regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions and covenants and restrictions contained in this Agreement shall remain in full force and effect, and shall in no way be affected, impaired or 16 83 invalidated. If for any reason such court or regulatory agency determines that the Holder is not permitted to acquire, or Issuer is not permitted to repurchase pursuant to Section 7, the full number of shares of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5 hereof), it is the express intention of Issuer to allow the Holder to acquire or to require Issuer to repurchase the greatest lesser number of shares as may be permissible, without any amendment or modification hereof. 17. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) at the respective addresses of the parties set forth in the Merger Agreement (or at such other address for a party as shall be specified by like notice). 18. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 19. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 20. Except as otherwise expressly provided herein, each of the parties hereto shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel. 21. Except as otherwise expressly provided herein or in the Merger Agreement, this Agreement contains the entire agreement between the parties with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereof, written or oral. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended to confer upon any party, other than the parties hereto, and their respective successors except as assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein. 22. Capitalized terms used in this Agreement and not defined herein shall have the meanings assigned thereto in the Merger Agreement. 17 84 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the date first above written. PREMIER FINANCIAL SERVICES, INC. By: /s/ Richard L. Geach ---------------------------- Richard L. Geach President and Chief Executive Officer NORTHERN ILLINOIS FINANCIAL CORPORATION By: /s/ Robert W. Hinman ---------------------------- Robert W. Hinman President and Chief Executive Officer 18 EX-10 4 EXHIBIT 10.2 EXECUTION COPY STOCK OPTION AGREEMENT, dated January 22, 1996, between Premier Financial Services, Inc., a Delaware corporation ("Issuer"), and Northern Illinois Financial Corporation, an Illinois corporation ("Grantee"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Grantee, Issuer and Grand Premier Financial, Inc., a Delaware corporation ("GPF"), have entered into an Agreement and Plan of Reorganization of even date herewith (the "Merger Agreement"), which agreement has been executed by the parties hereto immediately prior to this Stock Option Agreement (the "Agreement"); and WHEREAS, as a condition to Grantee's entering into the Merger Agreement and in consideration therefor, Issuer has agreed to grant Grantee the Option (as hereinafter defined): NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth herein and in the Merger Agreement, the parties hereto agree as follows: 1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option (the "Option") to purchase, subject to the terms hereof, up to 1,302,325 fully paid and nonassessable shares of Issuer's Common Stock, par value $5.00 per share ("Common Stock"), at a price of $9 per share (the "Option Price"); provided, however, that in no event shall the number of shares of Common Stock for which this Option is exercisable exceed 19.9% of the Issuer's issued and outstanding shares of Common Stock without giving effect to any shares subject to or issued pursuant to the Option. The number of shares of Common Stock that may be received upon the exercise of the Option and the Option Price are subject to adjustment as herein set forth. (b) In the event that any additional shares of Common Stock are either (i) issued or otherwise become outstanding after the date of this Agreement (other than pursuant to this Agreement) or (ii) redeemed, repurchased, retired or otherwise cease to be outstanding after the date of the Agreement (such event a "Change in Shares Outstanding Event"), the number of shares of Common Stock subject to the Option shall be increased or decreased, as appropriate, so that, after such Change in Shares Outstanding Event, such number equals 19.9% of the number of shares of Common Stock then issued and outstanding without giving effect to any shares subject or issued pursuant to the Option. Nothing contained in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize Issuer to issue or redeem, repurchase, or retire shares of Common Stock or to 86 authorize either the Issuer or the Grantee otherwise to breach any provision of the Merger Agreement. 2. (a) The Holder (as hereinafter defined) may exercise the Option, in whole or part, and from time to time, if, but only if, both an Initial Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as hereinafter defined) shall have occurred prior to the occurrence of an Exercise Termination Event (as hereinafter defined), provided that the Holder shall have sent written notice of such exercise (as provided in subsection (e) of this Section 2) prior to the date that is 90 days after the date that Holder is notified of such Subsequent Triggering Event pursuant to section 2(d) herein. Each of the following shall be an Exercise Termination Event: (i) the Effective Time (as defined in the Merger Agreement); (ii) termination of the Merger Agreement in accordance with its terms if such termination occurs pursuant to Section 8.1(b) or prior to the occurrence of an Initial Triggering Event, other than a termination by Grantee pursuant to Section 8.1(f) of the Merger Agreement, or (iii) the passage of 12 months after termination of the Merger Agreement (other than pursuant to Section 8.1(b)) if such termination follows, or occurs at the same time as, the occurrence of an Initial Triggering Event or is a termination by Grantee pursuant to Section 8.1(f) of the Merger Agreement; provided, however, that if an Initial Triggering Event (or an additional Initial Triggering Event) shall occur following termination of the Merger Agreement in accordance with this clause (iii), the Exercise Termination Event shall be the passage of 12 months from the occurrence of the Last Initial Triggering Event, but in no event the passage of more than 18 months from the date of termination of the Merger Agreement. The "Last Initial Triggering Event" shall mean the last Initial Triggering Event to occur. The term "Holder" shall mean the holder or holders of the Option. (b) The term "Initial Triggering Event" shall mean any of the following events or transactions occurring after the date hereof: (i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"), without having received Grantee's prior written consent, shall have entered into an agreement to engage in an Acquisition