Other definitive proxy statements

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.     )
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Filed by a Party other than the Registrant ¨
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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 under §240.14a-12
First Midwest Bancorp, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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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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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. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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April 11, 2017




Dear Stockholder:
You are cordially invited to attend the 2017 Annual Meeting of Stockholders of First Midwest Bancorp, Inc., which will be held on Wednesday, May 17, 2017 at 9:00 a.m., Central time, at the Westin Chicago Northwest Hotel, 400 Park Boulevard, Itasca, Illinois 60143.
The matters to be acted on at the Annual Meeting are described in the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement. Also enclosed is a copy of our 2016 Annual Report. Please review these materials carefully before voting.
We are pleased to offer multiple options for voting your shares. As detailed in the Questions and Answers section of the Proxy Statement, you may vote your shares via the Internet, by telephone or by mail. Voting in any of these ways will not prevent you from attending the Annual Meeting. You also may vote in person by written ballot at the Annual Meeting.
Your vote is very important to us. Whether or not you plan to attend the meeting in person, your shares should be represented and voted.
On behalf of our Board of Directors, I would like to express our appreciation for your continued interest in First Midwest. I hope you will be able to attend the Annual Meeting.
Sincerely,
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Michael L. Scudder
President and Chief Executive Officer




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One Pierce Place, Suite 1500
Itasca, Illinois 60143
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Date and Time:
May 17, 2017 at 9:00 a.m., Central time.
Place:
Westin Chicago Northwest Hotel, 400 Park Boulevard, Itasca, Illinois 60143.
Items of Business:
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To elect as directors the seven nominees identified in the attached Proxy Statement, each to serve for a term as described in the Proxy Statement.
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To approve and adopt an amendment to the Company’s Restated Certificate of Incorporation, as amended, to declassify the Board of Directors.
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To approve and adopt an amendment to the Company’s Restated Certificate of Incorporation, as amended, to increase the number of authorized shares of common stock from 150,000,000 to 250,000,000.
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To approve an advisory (non-binding) resolution regarding the compensation paid in 2016 to the Company’s named executive officers.
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To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2017.
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To transact such other business as may properly come before the Annual Meeting.
Record Date:
You are entitled to vote at the Annual Meeting only if you owned shares of First Midwest Bancorp, Inc. common stock at the close of business on March 24, 2017, which is the record date for the Annual Meeting.
Proxy Voting:
It is important that your shares be represented and voted at the Annual Meeting. You can vote your shares via the Internet, by telephone or by mail. Voting in any of these ways will not prevent you from attending or voting your shares in person at the Annual Meeting. For instructions on how to vote your shares, please see the Questions and Answers section of the Proxy Statement.
By Order of the Board of Directors,

Nicholas J. Chulos
Executive Vice President, Corporate Secretary
and General Counsel

April 11, 2017



TABLE OF CONTENTS





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One Pierce Place, Suite 1500
Itasca, Illinois 60143
PROXY STATEMENT
INTRODUCTION AND SUMMARY
This Proxy Statement is being furnished in connection with a solicitation of proxies by the Board of Directors of First Midwest Bancorp, Inc., a Delaware corporation, to be used at our 2017 Annual Meeting of Stockholders. The approximate date on which this Proxy Statement, the accompanying Proxy Card and our 2016 Annual Report are first being sent or otherwise made available to stockholders is April 11, 2017. The following is a summary of items to be voted upon at the Annual Meeting.
Annual Meeting of Stockholders
Date and Time:
May 17, 2017 at 9:00 a.m., Central time
Place:
Westin Chicago Northwest Hotel, 400 Park Boulevard, Itasca, Illinois 60143
Record Date:
March 24, 2017
Important Notice Regarding the Availability of Proxy Materials
A copy of our Annual Report for the year ended December 31, 2016 accompanies this Proxy Statement. The Notice, this Proxy Statement and our Annual Report are available at www.proxyvote.com (if you utilize www.proxyvote.com , you will need the control number included on your Proxy Card). If you would like to receive,


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without charge, a paper copy of our Annual Report, please contact our Corporate Secretary at First Midwest Bancorp, Inc., One Pierce Place, Suite 1500, Itasca, Illinois 60143.
Election of Directors
The first item of business at the Annual Meeting will be the election of seven directors of the Company. The nominees are Thomas L. Brown, Phupinder S. Gill, Kathryn J. Hayley, Frank B. Modruson, Ellen A. Rudnick, Michael J. Small and Stephen C. Van Arsdell. Each nominee is currently a director of the Company, with Mr. Brown, Ms. Hayley and Messrs. Modruson and Van Arsdell having been appointed to the Board following the 2016 annual meeting of stockholders.
If the proposal to amend the Company’s Certificate of Incorporation to declassify the Board of Directors, which is the second item of business at the Annual Meeting, is approved and adopted, then each nominee standing for election would be elected to a one-year term that expires in 2018. If the proposal to declassify the Board of Directors is not approved and adopted, then Ms. Hayley and Mr. Van Arsdell would be elected to the class of directors whose term expires in 2019 and Messrs. Brown, Gill and Modruson, Ms. Rudnick and Mr. Small would be elected to the class of directors whose term expires in 2020.
Director Nominees
Age
Director
Since
Independent
Board of
Directors Vote
Recommendation
Thomas L. Brown
60
2017
Yes
FOR
Vice President and Chief Financial Officer
RLI Corp.
Phupinder S. Gill
56
2010
Yes
FOR
Former Chief Executive Officer
CME Group, Inc.
Kathryn J. Hayley
58
2016
Yes
FOR
Former Executive Vice President
UnitedHealthcare
Frank B. Modruson
57
2016
Yes
FOR
Former Partner and Chief Information Officer
Accenture plc
Ellen A. Rudnick
66
2005
Yes
FOR
Senior Advisor and
Adjunct Professor of Entrepreneurship
University of Chicago Booth School of Business
Michael J. Small
59
2010
Yes
FOR
President and Chief Executive Officer
Gogo, Inc.
Stephen C. Van Arsdell
66
2017
Yes
FOR
Former Senior Partner and
Chairman and Chief Executive Officer
Deloitte & Touche LLP
Amendment to Certificate of Incorporation to Declassify the Board of Directors
We are asking our stockholders to approve and adopt an amendment to our Certificate of Incorporation to declassify our Board of Directors.


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Amendment to Certificate of Incorporation to Increase the Authorized Shares of Common Stock
We are asking our stockholders to approve and adopt an amendment to our Certificate of Incorporation to increase the number of authorized shares of Common Stock from 150,000,000 to 250,000,000.
Executive Compensation
We are asking our stockholders to approve, on an advisory (non-binding) basis, a resolution regarding the compensation paid in 2016 to our named executive officers as disclosed in this Proxy Statement.
Independent Registered Public Accounting Firm
We are asking our stockholders to ratify, on an advisory (non-binding) basis, the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2017.
Certain Terms
Certain terms that we use in this Proxy Statement have particular meanings. For ease of reference, we have set forth below the meanings of these terms.
Term
Meaning
401(k) Plan
First Midwest Bancorp, Inc. Savings and Profit Sharing Plan, as amended
Annual Meeting
2017 Annual Meeting of Stockholders of First Midwest Bancorp, Inc.
Board of Directors or Board
Board of Directors of First Midwest Bancorp, Inc.
By-Laws
Amended and Restated By-Laws of First Midwest Bancorp, Inc., as amended
Certificate of Incorporation
Restated Certificate of Incorporation of First Midwest Bancorp, Inc., as amended
Common Stock
Common Stock, $0.01 par value per share, of First Midwest Bancorp, Inc.
Company, we, us or our
First Midwest Bancorp, Inc.
Deferred Compensation Plan
First Midwest Bancorp, Inc. Nonqualified Retirement Plan, as amended
Exchange Act
Securities Exchange Act of 1934, as amended
FASB
Financial Accounting Standards Board
First Midwest Bank or Bank
First Midwest Bank, which is a wholly-owned subsidiary of First Midwest Bancorp, Inc.
Form 10-K
First Midwest Bancorp, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016
Gain Deferral Plan
First Midwest Bancorp, Inc. Stock Option Gain Deferral Plan, as amended
Internal Revenue Code
Internal Revenue Code of 1986, as amended
M&A
Mergers and acquisitions
Named executive officers
Executive officers named in the Summary Compensation Table contained in this Proxy Statement


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Non-Employee Directors Stock Plan
First Midwest Bancorp, Inc. Amended and Restated Non-Employee Directors Stock Plan, as amended
Notice
The Notice of Annual Meeting of Stockholders that accompanies this Proxy Statement
Omnibus Stock and Incentive Plan
First Midwest Bancorp, Inc. Omnibus Stock and Incentive Plan, as amended
Pension Plan
First Midwest Bancorp, Inc. Consolidated Pension Plan, as amended
Proxy Card
The form of proxy card or voting instruction form that accompanies this Proxy Statement
Proxy Statement
This proxy statement
Record Date
March 24, 2017
SEC
United States Securities and Exchange Commission
TSR
Total stockholder return
QUESTIONS AND ANSWERS
Who can vote at the Annual Meeting?
You are entitled to vote your shares of Common Stock at the Annual Meeting if you were a stockholder of record of the Company at the close of business on March 24, 2017, the Record Date for the Annual Meeting. On that date, there were 102,840,266 shares of Common Stock outstanding, each of which is entitled to one vote for each matter to be voted on at the Annual Meeting. On the Record Date, we had 2,285 stockholders of record.
A proxy is your direction to another person to vote your shares. When you vote your shares, whether via the Internet, by telephone or by signing and mailing a Proxy Card, you will appoint certain officers of the Company to vote your shares of Common Stock at the Annual Meeting in the manner you instruct. Even if you plan to attend the Annual Meeting, you should vote your shares in advance.
Who is entitled to receive this mailing?
If you hold shares of our Common Stock that are registered in your name through our transfer agent, Computershare Trust Company, N.A., as of the Record Date, you are the stockholder of record with respect to those shares. If you hold shares of our Common Stock indirectly through a bank, broker or similar institution, you are considered a beneficial owner of those shares but are not the stockholder of record. We refer to banks, brokers and similar institutions in this Proxy Statement collectively as “brokers.” In this circumstance, you are a stockholder whose shares are held in “street name” and your broker is considered the stockholder of record. We sent copies of our proxy materials directly to all stockholders of record. If you are a beneficial owner whose shares are held in street name, these materials were sent to you by the broker through which you hold your shares. As the beneficial owner, you may direct your broker how to vote your shares at the Annual Meeting, and the broker is obligated to provide you with a voting instruction form for you to use for this purpose.
What does it mean if I receive more than one Proxy Card?
If you receive multiple Proxy Cards, this means you hold your shares in more than one account. To vote all of your shares by proxy, please vote the shares in each account via the Internet or by telephone, or complete, sign, date and return each Proxy Card that you receive.


