SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Filed by the Registrant
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Filed by a party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
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PRINCETON NATIONAL BANCORP, INC.
(Name of Registrant as Specified in Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously.
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Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement:
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(3)
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Filing Party:
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(4)
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Date Filed:
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 28, 2009
Dear Stockholder:
The Annual Meeting of Stockholders of Princeton National Bancorp, Inc., a Delaware
corporation, will be held at The Galleria Convention Center, 1659 North Main Street, Princeton,
Illinois, on Tuesday, April 28, 2009 at 10:00 a.m., for the purpose of considering and voting upon:
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(1)
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the election of four directors for a term of three years;
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(2)
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advisory vote on executive compensation; and
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(3)
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such other business as may properly come before the meeting or any adjournment
thereof.
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Stockholders of record at the close of business on February 27, 2009 will be entitled to
notice of, and to vote at, the meeting.
The Companys Annual Report to Stockholders for the year ended December 31, 2008 is enclosed.
IMPORTANT! TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE VOTE, SIGN, DATE AND
RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. NO POSTAGE IS REQUIRED IF THE PROXY
IS MAILED IN THE UNITED STATES.
Lou Ann Birkey
Vice President Investor Relations
and Corporate Secretary
March 16, 2009
TABLE OF CONTENTS
PROXY STATEMENT
March 16, 2009
This Proxy Statement and the accompanying proxy are being furnished in connection with the
solicitation of proxies by the Board of Directors of Princeton National Bancorp, Inc. (the
Company) (NASDAQ: PNBC) from holders of the Companys outstanding shares of common stock, par
value $5.00 per share (the Common Stock), for use at the Annual Meeting of Stockholders (the
Annual Meeting) to be held on April 28, 2009 at 10:00 a.m. at The Galleria Convention Center,
1659 North Main Street, Princeton, Illinois, or at any adjournment thereof, for the purposes set
forth in the accompanying Notice of Meeting and in this Proxy Statement. The Company will bear the
costs of soliciting proxies from its stockholders. In addition to soliciting proxies by mail,
directors, officers and employees of the Company, without receiving additional compensation
therefor, may solicit proxies by telephone or in person. This Proxy Statement and proxy are first
being mailed to the Companys stockholders on or about March 16, 2009.
Voting at the Annual Meeting
The close of business on February 27, 2009 has been fixed as the record date for the
determination of stockholders of the Company entitled to notice of, and to vote at, the Annual
Meeting. As of the close of business on that date, 3,298,041 shares of Common Stock were
outstanding and are entitled to vote at the Annual Meeting.
Each proxy that is properly voted, signed and received prior to the Annual Meeting will,
unless such proxy has been revoked, be voted in accordance with the instructions on such proxy. If
no instructions are indicated, proxies will be voted FOR the approval of the proposals described
in this Proxy Statement and FOR the election of all nominees named in the Proxy Statement. If
any other matters properly come before the Annual Meeting, the persons named as proxies will vote
upon such matters according to their judgment. Any stockholder has the right to revoke a proxy at
any time prior to its exercise at the Annual Meeting. A proxy may be revoked by properly executing
and submitting to the Company a later-dated proxy or by mailing written notice of revocation to
Princeton National Bancorp, Inc., 606 South Main Street, Princeton, Illinois 61356, Attention: Lou
Ann Birkey, Vice President Investor Relations and Corporate Secretary. A stockholder may also
revoke a proxy by appearing at the Annual Meeting and voting in person. Proxies are valid only for
the meeting specified therein or any adjournment of such meeting.
A quorum of stockholders is necessary to take action at the Annual Meeting. A majority of the
outstanding shares of Common Stock, represented in person or by proxy, shall constitute a quorum
for the transaction of business at the Annual Meeting. Votes cast by proxy or in person at the
Annual Meeting will be tabulated by the judges of election appointed for the meeting. The judges
will determine whether a quorum is present and, for purposes of determining the presence of a
quorum, will treat abstentions as shares that are present and entitled to vote. Under certain
circumstances, a broker or other nominee may have discretionary authority to vote shares of Common
Stock, if instructions have not been received from the beneficial owner or other person entitled to
vote. If a broker or other nominee indicates on the proxy that it does not have instructions or
discretionary authority to vote certain shares of Common Stock on a particular matter (a broker
non-vote), those shares will be considered as
Page 1
present for purposes of determining whether a quorum
is present, but will not have the effect of votes for or against any proposal.
Under Proposal 1, the four nominees for director who receive the greatest number of votes cast
in person or by proxy at the Annual Meeting shall be elected directors of the Company.
Under Proposal 2, the affirmative vote of a majority of the shares cast is needed to approve
the advisory proposal on the compensation of the Companys named Executive Officers.
Shares of Common Stock of the Company will be voted as specified. If no specification is
made, shares will be voted FOR the nominees for director named below, for Proposal 2, and IN
ACCORDANCE WITH THE DISCRETION OF THE PROXIES as to any other matters which may properly come
before the meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The Companys Board of Directors is currently comprised of twelve directors who are divided
into three classes. One class is elected each year for a three-year term. At the Annual Meeting,
Directors Bieber, Bruce, Ernat, and Sorcic will be nominated to serve in Class II until the Annual
Meeting of Stockholders to be held in 2012 and until their successors have been duly elected and
qualified.
All of the nominees are currently serving as directors of the Company. Each of the nominees
has agreed to serve as a director, if elected, and the Company has no reason to believe that any
nominee will be unable to serve. In the event of the refusal or inability of any nominee for
director of the Company to serve as a director, the persons named in the accompanying form of proxy
shall vote such proxies for such other person or persons as may be nominated as directors by the
Board of Directors of the Company, unless the number of directors shall have been reduced by the
Board.
All of the nominees and directors continuing in office also served on the Board of Directors
of the Companys wholly-owned subsidiary, Citizens First National Bank (Citizens Bank) during
2008, except for Directors Covert, Ernat, Lee and Janko.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF THE
FOUR NOMINEES LISTED ON THE NEXT PAGE:
Page 2
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Name and Age at
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Position, Principal Occupation, Business Experience and
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December 31, 2008
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Directorship
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Class II Directors
Nominees for Three-Year Terms Expiring in 2012
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Gary C. Bruce, 56
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Director since 2001. Owner of Bruce Jewelers. Also a member of the
Companys Audit Committee.
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John R. Ernat, 60
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Director since 1994. Partner in I. Ernat & Sons, a farming operation.
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Gretta E. Bieber, 56
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Appointed to the Board January 26, 2009. Attorney with Alshuler,
Simantz & Hem LLC. Director of Citizens First National Bank since
2005.
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Tony J. Sorcic, 55
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Director since 1986. President and Chief Executive Officer of the
Company since January 1997. Also a member of the Executive Committee.
President and Chief Executive Officer of Citizens First National
Bank since 1995.
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Class III Directors Terms Expire in 2010
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Daryl Becker, 71
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Director since 2002. Owner of Beck Oil Company. Also a member of the
Companys Audit Committee.
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Sharon L. Covert, 65
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Director since 2001. Secretary/Treasurer of Covert Farms, Inc., a
farming operation.
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Mark Janko, 53
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Director since 2002. Owner and President of Janko Realty and
Development, a real estate development company.
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Willard Lee, 79
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Director since 2005. Retired President of Somonauk FSB Bancorp, Inc.
and Farmers State Bank.
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Stephen W. Samet, 64
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Director since 1986. President and General Manager of WZOE, Inc., a
commercial radio broadcasting company. Also a member of the
Companys Audit and Executive Committees.
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Class I Directors Terms Expire in 2011
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Donald E. Grubb, 68
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Director since 1991. President of Grubb Farms, Inc., a farming
operation. Also a member of the Companys Executive Committee.
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Ervin I. Pietsch, 67
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Director since 1994. Retired Vice President, Ideal Industries, Inc.,
a manufacturer of electrical test equipment.
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Craig O. Wesner, 67
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Director since 1997. Retired General Manager of Ag View FS, Inc., a
farm supply cooperative. Also a member of the Companys Executive
Committee.