Transaction (as hereinafter defined) with any person (the term "person" for purposes of this Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules and regulations thereunder) other than GPF, Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or the Board of Directors of Issuer shall have recommended that the stockholders of Issuer approve or accept any Acquisition Transaction. For purposes of this Agreement, "Acquisition Transaction" shall mean (w) a merger or consolidation, or any similar transaction, involving Issuer or any Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange Commission (the "SEC")) of Issuer, (x) a purchase, lease or other acquisition or assumption of 2 87 all or a substantial portion of the assets or deposits of Issuer or any Significant Subsidiary of Issuer, (y) a purchase or other acquisition (including by way of merger, consolidation, share exchange or otherwise) of securities representing 15% or more of the voting power of Issuer or any Significant Subsidiary of Issuer, or (z) any substantially similar transaction; provided, however, that any transaction described in this sentence that is expressly permitted by the Merger Agreement shall not be deemed to be an Acquisition Transaction; (ii) Issuer or any Issuer Subsidiary, without having received Grantee's prior written consent, shall have authorized, recommended, proposed or publicly announced its intention to authorize, recommend or propose, to engage in an Acquisition Transaction with any person other than GPF, Grantee or a Grantee Subsidiary, or the Board of Directors of Issuer shall have publicly withdrawn or modified, or publicly announced its intent to withdraw or modify, in any manner adverse to Grantee, its recommendation that the stockholders of Issuer approve the transactions contemplated by the Merger Agreement; (iii) (A) Any person, other than an Excluded Person (as hereinafter defined) or an Existing 15% Shareholder (as hereinafter defined), alone or together with such person's affiliates and associates (such terms for purposes of this Agreement having the meanings assigned thereto in Rule 12b-2 under the 1934 Act) shall have acquired beneficial ownership or the right to acquire beneficial ownership of 15% or more of the shares of Common Stock then outstanding (the term "beneficial ownership" for purposes of this Agreement having the meaning assigned thereto in Section 13(d) of the 1934 Act and the rules and regulations thereunder); (B) any group (such term for purposes of this Agreement having the meaning assigned thereto in Section 13(d)(3) of the 1934 Act), other than a group of which any Excluded Person is a member, shall have been formed that acquires beneficial ownership or the right to acquire beneficial ownership of 15% or more of the shares of Common Stock then outstanding; (C) any Existing 15% Shareholder, alone or together with such person's affiliates and associates, shall have acquired beneficial ownership or the right to acquire beneficial ownership of shares of Common Stock in addition to the shares of Common Stock beneficially owned by such Existing 15% Shareholder as of the date hereof. For purposes of this Agreement, "Excluded Person" shall mean GPF, Grantee, any Grantee Subsidiary, any employee benefit plan maintained by the Issuer or an Issuer Subsidiary as of the date of this Agreement, any Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of its business, or the trustee and beneficiaries of any blind voting trust under which certain shares of Common Stock and preferred stock of the Issuer that are convertible into Common Stock are held in accordance with the June 15, 1993 order (the "Order") of the Federal Reserve Bank of Chicago (the "Federal Reserve Bank") approving the transaction in which such shares were issued. "Existing 15% Shareholder" shall mean any person, other than 3 88 an Excluded Person, who as of the date hereof beneficially owns 15% or more of the outstanding Common Stock. (iv) Any person other than GPF, Grantee or any Grantee Subsidiary shall have made a bona fide proposal to Issuer or its stockholders by public announcement or written communication that is or becomes the subject of public disclosure to (A) engage in an Acquisition Transaction or (B) commence a tender or exchange offer the consummation of which would result in such person acquiring beneficial ownership of securities representing 15% or more of Issuer's voting power; (v) After an overture is made by a third party (other than an Excluded Person) to Issuer or its stockholders to engage in an Acquisition Transaction, Issuer shall have breached any covenant or obligation contained in the Merger Agreement and such breach (x) would entitle Grantee to terminate the Merger Agreement and (y) shall not have been cured prior to the Notice Date (as defined below); or (vi) Any person other than GPF, Grantee or any Grantee Subsidiary, other than in connection with a transaction to which Grantee has given its prior written consent, shall have filed an application or notice with the Federal Reserve Board, or other federal or state bank regulatory authority, which application or notice has been accepted for processing, for approval to engage in an Acquisition Transaction. (c) The term "Subsequent Triggering Event" shall mean either of the following events or transactions occurring after the date hereof: (i) The acquisition (A) by any person (other than an Excluded Person or Existing 15% Shareholder) or group (other than a group of which an Excluded Person is a member) of beneficial ownership of 20% or more of the then outstanding Common Stock or (B) by an Existing 15% Shareholder of any shares of Common Stock in addition to the shares of Common Stock beneficially owned by such Existing 15% Shareholder on the date hereof; (ii) The occurrence of the Initial Triggering Event described in paragraph (i) of subsection (b) of this Section 2, except that the percentage referred to in clause (y) shall be 20%. (d) Issuer shall notify Grantee promptly in writing of the occurrence of any Initial Triggering Event or Subsequent Triggering Event of which it has notice (together, a "Triggering Event"), it being understood that the giving of such notice by Issuer shall not be a condition to the right of the Holder to exercise the Option. 