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How are shares voted and counted?
If you are a stockholder of record on the Record Date and you properly vote your shares via the Internet, by telephone or by mail, your shares will be voted in accordance with your instructions. If you sign and return your Proxy Card, but do not give voting instructions, your shares will be voted in the manner recommended by the Board of Directors, as follows:  FOR each director nominee named in this Proxy Statement and FOR each of the other items set forth in the Notice attached to this Proxy Statement. If you sign and return your Proxy Card, but do not give voting instructions, you also will grant discretionary authority to the named proxies to vote on any other matters that may properly come before the Annual Meeting, or any adjournment or postponement, which will be voted in accordance with the best judgment of the named proxies.
If your shares are held in street name, on routine matters, the shares will be voted by the broker through which you hold your shares in accordance with your instructions and, if no instructions are given, your broker is entitled to vote your shares in its discretion. On non-routine matters, your broker will vote your shares only if you have provided the broker with voting instructions. If you do not give your broker voting instructions for non-routine items, your shares will be treated as “broker non-votes.” This means your shares will be counted for the purpose of determining if a quorum is present but, except as provided below, will not be included as votes cast with respect to the non-routine items. The determination of whether a matter is routine or non-routine is made under the rules of the NASDAQ Stock Market. An abstention occurs when a stockholder marks his or her Proxy Card as ABSTAIN and thereby abstains from voting on a matter.
The following chart explains which items to be voted upon at our Annual Meeting are routine and non-routine and the treatment of broker non-votes and abstentions.
Item
Type
Effect of Broker Non-Votes and Abstentions
Non-Routine
Broker non-votes and votes to ABSTAIN are not treated as a “vote cast” with respect to the election of a director, and thus will have no effect on the outcome of the vote.
Non-Routine
Broker non-votes and votes to ABSTAIN will have the effect of a vote AGAINST this item.

Non-Routine
Broker non-votes and votes to ABSTAIN will have the effect of a vote AGAINST this item.
Non-Routine
Broker non-votes will have no effect on the outcome of the vote on this item. Votes to ABSTAIN will have the effect of a vote AGAINST this item.
Routine
Broker non-votes are not expected to exist because brokers have discretionary authority to vote on this item. Votes to ABSTAIN will have the effect of a vote AGAINST this item.


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What is the required vote for each item of business to properly come before the Annual Meeting?
A quorum is required to transact business at the Annual Meeting. The holders of a majority of the outstanding shares of Common Stock on the Record Date, present in person or represented by proxy and entitled to vote, will constitute a quorum for the transaction of business at the Annual Meeting. Abstentions and broker non-votes are treated as present for quorum purposes.
Item 1—Election of Directors . You may vote FOR or AGAINST any or all director nominees named in this Proxy Statement, or you may ABSTAIN as to one or more directors. A majority of the votes cast at the Annual Meeting with respect to the election of a director must be voted FOR the director in order for the director to be elected. If a director who currently serves on the Board of Directors fails to receive a majority of the votes cast FOR his or her election, he or she will tender his or her resignation to the Board of Directors for consideration, and our Nominating and Corporate Governance Committee will recommend to the Board of Directors whether to accept or reject the resignation, or whether other action should be taken. The Board of Directors will consider the recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date of the certification of the election results.
Item 2—Approval and Adoption of an Amendment to the Company’s Certificate of Incorporation to Declassify the Board of Directors . You may vote FOR or AGAINST the amendment to our Certificate of Incorporation to declassify the Board of Directors, or you may ABSTAIN. A majority of the outstanding shares of Common Stock entitled to vote at the Annual Meeting must be voted FOR the amendment in order for the amendment to be approved and adopted.
Item 3—Approval and Adoption of an Amendment to the Company’s Certificate of Incorporation to Increase the Number of Authorized Shares of Common Stock from 150,000,000 to 250,000,000 . You may vote FOR or AGAINST the amendment to our Certificate of Incorporation to increase the number of authorized shares of Common Stock from 150,000,000 to 250,000,000, or you may ABSTAIN. A majority of the outstanding shares of Common Stock entitled to vote at the Annual Meeting must be voted FOR the amendment in order for the amendment to be approved and adopted.
Item 4—Approval of an Advisory (Non-Binding) Resolution Regarding the Compensation Paid in 2016 to the Company’s Named Executive Officers . You may vote FOR or AGAINST the advisory resolution regarding the compensation paid to our named executive officers, or you may ABSTAIN. A majority of the votes present in person or represented by proxy and entitled to vote at the Annual Meeting must be voted FOR this item in order for it to pass.
Item 5—Ratification of the Appointment of the Company’s Independent Registered Public Accounting Firm . You may vote FOR or AGAINST the ratification of our Audit Committee’s appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2017, or you may ABSTAIN. A majority of the votes present in person or represented by proxy and entitled to vote at the Annual Meeting must be voted FOR ratification in order for this item to pass.


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How do I vote?
If you are a stockholder of record, you may cast your vote in one of four ways:
:
By Internet. The web address for Internet voting can be found on the Proxy Card. Internet voting is available 24 hours a day. To be valid, your vote by Internet must be received by the deadline specified on the Proxy Card.
(
By Telephone. The number for telephone voting can be found on the Proxy Card. Telephone voting is available 24 hours a day. To be valid, your vote by telephone must be received by the deadline specified on the Proxy Card.
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By Mail. Request a paper copy of the Proxy Card if you have not received one, and mark the Proxy Card, sign and date it, and return it in the postage pre-paid envelope provided. To be valid, your vote by mail must be received by the deadline specified on the Proxy Card.
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At the Annual Meeting. You can vote your shares in person at the Annual Meeting. You must present an acceptable form of identification (such as a valid driver’s license) in order to enter the Annual Meeting and vote in person.
If you hold your shares in street name, you may vote by following your broker’s instructions or, in order to vote in person at the Annual Meeting, you must obtain from the broker through which you hold your shares, both an account statement showing that you owned shares of Common Stock as of the Record Date and a “legal proxy” form, and bring them to the meeting.
How can I revoke or change my vote?
You can revoke or change your vote at any time before your shares are voted at the Annual Meeting by timely:
resubmitting your vote via the Internet or by telephone; or
executing and mailing a Proxy Card that is dated and received on a later date; or
giving written notice of revocation to our Corporate Secretary at One Pierce Place, Suite 1500, Itasca, Illinois 60143; or
voting in person at the Annual Meeting.
If your shares are held in street name, you should contact your broker to change your vote.
How can I obtain an additional Proxy Card?
If you lose, misplace or otherwise need to obtain a Proxy Card, and:
you are a stockholder of record, contact our Corporate Secretary’s office at (630) 875-7463; or
you hold Common Stock in street name through a broker, contact your account representative at that organization.
How will current employees who participate in the Company’s benefit plans receive our proxy materials?
Employees who participate in the First Midwest Bancorp, Inc. Savings and Profit Sharing Plan , First Midwest Bancorp, Inc. Nonqualified Retirement Plan , First Midwest Bancorp, Inc. Stock Option Gain Deferral Plan and/or the First Midwest Bancorp, Inc. Dividend Reinvestment Plan , and have a Company e-mail address, will receive an


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e-mail from Broadridge Financial Solutions, Inc. describing how to access proxy materials and vote via the Internet or by telephone. One e-mail will be sent for all accounts registered in the same employee name. If the employee’s accounts are registered in different names, he or she will receive a separate e-mail for each account. This e-mail will be titled:  FIRST MIDWEST BANCORP, INC. 2017 ANNUAL MEETING OF STOCKHOLDERS AND PROXY VOTE.
The trustees under these plans (other than the First Midwest Bancorp, Inc. Dividend Reinvestment Plan) are the stockholders of record of all shares of Common Stock held in the plans, and the trustees will vote the shares held for the account of each employee in accordance with the instructions received from the employee. Employees should instruct the trustees how to vote their shares by using the instructions provided in the e-mail and vote via the Internet or by telephone. If the trustees do not receive voting instructions by the specified deadline, the trustees will vote the shares proportionally in the same manner as those shares for which instructions were received. Because the employees are not the record owners of the related shares, the employees may not vote these shares in person at the Annual Meeting. Individual voting instructions to the plan trustees will be kept confidential and will not be disclosed to any of our directors, officers or employees .
Who pays for the expenses of this proxy solicitation?
We will pay the expenses of the preparation of proxy materials and the solicitation of proxies for the Annual Meeting. In addition to the solicitation of proxies by mail, solicitations may be made by certain of our directors, officers, employees or affiliates telephonically, electronically or by other means of communication. Directors, officers and employees will receive no additional compensation for any such solicitation. Although we do not anticipate using a paid proxy solicitor in connection with the Annual Meeting, we may do so if we believe this to be appropriate. We will reimburse brokers for costs incurred by them in mailing proxy materials to beneficial owners in accordance with applicable requirements.
What do I need to do to attend the Annual Meeting?
All stockholders must bring an acceptable form of identification, such as a valid driver’s license, in order to attend the Annual Meeting in person. If you hold shares in street name and would like to attend our Annual Meeting, you also will need to bring an account statement or other acceptable evidence of ownership of Common Stock as of the close of business on the Record Date. If you attend the Annual Meeting as a representative of a stockholder that is an entity, then you must bring proof of your authorization to attend and act on behalf of that entity.
Is a list of stockholders available for inspection?
A list of the stockholders of record as of the Record Date will be available for inspection for purposes germane to the Annual Meeting during ordinary business hours at our offices, One Pierce Place, Suite 1500, Itasca, Illinois 60143, from May 5, 2017 to May 16, 2017, as well as at the Annual Meeting.
How do I obtain the voting results?
Preliminary voting results will be announced at the Annual Meeting. Final voting results are expected to be published in a Current Report on Form 8-K filed with the SEC within four business days after the Annual Meeting. A copy of this Current Report on Form 8-K will be available on our website at www.firstmidwest.com/investorrelations after its filing with the SEC.