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Page 3
PROPOSAL 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
On February 17, 2009, the President signed into law the American Recovery and Reinvestment Act
of 2009. Among other things, the broad sweeping legislation requires that TARP recipients during
the period in which any obligation arising from financial assistance provided under the TARP
remains outstanding shall permit a separate [nonbinding] shareholder vote to approve the
compensation of executives, as disclosed pursuant to the compensation disclosure rules of the
Commission. The nonbinding vote is required annually at each annual or other meeting of
shareholders during the period that any obligation arising from financial assistance provided under
the TARP remains outstanding.
On January 23, 2009, the Company completed the sale of $25.1 million of preferred stock and a
warrant to purchase up to 155,025 shares of the Companys common stock to the U.S. Treasury under
the TARP Program. As a result, the Company is submitting this nonbinding proposal for
consideration by shareholders in compliance with Section 7001 of the American Recovery and
Reinvestment Act of 2009.
This proposal, commonly known as a
Say-on-Pay
proposal, gives you as a shareholder the
opportunity to endorse or not endorse our executive pay program and policies through the following
resolution:
Resolved, that the shareholders approve the executive compensation of the Company,
as described in the Compensation Discussion and Analysis and the tabular
disclosure regarding named executive officer compensation (together with the
accompanying narrative disclosure) in this Proxy Statement.
Because your vote is advisory, it will not be binding upon the Board. However, the
Compensation Committee will take into account the outcome of the vote when considering future
executive compensation arrangements.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE EXECUTIVE
COMPENSATION OF THE COMPANY, AS DESCRIBED IN THE COMPENSATION DISCUSSION AND ANALYSIS, AND THE
TABULAR DISCLOSURE REGARDING NAMED EXECUTIVE OFFICER COMPENSATION (TOGETHER WITH THE ACCOMPANYING
NARRATIVE DISCLOSURE) IN THIS PROXY STATEMENT.
Page 4
SECURITY OWNERSHIP OF DIRECTORS, NOMINEES FOR DIRECTOR,
MOST HIGHLY COMPENSATED EXECUTIVE OFFICERS AND ALL DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP
The number and percentage of shares of Common Stock beneficially owned as of February 27, 2009
are listed below for each executive officer and director of the Company. Except as set forth
below, the nature of each directors beneficial ownership is sole voting and investment power.
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Amount and Nature
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Percent of
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of Beneficial Ownership
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Common Stock
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Daryl Becker
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16,664
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1
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*
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Gary C. Bruce
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16,501
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*
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Gretta E. Bieber
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4,612
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*
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Sharon L. Covert
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15,797
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4
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*
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John R. Ernat
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23,808
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*
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Donald E. Grubb
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29,704
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*
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Mark Janko
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17,751
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7
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*
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Willard Lee
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9,594
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8
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*
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Ervin I. Pietsch
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36,240
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9
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1.10
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%
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Stephen W. Samet
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27,616
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10
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*
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Tony J. Sorcic
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111,537
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11
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3.38
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%
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Craig O. Wesner
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28,749
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12
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*
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All directors and executive officers (16 persons) of the Company and/or Citizens Bank, as a group,
beneficially own 398,605 shares of Common Stock, or 12.09% of the outstanding Common Stock.
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1
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Includes 4,344 shares held by his wife; and 8,001 exercisable stock options.
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2
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Includes 11,501 exercisable stock options.
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3
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Includes 4,001 exercisable stock options.
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4
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Includes 526 shares held by her husband; and 8,001 exercisable stock options.
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5
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Includes 300 shares held by his wife; and 8,501 exercisable stock options.
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6
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Includes 1,943 shares held by his wife; and 8,287 exercisable stock options.
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7
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Includes 10,001 exercisable stock options.
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8
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Includes 2,392 shares held by his wifes trust; and 4,001 exercisable stock options.
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9
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Includes 13,201 exercisable stock options.
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10
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Includes 450 shares held jointly with his wife; 364 shares held by his wife; and
11,501 exercisable stock options.
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11
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Includes 2,527 shares held by his wife; 2,246 shares held by his sons; and 80,001
exercisable stock options.
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12
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Includes 857 shares held by his wife; and 12,501 exercisable stock options.
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Page 5
Board of Directors Meetings and Committees
The Board of Directors held five meetings during 2008. The Board of Directors has an
Executive Committee, an Audit Committee, a Compensation Committee and an ad hoc Nominating
Committee. Each director of the Company attended at least 75% of the meetings of the Board of
Directors and the Committees on which he or she served. The Board of Directors has determined that
Becker, Bieber, Bruce, Covert, Ernat, Grubb, Janko, Lee, Pietsch, Samet and Wesner are independent
as independence is defined in the NASDAQs listing standards, as those standards have been modified
or supplemented.
Executive Committee
The Executive Committee is authorized, to the extent permitted by law, to act on behalf of the
Board of Directors of the Company in the interim between meetings of the Board. Directors Donald
E. Grubb, Tony J. Sorcic, Stephen W. Samet and Craig O. Wesner are members of the Executive
Committee. The Committee did not meet in 2008.
Audit Committee
The Audit Committee has the responsibility for reviewing the scope of internal and external
audit procedures, reviewing the results of internal and external audits conducted with respect to
the Company and Citizens Bank and periodically reporting such results to the Board of Directors.
Directors Daryl Becker, Gary C. Bruce and Stephen W. Samet are members of the Audit Committee. The
Committee met six times during 2008.
Nominating Committee
The Board of Directors has an ad hoc Nominating Committee. The Nominating Committee identifies
individuals to become board members and selects, or recommends for the Boards selection, director
nominees to be presented for stockholder approval at the annual meeting of stockholders or to fill
any vacancies. Directors Gary Bruce, Stephen W. Samet and Craig O. Wesner were members of the ad
hoc Nominating Committee. The Nominating Committee met one time during 2008.
The Board of Directors has adopted a written charter for the Nominating Committee, a copy of
which is available on our website at
http://www.pnbc-inc.com
. When formed, it is
anticipated that each of the members of the Nominating Committee will be independent as
independence is defined in NASDAQs listing standards, as those standards have been modified or
supplemented.
The Nominating Committees policy is to consider director candidates recommended by
stockholders. Such recommendations must be made pursuant to timely notice in writing to:
Princeton National Bancorp, Inc.
606 South Main Street
Princeton, Illinois 61356
Attention: Chairman
The Nominating Committee has not established specific, minimum qualifications for recommended
nominees or specific qualities or skills for one or more of the directors to possess. The
Nominating Committee will use a subjective process for identifying and evaluating nominees for
director, based on the information available to, and the subjective judgments of, the members of
the Nominating Committee, and the Companys then current needs. Although the Committee does not
believe there would be any difference in the manner in which it evaluates nominees based on whether
the nominee is recommended by a stockholder,
Page 6
historically, nominees have been existing directors or
business associates of our directors or officers.
Page 7
Compensation Committee
The Company has a joint Compensation Committee of the Board of Directors with Citizens Bank.
The Executive Officers of the Company are also Executive Officers of Citizens Bank and, as a
result, they receive compensation only from Citizens Bank for services to the Company and Citizens
Bank. During 2008, the Directors Personnel Policy and Salary Committee (the Committee)
established the compensation procedures and policies for the Company and Citizens Bank. The
Committee is empowered to review and approve the annual compensation and compensation procedures
for the Companys Executive Officers, which consist of the President & Chief Executive Officer,
Executive Vice President and Senior Vice President & Chief Financial Officer/Treasurer. The
Committee relies on recommendations of the President & Chief Executive Officer with respect to the
Companys senior officers other than himself. The Company does not customarily utilize
compensation consultants. The Committee met three times in 2008.
The Board of Directors has adopted a written charter for the Committee, a copy of which is
also available on the Companys website at
http://www.pnbc-inc.com.
Citizens Bank Board of Directors
The Board of Directors of Citizens Bank held thirteen meetings during 2008. The Board of
Directors of Citizens Bank has Auditing & Accounting; Fiduciary Services Auditing & Accounting;
Loan; Fiduciary Services; Marketing & Sales Management; CRA & Compliance; Personnel Policy &
Salary; Executive; and Funds Management Committees. The Committees collectively held a total of
fifty meetings during 2008. Each director of Citizens Bank attended at least 75% of the
meetings of the Board of Directors and the Committees on which he or she served.