4 89 (e) In the event the Holder is entitled to and wishes to exercise the Option, it shall send to Issuer a written notice (the date of which being herein referred to as the "Notice Date") specifying (i) the total number of shares it will purchase pursuant to such exercise and (ii) a place and date not earlier than three business days nor later than 60 business days from the Notice Date for the closing of such purchase (the "Closing Date"); provided that if prior notification to or approval of the Federal Reserve Board or any other regulatory agency is required in connection with such purchase, the Holder shall promptly file the required notice or application for approval and shall expeditiously process the same and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which any required notification periods have expired or been terminated or such approvals have been obtained and any requisite waiting period or periods shall have passed. Any exercise of the Option shall be deemed to occur on the Notice Date relating thereto. (f) At the closing referred to in subsection (e) of this Section 2, the Holder shall pay to Issuer the aggregate purchase price for the shares of Common Stock purchased pursuant to the exercise of the Option in immediately available funds by wire transfer to a bank account designated by Issuer, provided that failure or refusal of Issuer to designate such a bank account shall not preclude the Holder from exercising the Option. (g) At such closing, simultaneously with the delivery of immediately available funds as provided in subsection (f) of this Section 2, Issuer shall deliver to the Holder a certificate or certificates representing the number of shares of Common Stock purchased by the Holder and, if the Option should be exercised in part only, a new Option evidencing the rights of the Holder thereof to purchase the balance of the shares purchasable hereunder, and the Holder shall deliver to Issuer a copy of this Agreement and a letter agreeing that the Holder will not offer to sell or otherwise dispose of such shares in violation of applicable law or the provisions of this Agreement. (h) Certificates for Common Stock delivered at a closing hereunder may be endorsed with a restrictive legend that shall read substantially as follows: "The transfer of the shares represented by this certificate is subject to certain provisions of an agreement between the registered holder hereof and Issuer and to resale restrictions arising under the Securities Act of 1933, as amended. A copy of such agreement is on file at the principal office of Issuer and will be provided to the holder hereof without charge upon receipt by Issuer of a written request therefor." 5 90 It is understood and agreed that: (i) the reference to the resale restrictions of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend shall be removed by delivery of substitute certificate(s) without such reference if the Holder shall have delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel, in form and substance reasonably satisfactory to Issuer, to the effect that such legend is not required for purposes of the 1933 Act; (ii) the reference to the provisions to this Agreement in the above legend shall be removed by delivery of substitute certificate(s) without such reference if the shares have been sold or transferred in compliance with the provisions of this Agreement and under circumstances that do not require the retention of such reference; and (iii) the legend shall be removed in its entirety if the conditions in the preceding clauses (i) and (ii) are both satisfied. In addition, such certificates shall bear any other legend as may be required by law. (i) Upon the giving by the Holder to Issuer of the written notice of exercise of the Option provided for under subsection (e) of this Section 2 and the tender of the applicable purchase price in immediately available funds, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of Issuer shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. Issuer shall pay all expenses, and any and all United States federal, state and local taxes and other charges that may be payable in connection with the preparation, issue and delivery of stock certificates under this Section 2 in the name of the Holder or its assignee, transferee or designee. 3. Issuer agrees: (i) that it shall at all times maintain, free from preemptive rights, sufficient authorized but unissued or treasury shares of Common Stock so that the Option may be exercised without additional authorization of Common Stock after giving effect to all other options, warrants, convertible securities and other rights to purchase Common Stock; (ii) that it will not, by charter amendment or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by Issuer; (iii) promptly to take all action as may from time to time be required (including (x) complying with all premerger notification, reporting and waiting period requirements specified in 15 U.S.C. Section 18a and regulations promulgated thereunder and (y) in the event, under the Bank Holding Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as amended, or any state banking law, prior approval of or notice to the Federal Reserve Board or to any state regulatory authority is necessary before the Option may be exercised, cooperating fully with the Holder in preparing such applications or notices and providing such information to the Federal Reserve Board or such state regulatory authority as 6 91 they may require) in order to permit the Holder to exercise the Option and Issuer duly and effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly to take all action provided herein to protect the rights of the Holder against dilution. 4. This Agreement (and the Option granted hereby) are exchangeable, without expense, at the option of the Holder, upon presentation and surrender of this Agreement at the principal office of Issuer, for other Agreements providing for Options of different denominations entitling the holder thereof to purchase, on the same terms and subject to the same conditions as are set forth herein, in the aggregate the same number of shares of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein include any Stock Option Agreements and related Options for which this Agreement (and the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Agreement, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like tenor and date. Any such new Agreement executed and delivered shall constitute an additional contractual obligation on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed or mutilated shall at any time be enforceable by anyone. 5. In addition to the adjustment in the number of shares of Common Stock that are purchasable upon exercise of the Option pursuant to Section 1 of this Agreement, the number of shares of Common Stock purchasable upon the exercise of the Option and the Option Price shall be subject to adjustment from time to time as provided in this Section 5. In the event of any change in, or distributions in respect of, the Common Stock by reason of stock dividends, split-ups, mergers, recapitalizations, combinations, subdivisions, conversions, exchanges of shares, distributions on or in respect of the Common Stock that would be prohibited under the terms of the Merger Agreement, or the like, the type and number of shares of Common Stock purchasable upon exercise hereof and the Option Price shall be appropriately adjusted in such manner as shall fully preserve the economic benefits provided hereunder and proper provision shall be made in any agreement governing any such transaction to provide for such proper adjustment and the full satisfaction of the Issuer's obligations hereunder. 