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ITEM  1—ELECTION OF DIRECTORS
Our Board of Directors currently consists of sixteen directors, but will be reduced to fifteen members as described below. Historically, the Board has been divided into three classes, with each director serving for a three-year term. At each annual meeting, only one class of directors stands for election. This year, as described more fully under Item 2—Approval and Adoption of an Amendment to the Company’s Certificate of Incorporation to Declassify the Board of Directors , we are seeking to amend our Certificate of Incorporation to provide that directors will be elected to one-year terms on a go-forward basis, beginning with the nominees standing for election at this Annual Meeting. Accordingly, with respect to the election of directors at this Annual Meeting, we are asking stockholders to elect our director nominees to one-year terms, subject to the outcome of the vote on the declassification of our Board. If our stockholders do not approve the declassification of our Board, then our Board of Directors will remain classified, directors will continue to serve for staggered terms and our director nominees will be elected for the terms indicated in the table below.
Nominees for Election
Upon the recommendation of our Nominating and Corporate Governance Committee, our Board of Directors unanimously nominated Thomas L. Brown, Phupinder S. Gill, Kathryn J. Hayley, Frank B. Modruson, Ellen A. Rudnick, Michael J. Small and Stephen C. Van Arsdell to stand for election at this year’s Annual Meeting, all of whom are currently serving as directors of the Company. Mr. Gill, Ms. Rudnick and Mr. Small presently serve in the class of directors who were last elected in 2014 and whose term expires at the Annual Meeting. Mr. Brown, Ms. Hayley and Messrs. Modruson and Van Arsdell were appointed to the Board over the course of the last year and have not yet been placed in a class. Each of the nominees meets the standards of independence under our Corporate Governance Guidelines and the rules of the NASDAQ Stock Market.
John F. Chlebowski, Jr. also currently serves in the class of directors whose term expires at this Annual Meeting. As previously announced, Mr. Chlebowski, who has served as one of our directors since 2007, has advised us that he will retire from the Board upon the conclusion of his current term. Prior to the Annual Meeting, the Board will take action to reduce the number of directors to fifteen members. As such, at and following the Annual Meeting, our Board of Directors will consist of fifteen members until such time as the Board may determine to change the number of directors.
Depending on the outcome of the vote to declassify our Board, each nominee, if re-elected at the Annual Meeting, will hold office for a term expiring as follows and until his or her successor has been elected and qualified:
Nominee
Expiration of Term if Declassification of Board is Approved
Expiration of Term if Declassification of Board is not Approved
Thomas L. Brown
2018 Annual Meeting
2020 Annual Meeting
Phupinder S. Gill
2018 Annual Meeting
2020 Annual Meeting
Kathryn J. Hayley
2018 Annual Meeting
2019 Annual Meeting
Frank B. Modruson
2018 Annual Meeting
2020 Annual Meeting
Ellen A. Rudnick
2018 Annual Meeting
2020 Annual Meeting
Michael J. Small
2018 Annual Meeting
2020 Annual Meeting
Stephen C. Van Arsdell
2018 Annual Meeting
2019 Annual Meeting


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Directors of the Company are elected by a majority of the votes cast at the Annual Meeting. If a director nominee fails to receive the required majority vote for election, the nominee will tender his or her resignation as a director in accordance with our By-Laws and Corporate Governance Guidelines, and the Board of Directors will determine whether it is in the best interests of the Company to accept any tendered resignation.
Each nominee has informed us that he or she is willing to serve as a director if elected. Should any nominee become unable or refuse to serve as a director upon election, it is intended that the persons named as proxies on the Proxy Card will vote for the election of such other person as the Board of Directors may recommend.
Board Composition, Diversity, Tenure and Refreshment
Our fifteen continuing directors have significant and diverse operational, financial, risk, leadership and other experience. Over the past two years, two of our directors have announced their retirement and we have added four new directors. Throughout this process, we have enhanced the existing industry and Company-specific knowledge of our Board of Directors with the fresh perspectives brought by our new directors. We believe the result is an even more active and engaged Board with the skill sets necessary to guide the Company as it grows and as our business strategy and the banking industry around us continue to evolve. The following charts illustrate the tenure, independence, diversity, and qualifications and experience of our continuing directors:
piechartsproxy2016a01.jpg
Key Experience
ü
CEO or senior executive officer
ü
Business operations and management
ü
Corporate governance
ü
Executive compensation
ü
Mergers and acquisitions
ü
Strategic planning and growth
ü
Risk management
ü
Regulatory, compliance and legal
ü
Academia
ü
Ethics and integrity
ü
Financial expertise/literacy
ü
Civic and community engagement
ü
Other outside board experience
ü
Global and international experience
ü
Banking and financial services industry
ü
Brand management and marketing
ü
Cyber and information security
ü
Information technology
ü
Human resources
ü
Employee benefits


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Nomination Process
In identifying, evaluating and recommending nominees for the Board of Directors, our Nominating and Corporate Governance Committee places primary emphasis on the criteria set forth in our Corporate Governance Guidelines, which include:
the individual’s judgment, expertise, character, skills, background, knowledge of matters useful to the oversight of the Company and other relevant experience;
the individual’s ability and willingness to commit adequate time to Board and committee matters; and
the extent to which the interplay of the individual’s expertise, skills, knowledge and personality with that of other Board members will build a Board of Directors that is effective, collegial and responsive to the needs of the Company.
We do not set specific minimum qualifications that nominees must meet in order to be recommended to the Board of Directors. Each nominee is evaluated based on his or her individual merits, taking into account the needs of the Company and the composition of the Board of Directors. The Nominating and Corporate Governance Committee discusses and evaluates possible candidates in detail, and outside consultants are sometimes engaged to help identify potential candidates.
When making recommendations for nominees to the Board, the Nominating and Corporate Governance Committee attempts to include directors who, when taken together with the other nominees and continuing directors, will create a group that offers a diversity of education, professional experience, background, age, gender or minority status, perspective, viewpoint and skill. The Nominating and Corporate Governance Committee will consider and evaluate director candidates recommended by stockholders in the same manner as other candidates identified by the Committee. A stockholder who desires to formally nominate a candidate must do so by following the procedures described in the Company’s Certificate of Incorporation and By-Laws.
2017 Nominees and Continuing Directors
The evaluation and selection of each member of the Board of Directors is based on a variety of factors, as described above. The Board believes that each of the Company’s directors possesses the requisite skills, experience and attributes to qualify him or her to serve as a member of our Board of Directors.
For each of the nominees for election at this Annual Meeting, our Nominating and Corporate Governance Committee and the Board considered, among other factors, the following:
Thomas L. Brown – Mr. Brown’s significant finance, accounting, auditing and risk management background, including his experience as a current member of executive management of a public company and a former partner of a Big 4 public accounting firm, where he also served as Midwest Regional Financial Services Director.
Phupinder S. Gill – Mr. Gill’s extensive public company board and executive management experience, including his risk and M&A experience.
Kathryn J. Hayley – Ms. Hayley’s strong information technology and financial services background and extensive strategic planning and business and operations management experience, as well as her human resources and talent management experience, developed as a senior executive of several global companies and consulting firms.


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Frank B. Modruson – Mr. Modruson’s extensive background in technology and operations management, significant strategic and risk management experience and service on other public company boards.
Ellen A. Rudnick – Ms. Rudnick’s leadership and entrepreneurial experience, as well as her business management experience and service on other public company boards.
Michael J. Small – Mr. Small’s significant public company and management experience, including his strategic, operating and management experience gained as the current chief executive officer of a public company.
Stephen C. Van Arsdell – Mr. Van Arsdell’s strong accounting, auditing and risk management experience, as well as his extensive leadership and strategic skills and experience with public companies, developed as a former partner and chief executive officer of a Big 4 public accounting firm.
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Set forth below is the name of each member of the Board, along with his or her principal occupation for at least the previous five years and other professional experience.
Nominees Standing for Election at the Annual Meeting
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Thomas L. Brown
Age: 60
Director since: 2017
Independent: ü
Since 2011, Mr. Brown has been the Vice President and Chief Financial Officer of RLI Corp. (NASDAQ), a specialty insurer serving diverse niche property, casualty and surety markets. Previously, he was a partner of PricewaterhouseCoopers LLP, where he served for ten years as its Midwest Regional Financial Services Director and led teams responsible for the banking, insurance, capital markets and investment management business sectors. Mr. Brown is a certified public accountant.
Mr. Brown currently serves on the board of directors of Prime Holdings Insurance Services, Inc. (since 2016) . He also serves on the boards of directors of the Chicago Shakespeare Theater and Easter Seals Central Illinois, and the board of trustees of Illinois Wesleyan University.
The Board intends to appoint Mr. Brown to the Audit Committee and, upon formation, the Enterprise Risk Committee in May 2017.
Mr. Brown earned a Bachelor of Science degree in Accounting from Illinois Wesleyan University in 1979.
With his extensive finance and accounting background, combined with the insights of a member of the senior management of a public company, Mr. Brown brings valuable finance, accounting, strategic planning, risk and business management skills and experience to our Board of Directors.