Code of Ethics
The Company has adopted a Code of Ethics that applies to all of the employees, officers and
directors, including the principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions. The Code of Ethics
contains written standards that the Company believes are reasonably designed to deter wrongdoing
and to promote:
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Honest and ethical conduct, including the ethical handling of actual or apparent
conflicts of interest between personal and professional relationships;
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Full, fair, accurate, timely and understandable disclosure in reports and documents
that the Company files with, or submits to, the Securities and Exchange Commission and
in other public communications the Company makes;
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Compliance with applicable governmental laws, rules and regulations;
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The prompt internal reporting of violations of the Code to an appropriate person or
persons named in the Code; and
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Accountability for adherence to the Code.
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This Code of Ethics is included each year as Exhibit 14 to our Annual Report on Form 10-K and
is available on our website at
http://www.pnbc-inc.com.
The Company intends to satisfy the
disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or a waiver from, a
provision of the Code of Ethics that applies to the principal executive officer, principal
financial officer, principal accounting officer or controller, or persons performing similar
functions, and that relates to any element of the Code definition enumerated in Securities and
Exchange Commission, Regulation S-K, Item 406(b) by posting such information on our website at
http://www.pnbc-inc.com
within five business days following the date of the amendment or
waiver.
Page 8
Stockholder Communications with the Board
The Board of Directors has a process for stockholders to send communications to the Board of
Directors or its Audit Committee, including complaints regarding accounting, internal accounting
controls or auditing matters. Communications may be sent to the Board of Directors, its Audit
Committee or specific directors by regular mail to the attention of the Board of Directors, its
Audit Committee or specific directors at the principal executive office at 606 South Main Street,
Princeton, Illinois 61356. All of these communications will be reviewed by our Corporate Secretary
(1) to filter out communications that our Corporate Secretary deems are not appropriate for our
directors, such as spam and communications offering to buy or sell products or services, and (2)
to sort and relay the remainder to the appropriate directors. We encourage all of our directors to
attend the Annual Meeting of Stockholders, if possible. All of our directors attended last years
Annual Meeting of Stockholders.
Compensation of Directors
Each director of the Company who is not also an employee of the Company or an employee or
director of Citizens Bank received a $250 fee for each Board meeting attended and a $3,000
retainer. Each director of the Company who is also a director of Citizens Bank and who is not an
employee of the Company or Citizens Bank received a $100 fee for each Board meeting of the Company
attended in 2008. Each director of the Company, other than Directors Covert, Ernat, Janko and Lee,
was also a director of Citizens Bank during 2008. In addition, in 2008, each non-employee director
of the Company was awarded a grant of 2,000 stock options under the Princeton National Bancorp,
Inc. Stock Option Plans. The options vest over three years at a rate of one-third per year, have
an exercise price of $22.57 (the average of the low and high price on grant date) and expire on
December 31, 2018.
During 2008, each director of Citizens Bank who is not also an employee was paid a retainer
($17,500 per annum) plus a fee for each Board and Committee meeting attended. Each director of
Citizens Bank who is not also an employee, other than the Chairman of the Board, received a $100
fee for each Citizens Bank Board meeting and a $100 fee for each Committee meeting attended in
2008. The Chairman of the Board of Citizens Bank received a $200 fee for each Board meeting
attended and a $150 fee for each Committee meeting attended in 2008. The Chairman of the Audit
Committee received a $150 fee for each Audit Committee meeting attended in 2008.
PNBC/CFNB Director Compensation
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Fees Earned or
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Paid in
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Option
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Cash
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Awards
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Total
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Name
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($)
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($)
1
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($)
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(a)
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(b)
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(c)
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(d)
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Daryl Becker
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$
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21,450
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$
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4,000
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$
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25,450
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Gary C. Bruce
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$
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20,000
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$
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4,000
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$
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24,000
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Sharon L. Covert
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$
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4,750
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$
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4,000
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$
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8,750
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John R. Ernat
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$
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4,750
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$
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4,000
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$
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8,750
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Donald E. Grubb
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$
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20,900
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$
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4,000
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$
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24,900
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Mark Janko
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$
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4,750
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$
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4,000
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$
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8,750
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Willard Lee
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$
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4,750
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$
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4,000
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$
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8,750
|
|
Gretta E. Bieber
|
|
$
|
19,300
|
|
|
$
|
4,000
|
|
|
$
|
23,300
|
|
Ervin I. Pietsch
|
|
$
|
19,700
|
|
|
$
|
4,000
|
|
|
$
|
23,700
|
|
Stephen W. Samet
|
|
$
|
21,400
|
|
|
$
|
4,000
|
|
|
$
|
25,400
|
|
Craig O. Wesner
|
|
$
|
26,250
|
|
|
$
|
4,000
|
|
|
$
|
30,250
|
|
|
|
|
1
|
|
Represents the pro-rated portion of the value of grants made in 2007 and prior years
calculated in accordance with FAS 123R.
|
Page 9
Compensation Discussion and Analysis
Objectives of Compensation Program
The primary objective of the compensation program is to attract and retain qualified,
energetic staff members who are enthusiastic about the Companys mission and culture. A further
objective is to provide incentives and reward staff members for their contribution to the Company.
Also, the compensation program is designed to align managements compensation with the long-term
interests of stockholders.
Base Salary
Each Executive Officers current and prior compensation is considered in setting future
compensation. In addition, the Compensation Committee considers the job performance of the
Executive Officers and the average salaries, as published by the Illinois Bankers Association, the
American Bankers Association and Crowe Horwath, of all of those persons holding comparable
positions at comparably-sized bank holding companies and banks, as the case may be, in determining
each Executive Officers base salary. The base salaries of the Executive Officers are targeted at
the average base salary levels of the IBA 75
th
quartile, ABA 75
th
percentile
and Crowe Horwath 3
rd
quartile of the comparative compensation group.
Stock price performance has not been a factor in determining annual compensation, because the
price of the Companys stock is subject to a variety of factors outside of our control. There is
not an exact formula for allocating between cash and non-cash compensation. Compensation is
generally paid as earned.
Annual Executive Officer compensation consists of a base salary component and an incentive
component. It is the Committees intention to set total executive cash compensation at an
attractive, competitive level to retain a strong, motivated leadership team. The incentive plan is
included as part of compensation to align the financial incentives with the interests of the
stockholders.
Incentives
The compensation program is designed to reward staff members for their contribution to the
Company. The Executive Officers participate in the incentive compensation plan. Variable
compensation is awarded to the Executive Officers based on the performance of the Company and
Citizens Bank to maximize achievement of the key corporate strategies/objectives and annual
business plan of Citizens Bank. In measuring the Executive Officers contributions, the Committee
considers numerous factors including the Companys growth, financial performance and the
achievement of key measurement factors established and approved by the Committee. Those
measurement factors for 2008 included net income, efficiency ratio, asset growth and individual
management-by-objective measures (MBOs). These measurement factors were chosen because of their
direct correlation with the interests of stockholders.
The achievements accomplished determine the percentage payout. In determining the level of
payout for the measurement factors, the current years budget is used, as well as a target goal and
a target plus goal. Depending on the level of goals achieved, the minimum award level is 0% and
the maximum level is 35%. A scale is attached to each level indicating the percentage of the
payout based on the achieved results. The award for each measurement factor is multiplied by the
percentage of weighting in each Officers individual MBOs.
Equity Compensation
Each Executive Officer receives stock option grants under the Companys stock option
Page 10
plans. All Directors and employees of Citizens Bank are eligible for stock option grants. Beginning in
2006, the accounting treatment for stock options changed as a result of the Statement of Financial
Accounting Standards No. 123R. The Company assessed the desirability of granting shares of
restricted stock and concluded stock options are still a desirable form of long-term equity
compensation. The original Stock Option Plan was approved by the stockholders of the Company in
1998, the 2003 Stock Option Plan was approved by the stockholders in 2003, and the 2007 Stock
Compensation Plan was approved by stockholders in 2007. In the opinion of the Committee and the
Board of Directors, the Companys stock option plans promote the alignment of management and stockholder interests and
result in Executive Officers of the Company being sufficient stockholders to encourage long-term
performance and Company growth. The number of stock option grants made to each Executive Officer
is awarded on a discretionary basis, rather than formula basis, by the Committee.