6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to an Exercise Termination Event, Issuer shall, at the request of Grantee delivered within 90 days of such Subsequent Triggering Event (whether on its own behalf or on behalf of any subsequent holder of this Option (or part thereof) or any of the shares of Common Stock issued pursuant hereto), promptly prepare and file a registration statement under the 1933 Act covering this Option and any shares issued and issuable pursuant to this Option and shall use reasonable efforts to cause such registration statement to become 7 92 effective in order to permit the sale or other disposition of this Option and any shares of Common Stock issued upon total or partial exercise of this Option ("Option Shares") in accordance with any plan of disposition requested by Grantee. Issuer will use reasonable efforts to cause such registration statement to become effective. Grantee shall have the right to demand two such registrations. The foregoing notwithstanding, if, at the time of any request by Grantee for registration of the Option or Option Shares as provided above, Issuer is in registration with respect to an underwritten public offering of shares of Common Stock, and if in the good faith judgment of the managing underwriter or managing underwriters, or, if none, the sole underwriter or underwriters, of such offering, the inclusion of the Holder's Option or Option Shares would interfere with the successful marketing of the shares of Common Stock offered by Issuer, the number of Option Shares otherwise to be covered in the registration statement contemplated hereby may be reduced; and provided, however, that after any such required reduction the number of Option Shares to be included in such offering for the account of the Holder shall constitute at least 25% of the total number of shares to be sold by the Holder and Issuer in the aggregate; and provided further, however, that if such reduction occurs, then the Issuer shall file a registration statement for the balance as promptly as practical and no reduction shall thereafter occur. Each such Holder shall provide all information reasonably requested by Issuer for inclusion in any registration statement to be filed hereunder. If requested by any such Holder in connection with such registration, Issuer shall become a party to any underwriting agreement relating to the sale of such shares, but only to the extent of obligating itself in respect of representations, warranties, indemnities and other agreements customarily included in secondary offering underwriting agreements for the Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer agrees to send a copy thereof to any other person known to Issuer to be entitled to registration rights under this Section 6, in each case by promptly mailing the same, postage prepaid, to the address of record of the persons entitled to receive such copies. Notwithstanding anything to the contrary contained herein, in no event shall Issuer be obligated to effect more than two registrations pursuant to this Section 6 by reason of the fact that there shall be more than one Grantee as a result of any assignment or division of this Agreement. 7. (a) Immediately prior to the occurrence of a Repurchase Event (as defined below), (i) following a request of the Holder, delivered prior to an Exercise Termination Event, Issuer (or any successor thereto) shall repurchase the Option from the Holder at a price (the "Option Repurchase Price") equal to the amount by which (A) the Market/Offer price (as defined below) exceeds (B) the Option Price, multiplied by the number of shares for which this Option may then be exercised and (ii) at the request of the owner of Option Shares from time to time (the "Owner"), delivered within 90 days of such occurrence (or such later period as provided in Section 10), Issuer shall repurchase such number of the Option Shares from the 8 93 Owner as the Owner shall designate at a price (the "Option Share Repurchase Price") equal to the Market/Offer Price multiplied by the number of Option Shares so designated. The term "Market/Offer Price" shall mean the highest of (i) the price per share of Common Stock at which a tender offer or exchange offer therefor has been made, (ii) the price per share of Common Stock to be paid by any third party pursuant to an agreement with Issuer, (iii) the highest closing price for shares of Common Stock reported on the Nasdaq Stock Market's National Market within the six-month period immediately preceding the date the Holder gives notice of the required repurchase of this Option or the Owner gives notice of the required repurchase of Option Shares, as the case may be, or (iv) in the event of a sale of all or a substantial portion of Issuer's assets, the sum of the price paid in such sale for such assets and the current market value of the remaining assets of Issuer as determined by a nationally recognized investment banking firm mutually selected by the Holder or the Owner, as the case may be, on the one hand, and the Issuer, on the other, divided by the number of shares of Common Stock of Issuer outstanding at the time of such sale. In determining the Market/Offer Price, the value of consideration other than cash shall be determined by a nationally recognized investment banking firm mutually selected by the Holder or Owner, as the case may be, on the one hand, and the Issuer, on the other. (b) The Holder and the Owner, as the case may be, may exercise its right to require Issuer to repurchase the Option and any Option Shares pursuant to this Section 7 by surrendering for such purpose to Issuer, at its principal office, a copy of this Agreement or certificates for Option Shares, as applicable, accompanied by a written notice or notices stating that the Holder or the Owner, as the case may be, elects to require Issuer to repurchase this Option and/or the Option Shares in accordance with the provisions of this Section 7. Within the later to occur of (x) five business days after the surrender of the Option and/or certificates representing Option Shares and the receipt of such notice or notices relating thereto and (y) the time that is immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver or cause to be delivered to the Holder the Option Repurchase Price and/or to the Owner the Option Share Repurchase Price therefor or the portion thereof that Issuer is not then prohibited under applicable law and regulation from