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Phupinder S. Gill
Age: 56
Director since: 2010
Independent: ü
Mr. Gill served as the Chief Executive Officer of CME Group Inc. (NYSE), a global derivatives marketplace and exchange, from 2012 until his retirement on December 31, 2016. Prior thereto, he served as President from 2007 until 2012, and he previously served as President and Chief Operating Officer of CME Holdings and of CME from 2004 until 2007. From 2000 to 2003, he served as Managing Director and President of CME Clearing. Mr. Gill was also the President of GFX Corp., a wholly owned subsidiary of CME Group that provides liquidity in foreign exchange futures, from 1998 until 2012.
Mr. Gill currently serves on the board of directors of The Alexander Maxwell Grant Foundation. From 2012 until his retirement on December 31, 2016, he served on the boards of CME Group and the World Federation of Exchanges. He also previously served on the boards of CME Clearing Europe (CME Group’s UK Clearing House), Bursa Malaysia Derivatives Berhad, Bolsa Mexicana de Valores, S.A.B. de C.V., CME Group Foundation and CME Group Community Foundation. Mr. Gill is a past member of CME Group’s Competitive Markets Advisory Council.
Mr. Gill is a member of our Audit Committee. The Board intends to appoint Mr. Gill, upon formation, to the Enterprise Risk Committee in May 2017.
Mr. Gill earned a Bachelor of Science degree in Finance in 1985 and a Master of Business Administration with a concentration in Finance in 1987 from Washington State University.
Through his board and executive management experience, Mr. Gill brings important public company, technology, leadership, operating and senior management experience to our Board of Directors, as well as experience with M&A and global affairs. He also provides the perspective of a former chief executive officer of a public company.
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Kathryn J. Hayley
Age: 58
Director since: 2016
Independent: ü
Ms. Hayley is the Chief Executive Officer of Rosewood Advisory Services, LLC, a business advisory services firm. Previously, she served as an Executive Vice President of UnitedHealthcare (a subsidiary of UnitedHealth Group, Inc. (NYSE)), a position in which she served from 2012 to 2015, overseeing a number of strategic initiatives at this global healthcare company. From 2006 to 2012, she served as an executive of Aon plc (NYSE), including as Chief Executive Officer of Aon Consulting Worldwide and Aon Hewitt Consulting Americas. Prior to her service at Aon, Ms. Hayley was an information technology principal at Deloitte Consulting and led the U.S. financial services practice. She also served on the board of directors of Deloitte & Touche LLP U.S.
Ms. Hayley currently serves on the board of directors of Tribridge Holdings, LLC (since 2015) and the advisory board of E.A. Renfroe & Company, Inc. (since 2016). She also serves on the board of the Chicago Shakespeare Theater.
The Board of Directors intends to appoint Ms. Hayley to the Audit Committee and the Compensation Committee in May 2017.


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Ms. Hayley earned a Bachelor of Science degree in Applied Computer Science from Illinois State University in 1979 and a Master of Business Administration, with concentrations in Marketing and Finance, from the Kellogg School of Management at Northwestern University in 1984.
Through her extensive information technology and financial services background and her broad executive management experience, as well as her human resources and talent management experience, Ms. Hayley provides our Board with valuable strategic planning and business and operations management experience, as well as the global insights of a former senior executive of multiple global companies.
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Frank B. Modruson
Age: 57
Director since: 2016
Independent: ü
Mr. Modruson has served as President of Modruson & Associates, LLC, a management consulting firm, since 2015. Prior thereto, Mr. Modruson spent the majority of his career at Accenture plc, a global professional services company, where he served as a client partner and as Chief Information Officer.
He currently serves on the boards of directors of Landauer Corporation (since 2017; NYSE), Zebra Technologies Corporation (since 2014; NASDAQ), and Forsythe Technology, Inc. (since 2014). Mr. Modruson also serves on the boards of the Lyric Opera of Chicago and the Glen Ellyn Volunteer Fire Company.
The Board of Directors intends to appoint Mr. Modruson to the Audit Committee and, upon formation, the Enterprise Risk Committee in May 2017.
Mr. Modruson earned a Bachelor of Science degree in Computer Science from Dickinson College in 1984 and a Master of Science degree in Computer Science from Pennsylvania State University in 1987.
With his significant strategy, consulting and technology background, as well as experience on other public company boards, Mr. Modruson brings important strategic and business insights, as well as risk management and technological and operational efficiencies experience to our Board of Directors.
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Ellen A. Rudnick
Age: 66
Director since: 2005
Independent: ü
Since 1999, Ms. Rudnick has served at the University of Chicago Booth School of Business. She is currently a Senior Advisor and Adjunct Professor of Entrepreneurship, and she previously served as the Executive Director of the Polsky Center for Entrepreneurship and Innovation. Prior to joining the University of Chicago, Ms. Rudnick served as President and Chief Executive Officer of Healthcare Knowledge Resources, President of HCIA, Chairman of Pacific Biometrics and Corporate Vice President of Baxter Healthcare Corporation.
Ms. Rudnick currently serves on the boards of directors of Patterson Companies (since 2003; NASDAQ) and HMS Holdings, Corp. (since 1997; NASDAQ), and Liberty Mutual Insurance Company (since 2001).
Ms. Rudnick is a member of our Compensation Committee and Nominating and Corporate Governance Committee.


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Ms. Rudnick earned a Bachelor of Arts degree in Italian (with a minor in Economics) from Vassar College in 1972 and a Master of Business Administration with a concentration in Finance from the University of Chicago in 1973. She has spent over 30 years in business management and entrepreneurial activities, primarily in the healthcare and information services industries. She serves in various leadership positions with several civic and nonprofit organizations in the Chicago metropolitan area, including having served on the Northshore University Health System board of directors for over 20 years, and currently is on the boards of directors of Hyde Park Angels, the Chicagoland Entrepreneurship Center (1871) and Matter. She is the recipient of several honors, including the Today’s Chicago Woman 20th Anniversary Hall of Fame Award, the YWCA Leadership Award and the Illinois Venture Capital Industry Richard J. Daley Award.
With her extensive business background and her public company board experience, Ms. Rudnick brings important leadership, corporate and entrepreneurial experience to our Board of Directors, as well as valuable experience in business management.
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Michael J. Small
Age: 59
Director since: 2010
Independent: ü
Mr. Small is the President and Chief Executive Officer of Gogo, Inc. (NASDAQ), an airborne communications service provider, and has served in this capacity since 2010. He has also served as a director of Gogo, Inc. since 2010. Prior to joining Gogo, Mr. Small served as the Chief Executive Officer and a Director of Centennial Communications Corp. (NASDAQ) from 1999 to 2009. From 1995 to 1998, Mr. Small was the Executive Vice President and Chief Financial Officer of 360 Degrees Communications Company. Prior to 1995, he held the position of President of Lynch Corporation (NYSEMKT), a diversified acquisition-oriented company with operations in telecommunications, manufacturing and transportation services.
Mr. Small is a member of our Audit Committee. The Board intends to appoint Mr. Small, upon formation, to the Enterprise Risk Committee in May 2017.
Mr. Small earned a Bachelor of Arts degree in History from Colgate University in 1979 and a Master of Business Administration with a concentration in Finance from the University of Chicago in 1981.
Through his board, executive and financial experience, Mr. Small brings extensive public company, operating and management experience to our Board of Directors, as well as strategic, financial and M&A experience. He also provides the perspective of a current chief executive officer of a public company.
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Stephen C. Van Arsdell
Age: 66
Director since: 2017
Independent: ü
Mr. Van Arsdell is a former senior partner of Deloitte & Touche LLP, where he served as Chairman and Chief Executive Officer from 2010 to 2012, and as Deputy Chief Executive Officer from 2009 to 2010. Previously, he served as Deloitte’s partner-in-charge of its financial services practice in the Midwest, and he was a member of Deloitte’s board from 2003 through 2009. Mr. Van Arsdell is a certified public accountant.
Mr. Van Arsdell is a member of the Audit Committee of Brown Brothers Harriman & Co. (since 2015). He also is a member of the Dean’s advisory council for the College of Business at the University of Illinois and Vice


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Chairman of the board of directors of the University of Illinois Alumni Association. Mr. Van Arsdell currently serves on the board of trustees of the Morton Arboretum and previously chaired the board of trustees of the Conservation Foundation. He is a past member of the boards of the Illinois Cancer Council, Kidney Foundation of Illinois and Literacy Volunteers of America-Illinois.
The Board intends to appoint Mr. Van Arsdell to the Audit Committee and the Nominating and Corporate Governance Committee in May 2017.
He earned a Bachelor of Science degree in Accounting and a Masters of Accounting Science degree from the University of Illinois in 1972 and 1973, respectively.
Mr. Van Arsdell brings to our Board extensive accounting, auditing, risk management and financial experience, together with strategic and leadership skills developed through executive leadership positions with a global accounting and advisory services organization.
Continuing Directors Serving a Term Expiring in 2018
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Barbara A. Boigegrain
Age: 59
Director since: 2008
Independent: ü
Since 1994, Ms. Boigegrain has served as the Chief Executive Officer and General Secretary of Wespath Benefits and Investments (formerly the General Board of Pension and Health Benefits of The United Methodist Church), a pension, health and welfare benefit trustee and administrator that is one of the largest faith-based pension funds in the United States, with $21 billion of assets under management, and a global leader in environmental, social and governance (ESG) investing. Prior to 1994, Ms. Boigegrain spent eleven years as a consultant with Towers Perrin and four years with KPMG LLP and Dart Industries as a manager and analyst.
As the CEO and General Secretary of Wespath, Ms. Boigegrain has overseen its restructuring, significantly improved its performance and services and increased its assets under management. In her experience as a benefits consultant, she established the San Diego office of Towers Perrin. Ms. Boigegrain also is a member of the board of directors of Church Benefits Association and Chair of the Church Alliance.
Ms. Boigegrain is a member of our Compensation Committee and Nominating and Corporate Governance Committee.
Ms. Boigegrain earned a Bachelor of Arts degree in Biology and Psychology from Trinity University in 1979.
Through her extensive employee benefits, senior leadership and corporate governance experience, Ms. Boigegrain brings significant leadership, business development, operations and management skills to our Board of Directors. She also provides valuable knowledge of financial markets and strategic growth.