With respect to options granted in 1999 through 2005, each option period is for ten (10) years
and granted options are fully-vested. The 2008 grants were awarded as of December 31, 2008. With
respect to options granted in 2006, 2007 and 2008, each option period is for ten (10) years and
granted options become vested over a three-year period.
Retirement Plans
Citizens Bank maintains a 401(k) & Profit Sharing Plan. Citizens Bank will match 100% of
salary reduction contributions up to 3% of compensation, plus 50% of salary reduction contributions
in excess of 3%, but not to exceed 5%. Citizens Bank may also contribute a discretionary
contribution to the Profit Sharing Plan on an annual basis. The calculation used to determine
whether a contribution will be made is based on net income results of Citizens Bank.
Employment Agreements
Mr. Sorcic has an employment agreement with the Company, effective December 15, 2008, which
provides for his full-time employment in his present capacity at a base compensation of $319,748
per year, or such increased amount as the Board of Directors of Citizens Bank may determine, plus
fringe and health and welfare benefits. His term of employment is continuously extended so as to
have a remaining term of two years, unless terminated sooner as a result of good cause or for good
reason (see discussion below). The agreement also provides that Mr. Sorcic shall be eligible to
participate in any incentive plans that the Company establishes for its executives. Effective
January 1, 2009, Mr. Sorcics employment was amended to provide for discretionary allocations by
the Company to Mr. Sorcics account in the 2005 Deferred Compensation Plans. Descriptions of these
allocations are disclosed in the section titled Deferred Compensation Plans.
Mr. Miller has an employment agreement with the Company, effective December 15, 2008, which
provides for his full-time employment in his present capacity at a base compensation of $179,192
per year, or such increased amount as the Board of Directors of Citizens Bank may determine, plus
fringe and health and welfare benefits. His term of employment is continuously extended so as to
have a remaining term of eighteen months, unless terminated sooner as a result of good cause or for
good reason (see discussion below). The agreement also provides that Mr. Miller shall be eligible
to participate in any incentive plans that the Company establishes for its executives.
Descriptions of any potential post-termination payments are disclosed in the section titled
Other Potential Post-Employment Payments.
EXECUTIVE COMPENSATION
Page 11
Summary
The following table summarizes compensation for services to the Company and Citizens Bank for
the years ended December 31, 2008, 2007 and 2006 paid to, or earned by, the President & Chief
Executive Officer and Senior Vice President & Chief Financial Officer/Treasurer and the top three
other Executive Officers of the Company and/or Citizens Bank whose salary and bonus exceeded
$100,000 for the year ended December 31, 2008:
Page 12
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
Incentive
|
|
All Other
|
|
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Plan
|
|
Compensation
|
|
|
Name and Principal Position
|
|
Year
|
|
($)
1
|
|
($)
2
|
|
($)
3
|
|
Compensation
|
|
($)
4
|
|
Total ($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
Tony J. Sorcic
|
|
|
2008
|
|
|
$
|
319,455
|
|
|
$
|
109,731
|
|
|
$
|
40,000
|
|
|
|
|
|
|
$
|
18,076
|
|
|
$
|
487,262
|
|
President and Chief Executive Officer
|
|
|
2007
|
|
|
$
|
304,233
|
|
|
$
|
74,559
|
|
|
$
|
12,000
|
|
|
|
|
|
|
$
|
17,020
|
|
|
$
|
407,812
|
|
|
|
|
2006
|
|
|
$
|
289,503
|
|
|
$
|
47,961
|
|
|
$
|
0
|
|
|
|
|
|
|
$
|
17,298
|
|
|
$
|
354,762
|
|
James B. Miller
|
|
|
2008
|
|
|
$
|
173,239
|
|
|
$
|
62,710
|
|
|
$
|
8,000
|
|
|
|
|
|
|
$
|
14,678
|
|
|
$
|
258,627
|
|
Executive Vice President
|
|
|
2007
|
|
|
$
|
160,900
|
|
|
$
|
35,130
|
|
|
$
|
1,800
|
|
|
|
|
|
|
$
|
12,638
|
|
|
$
|
210,458
|
|
|
|
|
2006
|
|
|
$
|
155,246
|
|
|
$
|
23,441
|
|
|
$
|
0
|
|
|
|
|
|
|
$
|
13,254
|
|
|
$
|
191,941
|
|
Todd D. Fanning
|
|
|
2008
|
|
|
$
|
137,825
|
|
|
$
|
49,613
|
|
|
$
|
4,000
|
|
|
|
|
|
|
$
|
11,703
|
|
|
$
|
203,141
|
|
Senior Vice President &
|
|
|
2007
|
|
|
$
|
132,595
|
|
|
$
|
34,784
|
|
|
$
|
1,200
|
|
|
|
|
|
|
$
|
10,154
|
|
|
$
|
178,733
|
|
CFO/Treasurer
|
|
|
2006
|
|
|
$
|
111,929
|
|
|
$
|
20,634
|
|
|
$
|
0
|
|
|
|
|
|
|
$
|
9,856
|
|
|
$
|
142,419
|
|
Patrick B. Murray
|
|
|
2008
|
|
|
$
|
142,494
|
|
|
$
|
41,340
|
|
|
$
|
4,000
|
|
|
|
|
|
|
$
|
11,822
|
|
|
$
|
199,656
|
|
Senior Vice President Citizens
|
|
|
2007
|
|
|
$
|
144,212
|
|
|
$
|
32,461
|
|
|
$
|
1,200
|
|
|
|
|
|
|
$
|
11,083
|
|
|
$
|
188,956
|
|
Financial Advisors
|
|
|
2006
|
|
|
$
|
134,355
|
|
|
$
|
26,774
|
|
|
$
|
0
|
|
|
|
|
|
|
$
|
10,806
|
|
|
$
|
171,935
|
|
Jacqualyn L. Karlosky
|
|
|
2008
|
|
|
$
|
99,388
|
|
|
$
|
26,986
|
|
|
$
|
4,000
|
|
|
|
|
|
|
$
|
10,021
|
|
|
$
|
140,395
|
|
Senior Vice President Consumer
|
|
|
2007
|
|
|
$
|
93,901
|
|
|
$
|
21,735
|
|
|
$
|
1,200
|
|
|
|
|
|
|
$
|
8,133
|
|
|
$
|
124,969
|
|
Banking
|
|
|
2006
|
|
|
$
|
87,681
|
|
|
$
|
20,933
|
|
|
$
|
0
|
|
|
|
|
|
|
$
|
7,937
|
|
|
$
|
116,551
|
|
|
|
|
1
|
|
$25,000 of deferred compensation is included in the salary amount in column c which is
also shown in column b of the Non-Qualified Deferred Compensation table and does not represent
additional compensation
|
|
2
|
|
The Executive Officer may earn a performance incentive based on key results achieved
during the year (see page 8).
|
|
3
|
|
Represents the pro-rated portion of the value of grants made in 2007 and prior years
calculated in accordance with FAS 123R.
|
|
4
|
|
The compensation reported represents Company matching contributions to the Company
401(k) Plan and Company contributions to the Profit Sharing Plan.
|
Grants of Plan Based Award
The following tables present information about stock options granted to executive officers (of
the Company and/or Citizens Bank) in 2008 and information about options held by such officers as of
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Option
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
|
Underlying Options of
|
|
Exercise or Base
|
|
Grant Date Fair
|
|
|
|
|
|
|
Stock
|
|
Price of Option
|
|
Value of Stock
|
|
|
|
|
|
|
or Units
|
|
Awards
|
|
and
|
Name
|
|
Grant Date
|
|
(#)
1
|
|
($/Sh)
|
|
Option Awards
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
Tony J. Sorcic
|
|
|
12/31/08
|
|
|
|
20,000
|
|
|
$
|
22.57
|
|
|
$
|
7,200
|
|
President and Chief Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James B. Miller
|
|
|
12/31/08
|
|
|
|
5,000
|
|
|
$
|
22.57
|
|
|
$
|
1,800
|
|
Executive Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Todd D. Fanning
|
|
|
12/31/08
|
|
|
|
2,000
|
|
|
$
|
22.57
|
|
|
$
|
720
|
|
Senior Vice President &
CFO/Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick B. Murray
|
|
|
12/31/08
|
|
|
|
2,000
|
|
|
$
|
22.57
|
|
|
$
|
720
|
|
Senior Vice President -
Citizens Financial Advisors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jacqualyn L. Karlosky
|
|
|
12/31/08
|
|
|
|
2,000
|
|
|
$
|
22.57
|
|
|
$
|
720
|
|
Senior Vice President -
Consumer Banking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
The stock option exercise price is $22.57 and the stock options vest at a rate of 33
1/3% per year, with vesting dates of 12/31/09, 12/31/10, 12/31/11.