so delivering. (c) To the extent that Issuer is prohibited under applicable law or regulation from repurchasing the Option and/or the Option Shares in full, Issuer shall immediately so notify the Holder and/or the Owner and thereafter deliver or cause to be delivered, from time to time, to the Holder and/or the Owner, as appropriate, the portion of the Option Repurchase Price and the Option Share Repurchase price, respectively, that it is no longer prohibited from delivering, within five business days after the date on which Issuer is no longer so prohibited; provided, however, that if Issuer at any time after delivery of a notice of repurchase pursuant to paragraph (b) of this 9 94 Section 7 is prohibited under applicable law or regulation from delivering to the Holder and/or the Owner, as appropriate, the Option Repurchase Price and the Option Share Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its best efforts to obtain all required regulatory and legal approvals and to file any required notices as promptly as practicable in order to accomplish such repurchase), the Holder or Owner may revoke its notice of repurchase of the Option or the Option Shares either in whole or to the extent of the prohibition, whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder and/or the Owner, as appropriate, that portion of the Option Repurchase Price or the Option Share Repurchase Price that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the Holder, a new Stock Option Agreement evidencing the right of the Holder to purchase that number of shares of Common Stock obtained by multiplying the number of shares of Common Stock for which the surrendered Stock Option Agreement was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Option Repurchase Price less the portion thereof theretofore delivered to the Holder and the denominator of which is the Option Repurchase Price, or (B) to the Owner, a certificate for the Option Shares it is then so prohibited from repurchasing. (d) For purposes of this Section 7, a Repurchase Event shall be deemed to have occurred (i) upon the consummation of any merger, consolidation or similar transaction involving Issuer or any purchase, lease or other acquisition of all or a substantial portion of the assets of Issuer, other than any such transaction which would not constitute an Acquisition Transaction pursuant to the provisos to Section 2(b)(i) hereof or (ii) upon the acquisition by any person of beneficial ownership of 50% or more of the then outstanding shares of Common Stock, provided that no such event shall constitute a Repurchase Event unless a Subsequent Triggering Event shall have occurred prior to an Exercise Termination Event. The parties hereto agree that Issuer's obligations to repurchase the Option or Option Shares under this Section 7 shall not terminate upon the occurrence of an Exercise Termination Event unless no Subsequent Triggering Event shall have occurred prior to the occurrence of an Exercise Termination Event. 8. (a) In the event that prior to an Exercise Termination Event, Issuer shall enter into an agreement (i) to consolidate with or merge into any person, other than Grantee or one of its Subsidiaries, and shall not be the continuing or surviving corporation of such consolidation or merger, (ii) to permit any person, other than Grantee or one of its Subsidiaries, to merge into Issuer and Issuer shall be the continuing or surviving corporation, but, in connection with such merger, the then outstanding shares of Common Stock shall be changed into or exchanged for stock or other securities of any other person or cash or any other property or the then outstanding shares of Common Stock shall after such merger represent less than 50% of the outstanding voting shares and voting share equivalents of the merged 10 95 company, or (iii) to sell or otherwise transfer all or substantially all of its assets to any person, other than Grantee or one of its Subsidiaries, then, and in each such case, the agreement governing such transaction shall make proper provision so that the Option shall, upon the consummation of any such transaction and upon the terms and conditions set forth herein, be converted into, or exchanged for, an option (the "Substitute Option"), at the election of the Holder, of either (x) the Acquiring Corporation (as hereinafter defined) or (y) any person that controls the Acquiring Corporation. (b) The following terms have the meanings indicated: (1) "Acquiring Corporation" shall mean (i) the continuing or surviving corporation of a consolidation or merger with Issuer (if other than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or surviving person, and (iii) the transferee of all or substantially all of Issuer's assets. (2) "Substitute Common Stock" shall mean the common stock issued by the issuer of the Substitute Option upon exercise of the Substitute Option. (3) "Assigned Value" shall mean the Market/Offer Price, as defined in Section 7. (4) "Average Price" shall mean the average closing price of a share of the Substitute Common Stock for the one year immediately preceding the consolidation, merger or sale in question, but in no event higher than the closing price of the shares of Substitute Common Stock on the day preceding such consolidation, merger or sale; provided that if Issuer is the issuer of the Substitute Option, the Average Price shall be computed with respect to a share of common stock issued by the person merging into Issuer or by any company which controls or is controlled by such person, as the Holder may elect; provided, further, that in the event that the Substitute Common Stock is not listed on a national securities exchange or the Nasdaq Stock Market, the term "Average Price" shall mean the weighted average of the known sale prices per share for shares of Substitute Common Stock within the one-year period immediately preceding the consolidation, merger or sale in question, taking into account the sale prices, if any, for shares of Substitute Common Stock reported in the National Association of Securities Dealers' Electronic Bulletin Board Service or the National Quotation Bureau's "pink sheets" during such one-year period. (c) The Substitute Option shall have the same terms as the Option, provided, that if the terms of the Substitute Option cannot, for legal reasons, be the same as the Option, such terms shall be as similar as possible and in no event less advantageous to the Holder. The issuer of the Substitute Option shall also enter into an agreement with the then Holder or Holders of the Substitute Option in 11 96 substantially the same form as this Agreement, which shall be applicable to the Substitute Option. (d) The Substitute Option shall be exercisable for such number of shares of Substitute Common Stock as is equal to the Assigned Value