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Peter J. Henseler
Age: 58
Director since: 2011
Independent: ü
Mr. Henseler is the founder and President of Wise Consulting Group Inc., a strategy and management consulting firm. He previously held the position of Vice Chairman of TOMY International, a wholly-owned subsidiary of TOMY Company, Ltd., a global designer and marketer of toys and infant products, until his retirement from TOMY International in October 2012. He held the position of President of TOMY International from April 2011 until April 2012. Mr. Henseler was President of RC2 Corporation (NASDAQ) from 2002 to 2011, at which time TOMY Company acquired RC2. He served as RC2’s Executive Vice President of Sales and Marketing from 1999 to 2002. Mr. Henseler also served as a director of RC2 and TOMY International.
Prior to joining RC2, Mr. Henseler held marketing positions at McDonald’s Corporation and Hasbro, Inc. He currently serves as Chairman of the Toy Industry Foundation and previously served on the United States Toy Industry Association Board of Directors.
Mr. Henseler is a member of our Compensation Committee and Nominating and Corporate Governance Committee.
Mr. Henseler earned a Bachelor of Science degree in Marketing from Xavier University in 1980.
Mr. Henseler brings important executive management, operating and leadership skills and insights to our Board of Directors through his experience as a former president of a global public company, as well as his substantial operational, brand management and marketing experience.
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Patrick J. McDonnell
Age: 73
Director since: 2002
Independent: ü
Since 2000, Mr. McDonnell has served as the President and Chief Executive Officer of The McDonnell Company LLC, a business consulting company. In this position, he works with public and privately-held companies in a wide variety of industries to help define organizational opportunities to improve performance and achieve results. Previously, he served as a partner and Director of Global Assurance for PricewaterhouseCoopers LLP, an international public accounting firm, and Vice Chairman of Business Assurance for its predecessor, Coopers & Lybrand, LLP. Mr. McDonnell is a certified public accountant.
Mr. McDonnell served as a member of the board of directors of Material Sciences Corporation (NASDAQ) from 2006 to 2014. He also served as President and COO of LAI Worldwide, Inc., an executive recruiting firm, prior to its sale to TMP Worldwide, Inc. in 1999. He is a former Adjunct Professor at the Lake Forest Graduate School of Management, where he taught “Leading Organizational Change.”
Mr. McDonnell is a member of our Audit Committee (serving as its Chair) and Advisory Committee. The Board intends to appoint Mr. McDonnell, upon formation, to the Enterprise Risk Committee in May 2017.
Mr. McDonnell earned a Bachelor of Business Administration degree with a major in Management from the University of Notre Dame in 1965 and a Master of Business Administration from the University of Michigan in 1970.


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Through his significant finance and accounting background and his broad experience with a variety of public companies, Mr. McDonnell brings valuable tactical skills and experience in business management, strategic planning, finance, accounting and public company matters to our Board of Directors.
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Robert P. O’Meara
Age: 79
Director since: 1982
Independent: ü
Mr. O’Meara is currently the Chairman of the Board of the Company. He has over 45 years of experience in the banking and financial services industry. Mr. O’Meara previously served as Chairman of the Board of the Company from 1998 through 2007 and was re-appointed to this position in September 2008. Mr. O’Meara also is a member of the Board of Directors of First Midwest Bank and previously served as Chairman of the Board of the Bank from 2008 through 2011, and Vice Chair from 2011 through 2014.
Mr. O’Meara served as the Company’s Chief Executive Officer from 1987 through 2002 and as its Chief Operating Officer from 1983 to 1987. Prior to his tenure with the Company, Mr. O’Meara served as President and Chief Executive Officer of Citizens National Bank of Waukegan from 1970 to 1983. Prior thereto, he was in private law practice in Lake County, Illinois, and he remains a licensed lawyer in the State of Illinois. Mr. O’Meara also has served in various leadership positions with several civic and charitable organizations in the metropolitan Chicago area.
Mr. O’Meara serves as a member and the Chair of the Advisory Committee.
Mr. O’Meara earned a Bachelor of Science degree in Finance from the University of Notre Dame in 1959 and a Juris Doctor degree from Loyola University of Chicago in 1962.
Through his extensive background and experience in banking, management and strategic decision-making, as well as his in-depth knowledge of both the history and the current business of the Company, Mr. O’Meara provides our Board of Directors with significant executive experience and important information about the Company, as well as insight into the markets it serves and the financial services industry generally.
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Mark G. Sander
Age: 58
Director since: 2014
Independent: Insider
Mr. Sander is the Senior Executive Vice President and Chief Operating Officer of the Company and the President and Chief Operating Officer of First Midwest Bank. Mr. Sander also serves as a director of First Midwest Bank.
Prior to joining the Company in 2011, Mr. Sander served as Executive Vice President, Director of Commercial Banking at Associated Banc-Corp (NYSE) where he oversaw Associated’s commercial banking, treasury management, insurance brokerage and capital markets businesses. He also served as a member of Associated’s Executive and ALCO Committees. Previously, he served as a commercial banking executive at Bank of America and in numerous leadership positions in commercial banking at LaSalle Bank. Mr. Sander has more than thirty years of experience in the financial services industry.


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Mr. Sander earned a Bachelor of Science degree in Finance from the University of Illinois in 1980 and a Master of Business Administration with a concentration in Finance and International Economics from the University of Chicago in 1983.
Mr. Sander brings significant banking industry and executive experience to our Board of Directors. His important leadership position with the Company and First Midwest Bank and his involvement with the operations, vision and strategy of the Company and the Bank provide the Board with an understanding of the Company’s day-to-day operations and strategic goals.
Continuing Directors Serving a Term Expiring in 2019
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Br. James Gaffney, FSC
Age: 74
Director since: 1998
Independent: ü
Br. James served as the President of Lewis University, a leading Catholic and Lasallian university in Romeoville, Illinois, from 1988 until 2016. He currently serves as President Emeritus.
Br. James has served as a director, trustee or board member of more than ten educational, religious, civic, corporate and community organizations and agencies. He currently serves on the board of trustees of St. Mary’s College of California, the board of the International Association of Lasallian Universities and the board (as Vice Chair) of the American Red Cross – Illinois Valley Chapter. He also recently served on the boards of the Federation of Independent Illinois Colleges and Universities, the Community Foundation of Will County and the Will County Center for Economic Development. As a member of the De La Salle Christian Brothers, he chaired the Lasallian Association of College and University Presidents for 28 years.
Br. James has been the recipient of numerous honors, including the Pro Ecclesiae et Pontifice Medallion from the Vatican in 2013, the Roger Osman Award for Distinguished Volunteer Service from the United Way of Will County, a Lifetime Achievement Award and an Excellence in Education Award from the Joliet Region Chamber of Commerce and Industry, the De La Salle Award from Bethlehem University, the Provena St. Joseph Medical Center Founder’s Award, a Lifetime Achievement Award from the Village of Romeoville and honorary Doctoral Degrees from Saint Mary’s University of Minnesota, Bethlehem University and the University of St. Francis in Joliet.
Br. James is a member of our Nominating and Corporate Governance Committee (serving as its Chair) and Advisory Committee.
Br. James obtained a Bachelor of Arts degree in Theology and a Master of Education from Saint Mary’s University of Minnesota, a Master of Theology from Manhattan College in New York and a Doctor of Ministry in Pastoral Theology from the University of Saint Mary of the Lake in Mundelein, Illinois.
Br. James’s extensive background in executive administration enables him to bring valuable leadership, institutional management and consensus-building skills to our Board of Directors. His civic and charitable activities in the metropolitan Chicago area also give him unique insight into many of the markets and communities in which the Company operates.