|
Page 13
Outstanding Equity Awards at Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Number
|
|
|
|
|
|
|
|
|
of
|
|
Number of
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
|
Options
|
|
Options
|
|
Exercise
|
|
Option
|
|
|
Exercisable
|
|
Un-exercisable
|
|
Price
|
|
Expiration
|
Name
|
|
(#)
|
|
(#)
|
|
($)
|
|
Date
|
(a)
|
|
(b)
|
|
(c)
|
|
(e)
|
|
(f)
|
Tony J. Sorcic
|
|
|
20,000
|
1
|
|
|
|
|
|
$
|
28.56
|
|
|
|
12/31/13
|
|
President and Chief Executive Officer
|
|
|
20,000
|
1
|
|
|
|
|
|
$
|
28.83
|
|
|
|
12/31/14
|
|
|
|
|
20,000
|
1
|
|
|
|
|
|
$
|
33.25
|
|
|
|
12/31/15
|
|
|
|
|
|
|
|
|
20,000
|
2
|
|
$
|
32.55
|
|
|
|
12/31/16
|
|
|
|
|
|
|
|
|
20,000
|
3
|
|
$
|
24.84
|
|
|
|
12/31/17
|
|
|
|
|
|
|
|
|
20,000
|
4
|
|
$
|
22.57
|
|
|
|
12/31/18
|
|
James B. Miller
|
|
|
734
|
1
|
|
|
|
|
|
$
|
11.94
|
|
|
|
12/26/10
|
|
Executive Vice President
|
|
|
2,000
|
1
|
|
|
|
|
|
$
|
16.21
|
|
|
|
12/31/11
|
|
|
|
|
4,000
|
1
|
|
|
|
|
|
$
|
21.15
|
|
|
|
12/31/12
|
|
|
|
|
4,000
|
1
|
|
|
|
|
|
$
|
28.56
|
|
|
|
12/31/13
|
|
|
|
|
4,000
|
1
|
|
|
|
|
|
$
|
28.83
|
|
|
|
12/31/14
|
|
|
|
|
3,000
|
1
|
|
|
|
|
|
$
|
33.25
|
|
|
|
12/31/15
|
|
|
|
|
|
|
|
|
3,000
|
2
|
|
$
|
32.55
|
|
|
|
12/31/16
|
|
|
|
|
|
|
|
|
3,000
|
3
|
|
$
|
24.84
|
|
|
|
12/31/17
|
|
|
|
|
|
|
|
|
5,000
|
4
|
|
$
|
22.57
|
|
|
|
12/31/18
|
|
Todd D. Fanning
|
|
|
533
|
1
|
|
|
|
|
|
$
|
28.56
|
|
|
|
12/31/13
|
|
Senior Vice President & CFO/Treasurer
|
|
|
1,200
|
1
|
|
|
|
|
|
$
|
28.83
|
|
|
|
12/31/14
|
|
|
|
|
2,000
|
1
|
|
|
|
|
|
$
|
33.25
|
|
|
|
12/31/15
|
|
|
|
|
|
|
|
|
2,000
|
2
|
|
$
|
32.55
|
|
|
|
12/31/16
|
|
|
|
|
|
|
|
|
2,000
|
3
|
|
$
|
24.84
|
|
|
|
12/31/17
|
|
|
|
|
|
|
|
|
2,000
|
4
|
|
$
|
22.57
|
|
|
|
12/31/18
|
|
Patrick B. Murray
|
|
|
1,000
|
1
|
|
|
|
|
|
$
|
28.83
|
|
|
|
12/31/14
|
|
Senior Vice President Citizens
Financial Advisors
|
|
|
2,000
|
1
|
|
|
|
|
|
$
|
33.25
|
|
|
|
12/31/15
|
|
|
|
|
|
|
|
|
2,000
|
2
|
|
$
|
32.55
|
|
|
|
12/31/16
|
|
|
|
|
|
|
|
|
2,000
|
3
|
|
$
|
24.84
|
|
|
|
12/31/17
|
|
|
|
|
|
|
|
|
2,000
|
4
|
|
$
|
22.57
|
|
|
|
12/31/18
|
|
Jacqualyn L. Karlosky
|
|
|
2,000
|
1
|
|
|
|
|
|
$
|
28.56
|
|
|
|
12/31/13
|
|
Senior Vice President Consumer Banking
|
|
|
2,000
|
1
|
|
|
|
|
|
$
|
28.83
|
|
|
|
12/31/14
|
|
|
|
|
2,000
|
1
|
|
|
|
|
|
$
|
33.25
|
|
|
|
12/31/15
|
|
|
|
|
|
|
|
|
2,000
|
2
|
|
$
|
32.55
|
|
|
|
12/31/16
|
|
|
|
|
|
|
|
|
2,000
|
3
|
|
$
|
24.84
|
|
|
|
12/31/17
|
|
|
|
|
|
|
|
|
2,000
|
4
|
|
$
|
22.57
|
|
|
|
12/31/18
|
|
|
|
|
1
|
|
Stock Options are fully vested.
|
|
2
|
|
Stock Options vest at a rate of 33 1/3% per year, with vesting dates of 12/31/07, 12/31/08, 12/31/09
|
|
3
|
|
Stock Options vest at a rate of 33 1/3% per year, with vesting dates of 12/31/08, 12/31/09, 12/31/10
|
|
4
|
|
Stock Options vest at a rate of 33 1/3% per year, with vesting dates of 12/31/09, 12/31/10, 12/31/11
|
Option Exercised and Stock Vested
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Number of
|
|
|
|
|
Shares
|
|
|
|
|
Acquired
|
|
Value Realized
|
|
|
on Exercise
|
|
on Exercise
|
Name
|
|
(#)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
Tony J. Sorcic
|
|
|
|
|
|
|
|
|
President & Chief Executive Officer
|
|
|
|
|
|
|
|
|
James B. Miller
|
|
|
|
|
|
|
|
|
Executive Vice President
|
|
|
|
|
|
|
|
|
Todd D. Fanning
|
|
|
|
|
|
|
|
|
Senior Vice President & CFO/Treasurer
|
|
|
|
|
|
|
|
|
Patrick B. Murray
|
|
|
|
|
|
|
|
|
Senior Vice President Citizens Financial
|
|
|
|
|
|
|
|
|
Advisors
|
|
|
|
|
|
|
|
|
Jacqualyn L. Karlosky
|
|
|
|
|
|
|
|
|
Senior Vice President Consumer Banking
|
|
|
|
|
|
|
|
|
Deferred Compensation Plans
Mr. Sorcic participates in the Princeton National Bancorp, Inc. Deferred Compensation Plan and
the Princeton National Bancorp, Inc. 2005 Deferred Compensation Plan. Except as
Page 14
indicated below,
the terms of these plans are substantially identical.
Under the plans, prior to the beginning of each calendar year, Mr. Sorcic may elect to defer
the receipt of all or part of his compensation otherwise payable to him for the forthcoming calendar year. The plans
provide that amounts Mr. Sorcic defers are credited with earnings at the prime rate minus one and
one-half percent, adjusted annually, as reported in the Wall Street Journal. Effective January 1,
2009, the crediting rate under the 2005 plan will be the greater of the prime rate minus one and
one-half percent or 4%.
Effective January 1, 2009, the Company and Mr. Sorcic have agreed to amendments to Mr.