multiplied by the number of shares of Common Stock for which the Option is then exercisable, divided by the Average Price. The exercise price of the Substitute Option per share of Substitute Common Stock shall then be equal to the Option Price multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock for which the Option is then exercisable and the denominator of which shall be the number of shares of Substitute Common Stock for which the Substitute Option is exercisable. (e) In no event, pursuant to any of the foregoing paragraphs, shall the Substitute Option be exercisable for more than 19.9% of the shares of common stock of the issuer of the Substitute Option (the "Substitute Option Issuer") outstanding prior to exercise of the Substitute Option. In the event that the Substitute Option would be exercisable for more than 19.9% of the shares of common stock of the Substitute Option Issuer outstanding prior to exercise but for this clause (e), the Substitute Option Issuer shall make a cash payment to Holder equal to the excess of (i) the value of the Substitute Option without giving effect to the limitation in this clause (e) over (ii) the value of the Substitute Option after giving effect to the limitation in this clause (e). This difference in value shall be determined by a nationally recognized investment banking firm selected by the Holder or the Owner, as the case may be, and reasonably acceptable to the Acquiring Corporation. (f) Issuer shall not enter into any transaction described in subsection (a) of this Section 8 unless the Acquiring Corporation and any person that controls the Acquiring Corporation assume in writing all the obligations of Issuer hereunder. 9. (a) At the request of the holder of the Substitute Option (the "Substitute Option Holder"), the Substitute Option Issuer shall repurchase the Substitute Option from the Substitute Option Holder at a price (the "Substitute Option Repurchase Price") equal to (x) the amount by which (i) the Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by the number of shares of Substitute Common Stock for which the Substitute Option may then be exercised plus (y) Grantee's reasonable out-of-pocket expenses (to the extent not previously reimbursed), and at the request of the owner (the "Substitute Share Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall repurchase the Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to (x) the Highest Closing Price multiplied by the number of Substitute Shares so designated plus (y) Grantee's reasonable Out-of-Pocket Expenses (to the extent not previously reimbursed). The term "Highest Closing Price" shall mean the highest closing price for shares of 12 97 Substitute Common Stock within the six-month period immediately preceding the date the Substitute Option Holder gives notice of the required repurchase of the Substitute Option or the Substitute Share Owner gives notice of the required repurchase of the Substitute Shares, as applicable; provided, however, that in the event that the Substitute Common Stock is not listed on a national securities exchange or the Nasdaq Stock Market, the term "Highest Closing Price" shall mean the highest known sale price for shares of Substitute Common Stock within the six-month period immediately preceding the date that the Substitute Option Holder gives notice of the required repurchase of the Substitute Option or the Substitute Share Owner gives notice of the required repurchase of the Substitute Shares, as applicable, taking into account the sale prices, if any, for shares of Substitute Common Stock reported in the National Association of Securities Dealers' Electronic Bulletin Board Service or the National Quotation Bureau's "pink sheets" during such six-month period. (b) The Substitute Option Holder and the Substitute Share Owner, as the case may be, may exercise its respective right to require the Substitute Option Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to this Section 9 by surrendering for such purpose to the Substitute Option Issuer, at its principal office, the agreement for such Substitute Option (or, in the absence of such an agreement, a copy of this Agreement) and certificates for Substitute Shares accompanied by a written notice or notices stating that the Substitute Option Holder or the Substitute Share Owner, as the case may be, elects to require the Substitute Option Issuer to repurchase the Substitute Option and/or the Substitute Shares in accordance with the provisions of this Section 9. As promptly as practicable, and in any event within five business days after the surrender of the Substitute Option and/or certificates representing Substitute Shares and the receipt of such notice or notices relating thereto, the Substitute Option Issuer shall deliver or cause to be delivered to the Substitute Option Holder the Substitute Option Repurchase Price and/or to the Substitute Share Owner the Substitute Share Repurchase Price therefor or, in either case, the portion thereof which the Substitute Option Issuer is not then prohibited under applicable law and regulation from so delivering. (c) To the extent that the Substitute Option Issuer is prohibited under applicable law or regulation from repurchasing the Substitute Option and/or the Substitute Shares in part or in full, the Substitute Option Issuer following a request for repurchase pursuant to this Section 9 shall immediately so notify the Substitute Option Holder and/or the Substitute Share Owner and thereafter deliver or cause to be delivered, from time to time, to the Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the portion of the Substitute Share Repurchase Price, respectively, which it is no longer prohibited from delivering, within five business days after the date on which the Substitute Option Issuer is no longer so prohibited; provided, however, that if the Substitute Option Issuer is at any time 13 98 after delivery of a notice of repurchase pursuant to subsection (b) of this Section 9 prohibited under applicable law or regulation from delivering to the Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option Repurchase Price and the Substitute Share Repurchase Price, respectively, in full (and the Substitute Option Issuer shall use its best efforts to receive all required regulatory and legal approvals as promptly as practicable in order to accomplish such repurchase), the Substitute Option Holder or Substitute Share Owner may revoke its notice of repurchase of the Substitute Option or the Substitute Shares either in whole or to the extent of the prohibition, whereupon, in the latter case, the Substitute Option Issuer shall promptly (i) deliver to the Substitute Option Holder or Substitute Share Owner, as appropriate, that portion of the Substitute Option Repurchase Price or the Substitute Share Repurchase Price that the Substitute Option Issuer is not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new Substitute Option evidencing the right of the Substitute Option Holder to purchase that number of shares of the Substitute Common Stock obtained by multiplying the number of shares of the Substitute Common Stock for which the surrendered Substitute Option was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Substitute Option Repurchase Price less the portion thereof theretofore delivered to the Substitute Option Holder and the denominator of which is the Substitute Option Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the Substitute Common Shares it is then so prohibited from repurchasing. 