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Michael L. Scudder
Age: 56
Director since: 2008
Independent: Insider
Mr. Scudder is the President and Chief Executive Officer of the Company and Chairman of the Board and Chief Executive Officer of First Midwest Bank.
Prior to his current appointment in September 2008, Mr. Scudder served as the Company’s President and Chief Operating Officer beginning in May 2007, and as its Chief Financial Officer from January 2002 to May 2007. He previously served as the Group Executive Vice President and Chief Financial Officer of First Midwest Bank from May 1995 to December 2001. He also has served in various other management capacities in his over thirty years of service to the Company. Mr. Scudder began his professional career at KPMG LLP, an international public accounting firm.
Mr. Scudder serves as a member of our Advisory Committee.
Mr. Scudder earned a Bachelor of Science degree in Accounting from Illinois Wesleyan University in 1982, and a Master of Business Administration with a concentration in Finance from DePaul University in 1993. He is an active member of the ABA’s American Bankers CEO Council and the Mid-Size Bank Coalition of America. He is also a member of the Silver Cross Hospital board of directors, the Executive Committee of DePaul University’s Center for Financial Services and the Chicago Metropolitan Planning Council’s Executive Advisory Board. Additionally, he is a member of the Economic Club of Chicago and the Bankers Club of Chicago. He previously served as an inaugural member of the Federal Reserve Bank of Chicago’s Community Depository Institution Advisory Council.
Mr. Scudder brings extensive executive management, financial and banking experience to our Board of Directors and has important institutional knowledge of the Company and its business and clients. His day-to-day management of the Company provides the Board with Company-specific experience and expertise, including a complete understanding of the Company’s vision, strategy and operations as well as deep financial services industry knowledge.
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J. Stephen Vanderwoude
Age: 73
Director since: 1991
Independent: ü
Mr. Vanderwoude is currently a private investor. From 1996 until April 2007, he served as Chairman and Chief Executive Officer at Madison River Communications Corp., a company that acquired and operated rural telephone companies. Prior to his service to Madison River, he served as the President, Chief Executive Officer and a director of Powerhouse Technologies, Inc. (NASDAQ), and President, Chief Operating Officer and a director of Centel Corporation (NYSE). Mr. Vanderwoude served as a member of the board of directors of Centennial Communications Corp. (NASDAQ) from 2002 to 2009 and as its Chairman from 2007 to 2009.
Mr. Vanderwoude earned a Bachelor of Science degree in Engineering from the University of Pennsylvania in 1967 and a Master of Business Administration with concentrations in Economics and Marketing from the University of Chicago in 1977.


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Mr. Vanderwoude is a member of our Compensation Committee (serving as its Chair), Nominating and Corporate Governance Committee and Advisory Committee. The Board intends to appoint Mr. Vanderwoude, upon formation, to the Enterprise Risk Committee in May 2017.
Through his chief executive officer and director experience at other public companies, professional background and considerable business accomplishments and achievements, Mr. Vanderwoude brings valuable skills and experience in leadership, business management, strategic planning, finance, M&A and public company matters to our Board of Directors.
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For more information regarding our Board of Directors, its members, its committees and our corporate governance practices, please see the section of this Proxy Statement titled Corporate Governance at First Midwest or visit the Investor Relations section of our website at www.firstmidwest.com/officersdirectors .
Directors’ Recommendation
The Board of Directors unanimously recommends that stockholders vote FOR the election of each of Thomas L. Brown, Phupinder S. Gill, Kathryn J. Hayley, Frank B. Modruson, Ellen A. Rudnick, Michael J. Small and Stephen C. Van Arsdell as directors of the Company as set forth above.
ITEM  2—APPROVAL AND ADOPTION OF AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO DECLASSIFY THE BOARD OF DIRECTORS
Background
Our Certificate of Incorporation currently divides our Board of Directors into three classes, with the members of each class serving for staggered three-year terms. As a result, only one class of directors stands for election at each of the Company’s annual meetings of stockholders, such that stockholders vote on and elect approximately one-third of the Board each year. Under Delaware law, directors under a classified board structure may be removed by stockholders only for cause. At this Annual Meeting, we are asking stockholders to approve and adopt a proposal to amend our Certificate of Incorporation to declassify our Board of Directors. If approved, the declassification would be phased-in such that directors, including the nominees standing for election at this Annual Meeting, would be elected for one-year terms as their present terms expire. The amendment would include corresponding changes to allow stockholders to remove directors with or without cause.
The Nominating and Corporate Governance Committee considered and then recommended to our Board of Directors the proposed amendment to our Certificate of Incorporation to declassify the Board and corresponding changes. Our Board of Directors accepted this recommendation, determined that the proposed amendment was advisable and unanimously approved and adopted, at a meeting held in February 2017, the amendment, subject to stockholder approval at the Annual Meeting.
If stockholders approve and adopt the amendment, it will become effective upon the filing of a Certificate of Amendment to our Certificate of Incorporation with the Delaware Secretary of State, which the Company intends to file shortly after the Annual Meeting. The amendment to our Certificate of Incorporation to declassify our Board of Directors is not contingent upon the approval of any other proposal submitted at the Annual Meeting, including Item 3—Approval and Adoption of an Amendment to the Company’s Certificate of Incorporation to Increase the Number of Authorized Shares of Common Stock from 150,000,000 to 250,000,000 .


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Text of the Proposed Amendment
Paragraph (c) of PART III—GENERAL PROVISIONS of ARTICLE FOURTH of the Certificate of Incorporation would be amended and restated in its entirety to read as follows:
ARTICLE FOURTH . Authorized Stock .
PART III—GENERAL PROVISIONS
(c)
Removal of Directors .  Any or all directors may be removed from office at any time, with or without cause, by the affirmative vote of the holders of at least a majority of the voting power of the then outstanding Voting Stock. For purposes of this paragraph (c), each share of the Voting Stock shall have the number of votes granted to it pursuant to this Article Fourth.
Paragraphs (c), (d), (e) and (f) of ARTICLE FIFTH of the Certificate of Incorporation would be deleted in their entirety and replaced with new Paragraphs (c), (d) and (e), which would read as follows:
ARTICLE FIFTH . Board of Directors .
. . .
(c)
The successors of the directors whose terms expire at the 2017 annual meeting of stockholders shall serve a term of office to expire at the 2018 annual meeting of stockholders. At the 2018 annual meeting of stockholders, the successors of the directors whose terms expire at that meeting shall serve a term of office to expire at the 2019 annual meeting of stockholders. At the 2019 annual meeting of stockholders, and at each annual meeting of stockholders thereafter, the successors of the directors whose terms expire at each such meeting shall serve a term of office expiring at the annual meeting of stockholders next following their election.
(d)
Each director shall serve until his or her successor is elected and qualified or until his or her death, retirement, resignation or removal. Should a vacancy occur or be created, such vacancy shall be filled by a majority vote of the remaining directors then in office although less than a quorum, or by the sole remaining director. A director elected to fill a vacancy arising through death, retirement, resignation or removal of a director shall hold office until the end of the term to which such director’s predecessor was chosen. A director elected to fill a vacancy created through an increase in the number of directors shall serve a term of office to expire at the next annual meeting of stockholders.
(e)
Notwithstanding any of the foregoing provisions of this Article Fifth, whenever the holders of any outstanding class or series of Preferred Stock shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Restated Certificate of Incorporation and of the resolution of the Board of Directors providing for the issue of such class or series of Preferred Stock applicable thereto.
Paragraphs (g), (h), (i) and (j) of ARTICLE FIFTH of the Certificate of Incorporation would be redesignated as Paragraphs (f), (g), (h) and (i), respectively, with corresponding internal changes to references.


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Appendix A shows the proposed changes to the relevant sections of ARTICLE FOURTH and ARTICLE FIFTH of the Certificate of Incorporation resulting from the proposed amendments, with deletions indicated by strike-outs and additions indicated by underlining.
Reasons for the Proposed Amendment
The Nominating and Corporate Governance Committee and our Board of Directors periodically consider the Company’s corporate governance practices and structures. As part of that process, the Board considers corporate trends, peer practices, the views of our institutional stockholders and the guidelines of proxy advisory firms. As such, our Nominating and Corporate Governance Committee and the Board have, from time to time, reviewed our classified board structure, most recently earlier this year.
After careful consideration, and upon the recommendation of the Nominating and Corporate Governance Committee, our Board of Directors determined at its meeting held in February 2017, subject to stockholder approval, to declassify the Board over a phase-in period, commencing at this Annual Meeting.
In making this decision, the Board considered that many public companies have taken action to declassify their boards of directors. The Board of Directors further weighed the merits of both a classified board and an annually-elected board. In conducting its evaluation, the Board considered the advantages of a classified board structure, such as promoting board stability and continuity, providing a greater opportunity to protect the interests of stockholders in the event of an unsolicited takeover offer and reinforcing a commitment to long-term perspectives and value creation for our stockholders. The Board also considered, however, the corporate governance trend towards annual elections of directors, as well as the views of many of the Company’s institutional stockholders that an annually-elected board is preferable, as it enables stockholders to express a view and vote on the entire board of directors each year.
Effect of the Proposed Amendment
If the proposed amendment to the Certificate of Incorporation to declassify our Board is approved and adopted by our stockholders, our Certificate of Incorporation will be amended as set forth above.
Specifically, if the amendment is approved and adopted, our directors would be elected as follows:
Assuming each is elected at the Annual Meeting, each of Mr. Brown, Mr. Gill, Ms. Hayley, Mr. Modruson, Ms. Rudnick and Messrs. Small and Van Arsdell would be elected to a one-year term expiring at our 2018 annual meeting of stockholders, regardless of the class in which they currently serve.
Each of Ms. Boigegrain and Messrs. Henseler, McDonnell, O’Meara and Sander would continue to serve as directors in the class whose term ends at our 2018 annual meeting of stockholders. At our 2018 annual meeting of stockholders, such of these individuals and the directors elected at this Annual Meeting or their successors (but not those directors serving in the class whose term ends at the 2019 annual meeting) who are nominated by our Board to serve as directors would be elected to serve one-year terms.
Each of Br. James and Messrs. Scudder and Vanderwoude would continue to serve as directors in the class whose term ends at our 2019 annual meeting of stockholders. At our 2019 annual meeting of stockholders and at each annual meeting thereafter, all directors would be elected to serve one-year terms.
In all cases, each director will serve until his or her successor is elected and qualified or until his or her death, retirement, resignation or removal.