Sorcics employment agreement providing for an annual allocation to Mr. Sorcics account in the
plan. Commencing on January 1, 2009 and on each of the following four successive anniversaries of
that date, provided that Mr. Sorcic remains employed with the Company as of such date, the Company
shall credit $25,000 to Mr. Sorcics discretionary contributions account in the plan. Mr. Sorcic
shall become vested in such contributions at the rate of 20% per year beginning January 1, 2010,
provided he is employed by the Company on that date until he is 100% vested in such contributions
on January 1, 2014.
The vested contributions described above and any earnings thereon shall be paid to Mr. Sorcic
in 5 substantially equal installments, with the first installment being paid on the date Mr. Sorcic
attains age 61 (i.e., June 3, 2014) and the remaining four installments being paid on each June
3
rd
of the following four years. The contributions described above shall otherwise be
made and administered in accordance with the terms and conditions of the plan.
Amounts under the plans are generally payable to Mr. Sorcic upon the earliest of (i) the date
his employment terminates; (ii) his death; (iii) his total and permanent disability; or (iv) the
date of a change in control of the Company or Citizens First National Bank. Under the 2005 plan,
if Mr. Sorcic is considered a specified employee under applicable provisions of the federal tax
laws, a distribution following Mr. Sorcics termination of employment may not occur until 6 months
following the date of that termination. As of December 31, 2008, Mr. Sorcic would be considered a
specified employee. In addition, Mr. Sorcic may elect to be paid all or a portion of his plan
benefits upon an unforeseeable financial emergency, but only to the extent that the payment is
necessary to relieve that emergency.
Amounts payable under the plans are paid either in a lump sum or ten substantially equal
payments. Mr. Sorcic may change the form of benefit or waive the payment of plan accounts upon a
change in control and elect to receive payments on the next payment date under the plans, provided
that he makes the election in the calendar year preceding and at least 90 days prior to the change
in control. However, under the 2005 plan, a change in the form of benefit or a waiver of payment
upon a change in control would generally require a five-year delay in the first scheduled payment
under the plans.
Under the plans, the events that are deemed to constitute a change in control are
substantially similar to the events that constitute a change in control under the employment
agreement between the Company and Mr. Sorcic, except that under the 2005 plan, a change in
ownership of 30% of the Companys voting stock is required before a change in control will be
deemed to occur. See descriptions of potential post-termination payments which are disclosed in
the section titled Other Potential Post-Employment Payments.
Non-qualified Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
|
Aggregate
|
|
|
Contributions
|
|
Contributions
|
|
Earnings
|
|
Withdrawals/
|
|
Balance
|
|
|
in Last FY
|
|
in Last FY
|
|
in Last FY
|
|
Distributions
|
|
at Last FYE
|
Name
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
Tony J. Sorcic
President & Chief
|
|
$
|
25,000
|
1
|
|
|
|
|
|
$
|
8,921
|
|
|
|
|
|
|
$
|
172,355
|
|
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 15
|
|
|
1
|
|
Mr. Sorcic deferred the payment of $25,000 of his base salary under the terms and conditions of
the Princeton National Bancorp, Inc. 2005 Deferred Compensation Plan. The amount reported in
column b is also reported in column c of the Summary Compensation Table and does not represent
additional compensation.
|
Other Potential Post-Employment Payments
Our Executive Officers have built the Company into the successful enterprise it is today, and
we believe it is important to protect them in the event of a change in control, a termination of the
Executives employment without cause or good reason, the Executives death or the Executives
disability. Further, it is our belief the interests of stockholders will be best served if the
interests of our Senior Management are aligned with them, and providing change in control benefits
should eliminate, or at least reduce, the reluctance of Executive Officers to pursue potential
change in control transactions that may be in the best interests of stockholders. The cash
component of any post-termination payment is paid in a single, lump sum and is based upon a
multiple of base salary.
The following paragraphs describe the post-termination benefits payable to Mr. Sorcic and Mr.
Miller. During the period that the U.S. Treasury holds preferred stock of the Company pursuant to
the TARP Capital Purchase Program, the Company may be prohibited or restricted from making the
payments to Mr. Sorcic and Mr. Miller as described in this section.
A post-termination benefit is payable to Mr. Sorcic if, during the term of his employment
agreement, the Company or Citizens Bank terminates his employment without cause, Mr. Sorcic
terminates his employment for good reason, or the Company or Citizens Bank terminates Mr. Sorcics
employment within the twenty-four month period following the change in control. Under any of these
circumstances, Mr. Sorcic would be entitled to receive a lump sum payment payable within 30 days
following the date on which his employment terminates equal to the greater of his monthly salary
times twenty-four or the salary payable for the balance of the term of his employment agreement.
For the longer of twenty-four months or the period remaining in his employment agreement, Mr.
Sorcic also would be entitled to receive all benefits accrued under any incentive and retirement
plan of the Company and he and his dependents would continue to be covered by all welfare plans of
the Company. In addition, all outstanding stock options would become fully and immediately
exercisable. At December 31, 2008, had Mr. Sorcics employment with the Company or the Bank
terminated under one of the circumstances described above, Mr. Sorcic would have been entitled to
receive $660,036 (reflects two years) in base salary and $18,380 representing the present value of
continued welfare benefit plan participation described above.
If Mr. Sorcic dies during the term of his employment agreement, Mr. Sorcics the Company would
pay Mr. Sorcics beneficiary a lump-sum payment equal to 12 months of Mr. Sorcics base salary
prior to March 15
th
of the year following the in which Mr. Sorcics death occurs and Mr.
Sorcics spouse and other dependents would continue participation in the Companys welfare benefit
plans on the same terms as they would have been provided if Mr. Sorcic were an active employee and,
for the period of twenty-four months following the first anniversary of Mr. Sorcics death, Mr.
Sorcics spouse and other dependents would continue participation in the Companys welfare benefit
plans on the same terms as would have been provided if Mr. Sorcic were a retiree of the Company or
the Bank.
If Mr. Sorcics employment terminates due to his disability, the Company will continue to
Page 16
pay his base salary from the date of disability until Mr. Sorcic is eligible to receive benefit
payments under the Banks disability plan. During the period base salary payments continue, Mr.
Sorcic will remain eligible to participate in the Companys welfare benefit plans. Base salary
continuation payments are reduced by disability benefits paid to Mr. Sorcic and cease upon the
cessation of disability, except salary will be paid for an additional twelve months if neither the
Company nor the Bank offer Mr. Sorcic re-employment in the same position he held prior to his
disability.
A post-termination benefit is payable to Mr. Miller if, during the term of his employment
agreement, the Company or Citizens Bank terminates his employment without cause, Mr. Miller
terminates his employment for good reason, or the Company or Citizens Bank terminates Mr. Millers
employment within the twenty-four month period following the change in control. Under any of these
circumstances, Mr. Miller would be entitled to receive a lump sum payment payable within 30 days
following the date on which his employment terminates equal to the greater of his monthly salary
times eighteen or the salary payable for the balance of the term of his employment agreement. For
the longer of eighteen months or the period remaining in his employment agreement, Mr. Miller also
would be entitled to receive all benefits accrued under any incentive and retirement plan of the
Company and he and his dependents would continue to be covered by all welfare plans of the Company.
In addition, all outstanding stock options would become fully and immediately exercisable. At
December 31, 2008, had Mr. Millers employment with the Company or the Bank terminated under one of
the circumstances described above, Mr. Miller would have been entitled to receive $358,384
(reflects eighteen months) in base salary and $6,604 representing the present value of continued
welfare benefit plan participation described above.
Page 17
If Mr. Miller dies during the term of his employment agreement, for a period of 12 months from
the date of death, Mr. Millers spouse and other dependents would continue participation in the
Companys welfare benefit plans on the same terms as they would have been provided if Mr. Miller
were an active employee and for the period of twenty-four months following the first anniversary of
Mr. Millers death, Mr. Millers spouse and other dependents would continue participation in the
Companys welfare benefit plans on the same terms as would have been provided if Mr. Miller were a
retiree of the Company or the Bank.
If Mr. Millers employment terminates due to his disability, the Company will continue to pay
his base salary from the date of disability until Mr. Miller is eligible to receive benefit
payments under the Banks disability plan. During the period base salary payments continue, Mr.