10. The 90-day period for exercise of certain rights under Sections 2, 6, 7 and 13 shall be extended: (i) to the extent necessary to obtain all regulatory approvals for the exercise of such rights, and for the expiration of all statutory waiting periods; and (ii) to the extent necessary to avoid liability under Section 16(b) of the 1934 Act by reason of such exercise. 11. Issuer hereby represents and warrants to Grantee as follows: (a) Issuer has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Issuer and no other corporate proceedings on the part of Issuer are necessary to authorize this Agreement or to consummate the transactions so contemplated. This Agreement has been duly and validly executed and delivered by Issuer. (b) Issuer has taken all necessary corporate action to authorize and reserve and to permit it to issue, and at all times from the date hereof through the termination of this Agreement in accordance with its terms will have reserved for issuance upon the 14 99 exercise of the Option, that number of shares of Common Stock equal to the maximum number of shares of Common Stock at any time and from time to time issuable hereunder, and all such shares, upon issuance pursuant hereto, will be duly authorized, validly issued, fully paid, nonassessable, and will be delivered free and clear of all claims, liens, encumbrance and security interests and not subject to any preemptive rights. (c) Neither the execution and delivery of this Agreement by Issuer nor the consummation by Issuer of the transactions contemplated hereby, nor compliance by Issuer with any of the terms or provisions hereof, will (i) violate any provision of the Restated Certificate of Incorporation or By-Laws of Issuer or (ii) assuming that the consents and approvals referred to in Section 4.5 of the Merger Agreement are duly obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Issuer or any of the Issuer Subsidiaries or any of their respective properties or assets, or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of Issuer or any of the Issuer Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Issuer or any of the Issuer Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected. 12. Grantee hereby represents and warrants to Issuer that: (a) Grantee has all requisite corporate power and authority to enter into this Agreement and, subject to any approvals or consents referred to herein, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Grantee. This Agreement has been duly executed and delivered by Grantee. (b) The Option is not being, and any shares of Common Stock or other securities acquired by Grantee upon exercise of the Option will not be, acquired with a view to the public distribution thereof and will not be transferred or otherwise disposed of except in a transaction registered or exempt from registration under the Securities Act. 13. Neither of the parties hereto may assign any of its rights or obligations under this Option Agreement or the Option created hereunder to any other person, without the express written 15 100 consent of the other party, except that in the event a Subsequent Triggering Event shall have occurred prior to an Exercise Termination Event, Grantee, subject to the express provisions hereof, may assign in whole or in part its rights and obligations hereunder within 90 days following such Subsequent Triggering Event (or such later period as provided in Section 10); provided, however, that until the date 15 days following the date on which the Federal Reserve Board approves an application by Grantee under the BHCA to acquire the shares of Common Stock subject to the Option, Grantee may not assign its rights under the Option except in (i) a widely dispersed public distribution, (ii) a private placement in which no one party acquires the right to purchase in excess of 2% of the voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker or investment banker) for the purpose of conducting a widely dispersed public distribution on Grantee's behalf, or (iv) any other manner approved by the Federal Reserve Board. 14. Each of Grantee and Issuer will use its best efforts to make all filings with, and to obtain consents of, all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement, including without limitation making application to list or quote the shares of Common Stock issuable hereunder on any stock exchange or interdealer quotation system on which the Common Stock is listed or quoted and applying to the Federal Reserve Board under the BHCA for approval to acquire the shares issuable hereunder, but Grantee shall not be obligated to apply to state banking authorities for approval to acquire the shares of Common Stock issuable hereunder until such time, if ever, as it deems appropriate to do so. 15. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement by either party hereto and that the obligations of the parties hereto shall be enforceable by either party hereto through injunctive or other equitable relief. 16. If any term, provision, covenant or restriction contained in this Agreement is held by a court or a federal or state regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions and covenants and restrictions contained in this Agreement shall remain in full force and effect, and shall in no way be affected, impaired or invalidated. If for any reason such court or regulatory agency determines that the Holder is not permitted to acquire, or Issuer is not permitted to repurchase pursuant to Section 7, the full number of shares of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5 hereof), it is the express intention of Issuer to allow the Holder to acquire or to require Issuer to repurchase the greatest lesser number of shares as may be permissible, without any amendment or modification hereof. 16 101 17. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) at the respective addresses of the parties set forth in the Merger Agreement (or at such other address for a party as shall be specified by like notice). 18. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 19. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 20. Except as otherwise expressly provided herein, each of the parties hereto shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel. 21. Except as otherwise expressly provided herein or in the Merger Agreement, this Agreement contains the entire agreement between the parties with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereof, written or oral. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended to confer upon any party, other than the parties hereto, and their respective successors except as assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein. 22. Capitalized terms used in this Agreement and not defined herein shall have the meanings assigned thereto in the Merger Agreement. 17 102 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the date first above written. PREMIER FINANCIAL SERVICES, INC. By: /s/ Richard L. Geach ---------------------------- Richard L. Geach President and Chief Executive Officer NORTHERN ILLINOIS FINANCIAL CORPORATION By: /s/ Robert W. Hinman ---------------------------- Robert W. Hinman President and Chief Executive Officer 18 EX-99 5 EXHIBIT 99 ---------- NEWS RELEASE FOR: NORTHERN ILLINOIS FINANCIAL CORPORATION AND PREMIER FINANCIAL SERVICES, INC. For more information, contact: In Northeastern Illinois In Northwestern Illinois Robert Hinman Richard Geach/David Murray (708) 487-1818 (815) 233-3770/(815) 233-3773 GRAND PREMIER FINANCIAL, INC. TO BE FORMED BY PROPOSED MERGER BETWEEN NORTHERN ILLINOIS FINANCIAL CORPORATION AND PREMIER FINANCIAL SERVICES, INC. Proposed Merger of Equals Will Result in New Financial Services Firm with Assets of $1.6 Billion January 18, 1996 -- Northern Illinois Financial Corporation and Premier Financial Services, Inc. today announced that they have reached an understanding on substantially all material terms to merge their assets and operations into a new financial services organization to be named Grand Premier Financial, Inc. The new company will be headquartered in Wauconda, Illinois. The Grand Premier Financial, Inc. network will include Grand National Banks, Premier's First Banks, which will be renamed Grand National Banks, Premier Trust Services and Premier Insurance Services. Grand Premier Financial, Inc. will have assets of $1.6 billion, with facilities ranging in location from Lake Michigan to the Mississippi River. Northern Illinois Financial Corporation, based in Wauconda, Ill., is the parent company of four community banking organizations: Grand National Bank of Crystal Lake, Grand National Bank of Niles, Grand National Bank of South Chicago Heights and Grand National Bank of - more - 104 Grand Premier Financial, Inc. Page 2 Waukegan. It maintains a diversified network of 17 banking offices, which include loan facilities and supermarket branches throughout northeastern Illinois. Premier Financial Services, Inc. (NASDAQ-PREM), based in Freeport, Ill., is a multiline financial services company with interests in banking, trust, insurance and investments. It has locations in Cook, Lake, McHenry and DeKalb counties as well as seven northwestern Illinois counties -- Jo Daviess, Stephenson, Carroll, Whiteside, Lee, Ogle and Winnebago. Customer, Employee, Shareholder Benefits - ---------------------------------------- Richard L. Geach, president and CEO of Premier Financial Services, Inc., will become chief executive officer of Grand Premier Financial, Inc.; Robert W. Hinman, president and CEO of Northern Illinois Financial Corporation, will be the chief operating officer; and David L. Murray, executive vice president/CFO of Premier Financial Services, Inc., will become chief financial officer of the new company. In the proposed merger, which is subject to director, shareholder and regulatory approval, Northern Illinois Financial Corporation shareholders will receive 4.25 shares of Grand Premier Financial, Inc. for each share held. Premier Financial Services, Inc. shareholders will receive 1.116 shares of Grand Premier Financial, Inc. for each - more - 105 Grand Premier Financial, Inc. Page 3 share held. The transaction will be accounted for as a pooling of interests and will qualify as a tax-free exchange of shares. On a pro forma basis the new company will have $875 million in total loans outstanding. Its deposits under management will be $1.35 billion and total assets will be $1.65 billion. As of December 31, 1995, the new company had capital in excess of 9 percent of its assets, a ratio that will place Grand Premier Financial, Inc. in the ranks of well-capitalized financial organizations nationwide, according to Geach. "We came to this understanding because the obvious synergies between our two companies will provide significant new opportunities for our customers, employees and shareholders. "We estimate that within three years the pre-tax cost savings could be as much as $4 million annually. "Customers will almost immediately benefit from access to more products and financial services. With our combined higher lending limit, for example, we're able to serve larger customers locally -- customers who, in the past, might have turned to large money-center banks," Geach said. "Employees will have access to more business resources with which to work, as well as expanded opportunities for professional growth," Hinman explained. "We anticipate our shareholders will benefit from enhanced value derived from higher future earnings growth and the significant cost - more - 106 Grand Premier Financial, Inc. Page 4 savings we project over the next three years. Shareholders also will benefit from the financial strength of the combined company. Our credit portfolio quality and capital ratios are superior to most competitive institutions. This strength gives us the resources needed to expand our customer base throughout northern Illinois," Geach said. Tailored, Quality Service Focus - ------------------------------- "At a time when so many banks and financial services organizations are joining forces mainly for the sake of becoming larger, the merger that will create Grand Premier Financial, Inc. is grounded in different motives," Hinman said. "Not only do our products and people fit together well, both of our organizations have established reputations for localized, focused customer service. Together, we will continue to tailor services and products to the needs of our customers," Geach said. Hinman added: "Put simply, we are talking about persistent emphasis on service and product quality, more choices. Whether it's a matter of meeting with customers outside of normal banking hours or upgrading our technology to offer customers faster, more efficient access to accounts on a 24-hour basis, our dedication to service quality will be a defining factor at all 35 locations of the Grand Premier Financial, Inc. network." # # # -----END PRIVACY-ENHANCED MESSAGE-----