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Accordingly, if the amendment is approved and adopted, approximately 80% of our Board will stand for election at the 2018 annual meeting of stockholders, and the Board will be completely declassified and all directors will be elected annually beginning with the 2019 annual meeting of stockholders.
Under Delaware law, unless otherwise provided in a company’s certificate of incorporation, directors serving on a classified board may only be removed by stockholders for cause, while directors serving on a non-classified board may be removed by stockholders with or without cause. Our Certificate of Incorporation currently provides that directors may only be removed by stockholders for cause upon the vote of at least 67% of all outstanding shares. As a result, approval of the proposed amendment to declassify the Board will also result in an amendment to the Certificate of Incorporation to give our stockholders the ability to remove directors with or without cause upon the vote of at least a majority of all outstanding shares.
No amendments to our By-Laws are expected to be required in connection with the amendment of our Certificate of Incorporation to declassify the Board.
Impact if the Amendment is not Adopted
If the proposed amendment to the Certificate of Incorporation to declassify our Board is not approved and adopted by our stockholders, our Certificate of Incorporation will not be amended as set forth above and our Board of Directors will continue to be classified with directors serving staggered terms. In this event, the nominees standing for election at this Annual Meeting would be placed in classes and elected for the terms described under Item 1—Election of Directors—Nominees for Election . Thereafter, directors would continue to serve in classes for staggered three-year terms, and stockholders would be able to remove directors only for cause upon the vote of at least 67% of all outstanding shares.
Required Vote
Our Board of Directors unanimously approved and adopted the amendment to our Certificate of Incorporation to declassify the Board, including the related amendment to change the director removal requirement as described above. Accordingly, the affirmative vote of a majority of outstanding shares of Common Stock entitled to vote at the Annual Meeting is required for stockholders to approve and adopt the proposed amendment to our Certificate of Incorporation.
Directors’ Recommendation
The Board of Directors unanimously recommends that stockholders vote “FOR” approval and adoption of the amendment to our Certificate of Incorporation to declassify the Board of Directors.



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ITEM  3—APPROVAL AND ADOPTION OF AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 150,000,000 TO 250,000,000
Background
Our Certificate of Incorporation currently authorizes 1,000,000 shares of preferred stock and 150,000,000 shares of Common Stock. At the Annual Meeting, we are asking stockholders to approve and adopt a proposal to amend our Certificate of Incorporation to increase by 100,000,000 the number of shares of Common Stock that the Company is authorized to issue, from 150,000,000 to 250,000,000 shares. We are not proposing to make any changes to our authorized shares of preferred stock.
The Nominating and Corporate Governance Committee considered and then recommended to our Board of Directors the amendment to our Certificate of Incorporation to increase our authorized shares of Common Stock to 250,000,000 shares. Our Board of Directors accepted this recommendation, determined that the proposed amendment was advisable and unanimously approved and adopted, at a meeting held in February 2017, the amendment, subject to stockholder approval at this Annual Meeting.
If stockholders approve and adopt the amendment, it will become effective upon the filing of a Certificate of Amendment to our Certificate of Incorporation with the Delaware Secretary of State, which the Company intends to file shortly after the Annual Meeting. The amendment to our Certificate of Incorporation to increase the number of authorized shares of Common Stock from 150,000,000 to 250,000,000 is not contingent upon approval of any other proposal submitted at the Annual Meeting, including Item 2—Approval and Adoption of an Amendment to the Company’s Certificate of Incorporation to Declassify the Board of Directors .
Text of the Proposed Amendment
The first paragraph of ARTICLE FOURTH of the Certificate of Incorporation would be amended and restated in its entirety to read as follows:
ARTICLE FOURTH . Authorized Stock .
The total number of shares of stock which the Corporation shall have authority to issue is Two Hundred Fifty One Million (251,000,000) shares, of which One Million (1,000,000) shares shall be shares of Preferred Stock without par value (hereinafter sometimes referred to as “Preferred Stock”), and Two Hundred Fifty Million (250,000,000) shares shall be shares of Common Stock, $0.01 par value per share (hereinafter sometimes referred to as “Common Stock”).
Appendix B shows the proposed changes to the relevant sections of ARTICLE FOURTH of the Certificate of Incorporation resulting from the proposed amendments, with deletions indicated by strike-outs and additions indicated by underlining.
Reasons for the Proposed Amendment
Our Certificate of Incorporation currently authorizes up to 150,000,000 shares of Common Stock, and approximately 102.8 million shares are presently issued and outstanding. An additional 2.9 million shares of Common Stock may become outstanding by virtue of existing or future equity awards under our Omnibus Stock and Incentive Plan and our Non-Employee Directors Stock Plan. In addition, in the past few years, the Company has grown significantly through acquisitions and, since 2014, we have issued approximately 26.4 million shares of Common Stock in M&A transactions. We may in the future make additional acquisitions and may use Common Stock as consideration.


25


The Board of Directors believes it is in the best interests of the Company and its stockholders to increase the number of authorized shares of Common Stock to provide the Company with flexibility to consider and plan for future general corporate needs, including, but not limited to, capital raising, financing transactions, potential merger and acquisition transactions, employee stock or benefit plan needs, stock splits, stock dividends or other general corporate purposes. These opportunities can develop relatively quickly. The additional authorized shares of Common Stock would enable the Company to pursue strategic, financial, merger and acquisition or capital opportunities as they may be presented and to take timely advantage of market conditions as they may arise, without the delay and expense associated with calling and convening a special meeting of stockholders to authorize additional shares.
Although the Company has no plan, commitment or agreement as of the date of this Proxy Statement to issue additional shares of Common Stock resulting from the proposed increase in authorized shares, the Company regularly looks at and considers the desirability of issuing Common Stock in financing or merger and acquisition transactions.
Effect of the Proposed Amendment
If the proposed amendment to the Certificate of Incorporation is approved and adopted by our stockholders, approximately 147.2 million shares of Common Stock would then be authorized and available for future issuance. The additional authorized shares would be available for issuance from time-to-time by the Board of Directors for any proper general corporate purpose, including those described above, without further stockholder approval, other than as may be required by Delaware law or the rules of the NASDAQ Stock Market.
The additional shares of Common Stock for which we are seeking stockholder approval would be part of the existing class of our Common Stock and, if and when issued, would have the same rights and privileges as, and be identical in all respects (including voting, dividend, distribution and liquidation rights) to, shares of Common Stock currently outstanding. The proposed additional authorized shares of Common Stock will not affect any of the rights of the shares of Common Stock currently outstanding. Under Delaware law and our Certificate of Incorporation, holders of our Common Stock are not entitled to preemptive rights to purchase shares of Common Stock that the Company may issue in the future.
The ability of the Board of Directors to issue additional shares of Common Stock may, under certain circumstances, be deemed to have an anti-takeover effect. The Company could use the additional authorized shares of Common Stock to make it more difficult or to discourage efforts to obtain control of the Company. However, the amendment to our Certificate of Incorporation is not being proposed in order to prevent a change-in-control, nor is the amendment in response to any attempt, or contemplated attempt, to acquire control of the Company or to gain representation on our Board of Directors. As is true for our shares presently authorized but not issued, future issuances of the additional shares of Common Stock contemplated by the proposed amendment also could have a dilutive effect on earnings per share, book value per share, voting power and percentage ownership interest of current stockholders.
The Board of Directors intends to use the additional shares of Common Stock only for purposes and on terms that it deems to be in the best interests of the Company and its stockholders.
Impact if the Amendment is not Adopted
If the proposed amendment to our Certificate of Incorporation is not approved and adopted by our stockholders and we are unable to increase our number of authorized shares of Common Stock, the Company will be limited in the number of shares of Common Stock available for issuance to a total of 150,000,000 shares issued and outstanding. This could impact the Company’s ability in the future to issue Common Stock for capital raising, financing transactions, M&A transactions and other corporate purposes as the Company may not have a sufficient number of shares of Common Stock available to issue for these needs.


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Required Vote
Our Board of Directors unanimously approved and adopted the amendment to our Certificate of Incorporation to increase the number of authorized shares of Common Stock. Accordingly, the majority of outstanding shares of Common Stock entitled to vote at the Annual Meeting is required for stockholders to approve and adopt the proposed amendment to our Certificate of Incorporation.
Directors’ Recommendation
The Board of Directors unanimously recommends that stockholders vote “FOR” approval and adoption of the amendment to our Certificate of Incorporation to increase the number of authorized shares of Common Stock from 150,000,000 to 250,000,000 shares.
ITEM  4—APPROVAL OF AN ADVISORY (NON-BINDING) RESOLUTION REGARDING THE COMPENSATION PAID IN 2016 TO THE COMPANY’S NAMED EXECUTIVE OFFICERS
In accordance with applicable SEC rules, we are required to provide stockholders with an opportunity to approve, on an advisory basis, the compensation of our named executive officers as disclosed in this Proxy Statement. We refer to this proposal as the “say-on-pay” proposal. Our executive compensation programs, including detailed information regarding the compensation paid to our named executive officers for 2016, are described in the Compensation Discussion and Analysis and Executive Compensation Tables sections of this Proxy Statement.
Our Board of Directors views it as a good corporate governance practice to present the say-on-pay proposal to our stockholders annually. The Board made this recommendation to our stockholders at our 2012 annual meeting, and our stockholders overwhelmingly voted in favor of holding a say-on-pay vote every year, as opposed to every other year or every third year. Our stockholders will next have the opportunity to indicate their preference for the frequency of the say-on-pay vote at our 2018 annual meeting.
At our 2016 annual meeting of stockholders, 93% of the votes cast were voted in favor of the compensation paid to our named executive officers. We believe these results confirmed our approach to executive compensation. Our Compensation Committee intends to consider the say-on-pay vote results from this year, and future advisory votes, with respect to the design of and amounts paid under our executive compensation programs.
We are asking our stockholders to indicate their support for our executive compensation program as described in this Proxy Statement. This proposal gives our stockholders the opportunity to express their views on executive compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers described in this Proxy Statement. Accordingly, we will ask our stockholders to vote on the following resolution at the Annual Meeting:
RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the executive compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and related narrative discussion set forth in the 2017 annual meeting proxy statement, is hereby approved by the Company’s stockholders on an advisory basis.
The say-on-pay vote is advisory and is therefore not binding on the Company, the Compensation Committee or our Board of Directors. We value the opinions of our stockholders, and the Compensation Committee will consider the results of the vote on our say-on-pay proposal when establishing the design of and amounts paid under our future executive compensation programs.