Miller will remain eligible to participate in the Companys welfare benefit plans. Base salary
continuation payments are reduced by disability benefits paid to Mr. Miller and cease upon the
cessation of disability, except salary will be paid for an additional twelve months if neither the
Company nor the Bank offer Mr. Miller re-employment in the same position he held prior to his
disability.
A change in control is deemed to occur (i) upon the acquisition by any individual, entity or
group of beneficial ownership of more than 25% of the Companys voting stock; (ii) the commencement
of a tender offer or an exchange offer for more than 20% of the Companys outstanding voting stock;
(iii) upon a merger or consolidation of the Company after which the Companys stockholders
immediately prior to the merger hold less than 25% of the voting stock of the surviving
corporation; (iv) upon a transfer of 25% or more of the Companys voting stock or substantially all
of the property of Company, other than to an entity of which Company owns at least 50% of the
voting stock; (v) upon a merger or consolidation of the Bank after which the Banks stockholders
immediately prior to the merger hold less than 25% of the voting stock of the surviving
corporation; or (vi) upon a transfer of 25% or more of the Banks voting stock or substantially all
of the property of the Bank, other than to an entity of which the Bank owns at least 50% of the
voting stock.
For purposes of determining Mr. Sorcics and Mr. Millers rights to severance benefits upon
their voluntary termination of employment, good reason is deemed to exist if Mr. Sorcic or Mr.
Miller terminates his employment because, without his express written consent, (i) Bancorp
breaches any of the terms of his employment agreement, (ii) he is assigned duties materially
inconsistent with the duties and responsibilities stated in the by-laws of the Company and the Bank
for his positions, (iii) the duties and responsibilities for the office held by Mr. Sorcic or Mr.
Miller as stated in the by-laws of the Company and the Bank, respectively, are amended to be
materially inconsistent with the duties and responsibilities that would typically be expected of
that office; or (iv) the Company or the Bank changes by 50 miles or more the principal location in
which Mr. Sorcic or Mr. Miller is required to perform services. Upon the occurrence of any event
referenced in (i) through (iv) above, Mr. Sorcic and Mr. Miller shall, within 90 days of such
occurrence, provide the Company notice of the existence of the condition. Upon receiving notice,
the Company shall have no more than 30 days to remedy the condition. Executive shall have two
years from the date of the initial existence of one of the above events to terminate his employment
under this section.
Compensation Committee Report
The Committee of the Company has reviewed and discussed the Compensation Discussion and
Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and
discussions, the Committee recommended to the Board of Directors that the Compensation Discussion
and Analysis be included in this Proxy Statement.
The Committee certifies that it has reviewed with the Companys senior risk officers the
Companys incentive compensation arrangements that it has with its Senior Executive Officers
Page 18
(as such term is defined in the Emergency Economic Stabilization Act of 2008) and that the Committee
has made reasonable efforts to ensure that such arrangements do not encourage the Companys Senior
Executive Officers to take unnecessary and excessive
risks that threaten the value of the Company.
THE COMPENSATION COMMITTEE
|
|
|
|
|
Stephen W. Samet, Chairman
|
|
Daryl Becker
|
|
Craig
|
O. Wesner
|
|
|
|
|
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is a current or former employee of the Company or any
of its subsidiaries. No member of the Compensation Committee had any relationship with the Company
which would have required disclosure in this Proxy Statement under the caption Certain
Transactions. No Executive Officer of the Company served on the compensation committee or as a
director of any other entity whose Executive Officer(s) served on the Companys Compensation
Committee or Board.
Page 19
COMMON STOCK PRICE PERFORMANCE GRAPH
The following Common Stock price performance graph compares the monthly change in the
Companys cumulative total stockholder returns on its Common Stock, assuming the Common Stock was
purchased on December 31, 2003 and sold on December 31, 2008, with the cumulative total return of
stocks included in the Russell 3000, SNL Midwest Bank Stock Index and the NASDAQ Bank Index for the
same period. The amounts shown assume the reinvestment of dividends.
PRINCETON NATIONAL BANCORP, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ending
|
|
|
Index
|
|
|
12/31/03
|
|
|
12/31/04
|
|
|
12/31/05
|
|
|
12/31/06
|
|
|
12/31/07
|
|
|
12/31/08
|
|
|
Princeton National Bancorp, Inc.
|
|
|
|
100.00
|
|
|
|
|
104.33
|
|
|
|
|
124.41
|
|
|
|
|
125.70
|
|
|
|
|
97.18
|
|
|
|
|
92.63
|
|
|
|
Russell 3000
|
|
|
|
100.00
|
|
|
|
|
111.95
|
|
|
|
|
118.80
|
|
|
|
|
137.47
|
|
|
|
|
144.54
|
|
|
|
|
90.61
|
|
|
|
SNL Midwest Bank
|
|
|
|
100.00
|
|
|
|
|
112.84
|
|
|
|
|
108.73
|
|
|
|
|
125.68
|
|
|
|
|
97.96
|
|
|
|
|
64.44
|
|
|
|
NASDAQ Bank
|
|
|
|
100.00
|
|
|
|
|
110.99
|
|
|
|
|
106.18
|
|
|
|
|
117.87
|
|
|
|
|
91.85
|
|
|
|
|
69.88
|
|
|
|
The Companys Common Stock began trading on the NASDAQ Stock Market under the symbol PNBC on
May 8, 1992. On December 31, 2008 and February 27, 2009, the Record Date, the closing prices for
the Common Stock as quoted on NASDAQ Online was $22.14 and $13.03, respectively.
Page 20
AUDIT COMMITTEE REPORT
The Companys Audit Committee is currently comprised of three directors (Directors Becker,
Bruce and Samet). Each of the members of the Audit Committee is independent under the definition
contained in Rule 4200(a) (15) of NASDAQs listing standards. The Board of Directors has adopted a
written charter for the Audit Committee, a copy of which is available on our Website at
http://www.pnbc-inc.com.
In connection with the audited consolidated financial statements contained in the Companys
2008 Annual Report on Form 10-K for the fiscal year ended December 31, 2008, the Audit Committee
reviewed and discussed the audited financial statements with Management and BKD, LLP. The Audit
Committee discussed with BKD, LLP the matters required to be discussed by Statement on Auditing
Standards No. 61, as amended (AICPA, Professional Standards, Volume 1 AU Section 380), as adopted
by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee has also
received written disclosures from BKD, LLP required by the Public Company Accounting Oversight
Board regarding the independent accountants communications with the audit committee concerning
independence and has discussed with them their independence.
Based on the review and discussions, the Audit Committee recommended to the Board of Directors
that the audited consolidated financial statements be included in the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2008.
|
|
|
|
|
Daryl Becker
|
|
Gary C. Bruce
|
|
Stephen W. Samet
|
AUDIT AND NON-AUDIT FEES
The following table presents fees for professional audit services rendered by BKD, LLP for the
audit of the Companys consolidated financial statements for 2008 and 2007, and fees billed for
other services rendered by BKD, LLP:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
Audit Fees (1)
|
|
$
|
195,150
|
|
|
$
|
190,050
|
|
|
|
|
|
|
|
|
|
|
Audit-related fees (2)
|
|
$
|
16,000
|
|
|
$
|
10,500
|
|
|
|
|
|
|
|
|
|
|
Audit and audit-related fees
|
|
$
|
211,150
|
|
|
$
|
200,550
|
|
|
|
|
|
|
|
|
|
|
Tax fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All other fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fees
|
|
$
|
211,150
|
|
|
$
|
200,550
|
|
|
|
|
(1)
|
|
Audit fees include those necessary to perform the annual audit and quarterly
reviews of the Companys consolidated financial statements. In addition, audit fees
include audit or other attest services required by statute or regulation, such as
consents, reviews of SEC filings, and audits of internal control over financial
reporting.
|
|
(2)
|
|
Audit-related fees consist principally of fees for recurring and required
financial statement audits of the Companys employee benefit plan and other attest
services not required by statute or regulation.
|
Page 21
In accordance with Section 10A(i) of the Exchange Act, before BKD, LLP is engaged to render
audit or non-audit services, the engagement is approved by the Audit Committee. None of the
audit-related or other services described in the table above were approved by the Audit Committee,
pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X.
The Audit Committee of the Board of Directors of the Company considers that the provision of
the services referenced above to the Company is compatible with maintaining independence of BKD,
LLP. Representatives of BKD, LLP are expected to attend the Annual Meeting and will be available
to respond to appropriate questions or to make a statement if they desire to do so.
Page 22
AUDIT COMMITTEE FINANCIAL EXPERT
While the Board of Directors endorses the effectiveness of the Companys Audit Committee, its
membership does not include a director who qualifies for designation as an audit committee
financial expert a concept under federal regulation that contemplates such designation only when
an audit committee member satisfies all five qualification requirements, such as experience (or
experience actively supervising others engaged in) preparing, auditing, analyzing or evaluating
financial statements presenting a level of accounting complexity comparable to what is encountered
in connection with our Companys financial statements.
CERTAIN TRANSACTIONS
Several of the Companys directors and their affiliates, including corporations and firms of
which they are officers or in which they or members of their families have an ownership interest,
are customers of Citizens Bank. These persons, corporations and firms have had transactions in the
ordinary course of business with Citizens Bank, including borrowings of material amounts, all of
which, in the opinion of management, were on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with unaffiliated
persons and did not involve more than the normal risk of collectibility or present other
unfavorable features. It is the policy of Citizens Bank not to extend credit to Executive Officers
thereof. For any potential related party transaction that would require disclosure pursuant to
Item 404(a) of Regulation S-K, the details of the potential transaction are to be submitted in
written form to the Audit Committee for review and approval prior to commitment.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon its review of Forms 3, 4 and 5 and any amendment thereto furnished to the
Company pursuant to Rule 16a-3(e) of the Securities Exchange Act of 1934, as amended, and written
representations from the Directors and Executive Officers that no other reports were required, the
Company is not aware of any Director, Officer or beneficial holder of 10% of its Common Stock that
failed to file any such reports on a timely basis during 2008, except Director Mr. Samet filed one
report with respect to one transaction one day late.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of February 27, 2009, the only persons or groups who are known to the Company to be the
beneficial owners of more than 5% of the Common Stock were:
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Amount and Nature of
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Name and Address of Beneficial Owner
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Beneficial Ownership
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Percent of Class
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Tontine Partners, LP
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55 Railroad Avenue 3
rd
Floor
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Greenwich, CT 06830-6378
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233,911
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(1)
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7.09
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%
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1
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Based on Schedule 13F filed as of December 31, 2008
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ANNUAL MEETING TO BE HELD IN 2010
Any stockholder who intends to present a proposal (a Proponent) at next years Annual
Meeting of Stockholders to be held in 2010 must submit the proposal in writing to the Company on or
before November 16, 2009, in order for the proposal to be eligible for inclusion in the Companys
proxy statement and form of proxy for that meeting, pursuant to Rule 14A-8.
Page 23
In addition, pursuant to Rule 14a-4 of Regulation 14A under the Securities Exchange Act of
1934 and the Companys Bylaws, a stockholder must follow certain procedures to nominate persons for
Director or to introduce an item of business outside of Rule 14A-8 at an Annual Meeting of
Stockholders. The nomination or proposed item must be delivered to, or mailed to, and received no
later than the close of business on the 120
th
day, nor earlier than the close of
business on the 150
th
day, prior to the anniversary of the mailing date of the proxy
statement for the preceding years annual meeting.
The Chairman of the meeting may refuse to allow the transaction of any business not presented
beforehand or to acknowledge the nomination of any person not made in compliance with the following
procedures:
Proposed Item of Business
If the notice is regarding a proposed item of business, such stockholders notice to the
Corporate Secretary of the Company must contain the following information:
As to any business the stockholder proposes to bring before the annual meeting,
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a brief description of the business desired to be brought;
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the reasons for conducting such business at the annual meeting;
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any material interest of the stockholder in such business and the beneficial
owner, if any, on whose behalf the proposal is made;
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the name and address of both the stockholder and the beneficial owner; and
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the class and number of shares of the Companys capital stock that are owned
beneficially and of record by the stockholder and the beneficial owner.
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Nomination of Director
If the notice is regarding the nomination of a person for Director, such stockholders notice
to the Corporate Secretary of the Company must contain the following information:
As to each person whom the stockholder proposes to nominate for election as a Director,
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name, age, business address and residential address;
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principal occupation or employment;
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class and number of shares of Company stock beneficially-owned on the date of the
notice; and
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any other information relating to the nominee that would be required to be disclosed
on Schedule 13D under the Securities and Exchange Act of 1934.
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As to the stockholder giving the notice,
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name and address of stockholder, and name, business and residential address of any
other beneficial stockholders known by the stockholder to support the nominee; and
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class and number of shares of Company stock owned by the stockholder on the date of
the notice, and the number of shares beneficially-owned by other record or beneficial
stockholders known by the stockholder to be supporting the nominee.
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OTHER MATTERS
Management of the Company does not intend to present any other matters for action at the
annual meeting and has not been informed that other persons intend to present any other matters for
action at the meeting. However, if any other matters should properly come before
Page 24
the meeting, the persons named in the accompanying proxy intend to vote thereon, pursuant to the proxy, in
accordance with the recommendation of the management of the Company.
Page 25
PROXY AVAILABILITY
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to
be held on April 28, 2009:
The proxy statement and annual report to shareholders are available at our website at
www.pnbc-inc.com
.
By Order of the Board of Directors,
Lou Ann Birkey
Vice President Investor Relations
& Corporate Secretary
March 16, 2009
Page 26
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
April 28, 2009
- Please vote, sign, and return immediately -
The undersigned hereby appoints Messrs. Lawrence DeVore, James Smith, and John Isaacson, or
any of them, as the attorneys and proxies of the undersigned, with full power of substitution, to
represent and vote all shares of common stock of Princeton National Bancorp, Inc. (the Company),
standing in the name of the undersigned at the close of business on February 27, 2009, at the
Annual Meeting of Stockholders of the Company to be held at The Galleria Convention Center, 1659
North Main Street, Princeton, Illinois, at 10:00 a.m., on Tuesday, April 28, 2009 or at any
adjournment or postponement thereof, with all the powers that the undersigned would possess if
personally present, on all matters coming before said meeting, as follows:
(1)
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Election of directors
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o
I/We vote
FOR
all nominees listed below (other than any nominee whose name has
been lined out).
o
I/We
WITHHOLD AUTHORITY
to vote for all nominees listed below.
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Class II Directors
Gretta E. Bieber
Gary C. Bruce
John R. Ernat
Tony J. Sorcic
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YOU MAY WITHHOLD AUTHORITY TO VOTE FOR ANY OF THE ABOVE-NAMED NOMINEES BY LINING OUT THAT
NOMINEES NAME.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF THE
FOUR NOMINEES
(2)
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To approve the following advisory (non-binding) proposal
:
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o
I/We vote
FOR
Proposal II.
o
I/We
ABSTAIN
on the vote for Proposal II.
o
I/We vote
AGAINST
Proposal II.
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Resolved, that the shareholders approve the
executive compensation of the
Company, as described in the
Compensation Discussion and
Analysis and the tabular
disclosure regarding named
executive officer compensation
(together with the accompanying
narrative disclosure) in this
Proxy Statement.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE EXECUTIVE
COMPENSATION OF THE COMPANY.
(3)
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In their discretion, upon such other matters as may properly come before the Annual Meeting.
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This proxy when properly executed will be voted in the manner directed herein. If no
instructions are indicated, this proxy will be voted FOR the election of all nominees named in
the Proxy Statement and FOR the approval of the proposals described in the Proxy Statement.
Please vote, date and sign this proxy and return it in the enclosed envelope. When signing as
an executor, administrator, trustee, guardian, custodian, corporate officer or in any capacity
other than individually, give your full title as such. If stock is held jointly, each joint owner
should sign this proxy.
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(Date)
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(Shareholders Signature)
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(Capacity, if other than individually)
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(Shareholders Signature)
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(Capacity, if other than individually)
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The signer hereby revokes all proxies, if any, previously given by the signer to vote at the
meeting or any adjournment of the meeting.
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