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Directors’ Recommendation
The Board of Directors unanimously recommends that stockholders vote FOR approval of the advisory (non-binding) resolution regarding the compensation paid to the Company’s named executive officers set forth in this Proxy Statement.
ITEM  5—RATIFICATION OF THE APPOINTMENT OF THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Independent Registered Public Accounting Firm
The Audit Committee of the Board of Directors is responsible for appointing the Company’s independent registered public accounting firm, and the Audit Committee has selected Ernst & Young LLP to serve as our independent registered public accounting firm for the year ending December 31, 2017. We are submitting this selection for stockholder ratification at the Annual Meeting. We expect a representative of Ernst & Young LLP to be present at the Annual Meeting and to have an opportunity to make a statement if he or she desires to do so and to be available to respond to appropriate questions from stockholders. Ernst & Young LLP also served as our independent registered public accounting firm for the year ended December 31, 2016.
Although we are not required to have our stockholders ratify the selection of our independent registered public accounting firm, our Board of Directors has determined to seek this ratification from stockholders. This ratification is advisory and is, therefore, not binding on the Audit Committee. If our stockholders do not ratify the selection, the Audit Committee will reconsider whether to retain Ernst & Young LLP, but may retain them nonetheless. Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interests of the Company.
Fees Paid to Independent Registered Public Accounting Firm
The Audit Committee, or a designated member of the Audit Committee, approves in advance all audit and any non-audit services rendered by Ernst & Young LLP on behalf of the Company. The following table shows information about fees paid by the Company to Ernst & Young LLP for services related to the fiscal years indicated below. The increase in the total fees of Ernst & Young LLP in 2016 as compared to 2015 resulted primarily from the additional services provided by Ernst &Young LLP in connection with the Company’s M&A activity, subordinated notes offering and sale-leaseback transaction that occurred in 2016.
2016
Percent of
2016 Services
Approved by
Audit
Committee
2015
Percent of
2015 Services
Approved by
Audit
Committee
Audit fees (1)
$
1,593,904

100%
$
1,377,269

100%
Audit-related fees (2)
145,450

100%
96,472

100%
Tax fees (3)
166,940

100%
106,720

100%
Total fees
$
1,906,294

$
1,580,461

_________________________________
(1)
Includes fees and expenses for the audit of the Company’s annual financial statements, internal control over financial reporting and review of financial statements included in the Company’s quarterly reports filed with the SEC, as well as other services normally provided by an independent auditor in connection with statutory and regulatory filings or engagements, including consents, assistance with review of SEC filings and comfort letters in connection with the Company’s M&A activity and subordinated notes offering.
(2)
Includes fees related to the audits of the Company’s benefit plans and fees related to the sale-leaseback transaction completed during 2016.
(3)
Includes fees related to assistance with routine audits and tax planning, consulting and compliance services.


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For audit, audit-related services, tax-related services and all other services, our Audit Committee has determined specific services and dollar thresholds under which such services would be considered pre-approved. To the extent management requests services other than these pre-approved services, or beyond the dollar thresholds, our Audit Committee must specifically approve the services. Further, under our fee policy, our independent registered public accounting firm may not perform the non-audit services identified by the SEC as prohibited. Our fee policy requires management to provide to our Audit Committee on a quarterly basis a summary of all services performed by the independent registered public accounting firm.
Directors’ Recommendation
The Board of Directors unanimously recommends that stockholders vote FOR ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2017.
CORPORATE GOVERNANCE AT FIRST MIDWEST
Our Board of Directors is committed to maintaining strong corporate governance principles and practices. If you would like additional information about our corporate governance practices, you may view the following documents on our website at www.firstmidwest.com/corporategovernance or request them in print by sending a written request to the Corporate Secretary at First Midwest Bancorp, Inc., One Pierce Place, Suite 1500, Itasca, Illinois 60143:
Corporate Governance Guidelines;
Code of Ethics and Standards of Conduct (applicable to all directors, officers and employees);
Code of Ethics for Senior Financial Officers;
Audit Committee Charter;
Compensation Committee Charter;
Nominating and Corporate Governance Committee Charter; and
Related Person Transaction Policies and Procedures.
Corporate Governance Guidelines and Committee Charters
The Corporate Governance Guidelines and the charters of the Audit, Compensation and Nominating and Corporate Governance Committees of our Board of Directors describe our corporate governance practices. The Corporate Governance Guidelines and charters are intended to ensure that our Board of Directors has certain practices in place relating to oversight of management and various components of our business operations and to make decisions that are independent of management.


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Code of Ethics and Standards of Conduct
We have adopted a Code of Ethics and Standards of Conduct, which applies to all of our directors, officers and employees, as well as a Code of Ethics for Senior Financial Officers, which applies to our senior financial officers. Our Code of Ethics and Standards of Conduct meets the requirements of a “code of ethics” as defined by applicable SEC rules, and also meets the requirements of a “code of conduct” under the applicable rules of the NASDAQ Stock Market. Annually, all employees are required to certify that they have reviewed and are familiar with the Code of Ethics and Standards of Conduct, and all officers are required to certify compliance with this code. Waivers of the Code of Ethics and Standards of Conduct for executive officers are required to be disclosed to the Chair of the Nominating and Corporate Governance Committee of the Board. Similarly, our senior financial officers must certify annually that they have reviewed, are familiar with and are in compliance with the Code of Ethics for Senior Financial Officers. Waivers of the Code of Ethics for Senior Financial Officers must be submitted to and approved by the Board.
Director Independence
Our Board of Directors determines the independence of all non-employee directors in accordance with the independence requirements of the NASDAQ Stock Market rules. Accordingly, each year the Board affirmatively determines whether each non-employee director has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Annually, each non-employee director is required to complete a questionnaire that provides information about relationships that might affect the determination of independence. Management then provides the Nominating and Corporate Governance Committee and Board of Directors with relevant facts and circumstances of any relationship bearing on the independence of a director or nominee that is outside the categories permitted under the rules of the NASDAQ Stock Market.
Based on the review and recommendation by the Nominating and Corporate Governance Committee, the Board of Directors analyzed the independence of each of the Company’s nominees and other current directors, and determined that all of our directors meet the standards of independence under our Corporate Governance Guidelines and the NASDAQ Stock Market rules, other than Michael L. Scudder, the Company’s President and Chief Executive Officer, and Mark G. Sander, the Company’s Senior Executive Vice President and Chief Operating Officer, who are not considered to be independent under the standards of our Corporate Governance Guidelines and the rules of the NASDAQ Stock Market because they are employees. In addition, our Board of Directors determined that:
Each member of the Audit Committee is financially literate and has accounting or related financial management expertise (as such qualifications are defined under the rules of the NASDAQ Stock Market).
Patrick J. McDonnell and John F. Chlebowski, Jr. are “audit committee financial experts” within the meaning of the rules and regulations of the SEC, and that both Thomas L. Brown and Stephen C. Van Arsdell also would qualify as audit committee financial experts.
Each member of the Compensation Committee is a “non-employee director” within the meaning of SEC Rule 16b-3, and an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code.
Board Leadership and Structure
As provided in our Corporate Governance Guidelines, our Board of Directors does not have a fixed policy regarding the separation of the offices of Chairman and Chief Executive Officer and believes that it should maintain the flexibility to select the Chairman and its Board leadership structure, from time-to-time, based on the criteria that it deems to be in the best interests of the Company and its stockholders.


30


The position of Chairman of the Board is presently held by Robert P. O’Meara and the position of President and Chief Executive Officer is held by Michael L. Scudder. The Board of Directors believes that, at this time, the separation of the offices of Chairman of the Board and of President and Chief Executive Officer is appropriate for the Company. This separation presently allows Mr. Scudder to focus on his responsibilities of running the day-to-day affairs of the Company, enhancing stockholder value and expanding and strengthening the Company’s business. Concurrently, Mr. O’Meara, as Chairman of the Board, can utilize his intimate knowledge of the Company and significant industry experience to focus on leadership for the Board as it provides advice to and independent oversight of management. As the independent Chairman, Mr. O’Meara also serves as lead independent director and the presiding director at Board meetings, chairs Board meetings and has final approval of Board meeting agendas.
Risk Oversight
Risk is inherent with every business and we face a number of risks, including, for example, credit, market, liquidity, operational, strategic, compliance, legal, cyber and reputation risks, as well as risks related to general economic conditions. We do not view risk in isolation, but rather consider risk as part of our ongoing consideration of business strategy and business decisions.
Management is responsible for the day-to-day management of the risks the Company faces. It establishes and maintains risk management processes and policies designed to balance our operations and business opportunities with risk mitigation in order to create stockholder value. It is management’s responsibility to anticipate, identify and communicate risks to the Board of Directors and its committees. The Company also has a Chief Risk Officer.
The Board of Directors, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board of Directors has the responsibility to satisfy itself that the risk management processes, policies and levels designed and implemented by management are appropriate and functioning as designed. The Board performs its risk oversight function primarily through its committees and the operation of the Bank’s board of directors. Each of the Board’s committees is chaired by an independent director and supports the Board’s oversight functions by regularly addressing various risks in their respective areas of oversight.
Specifically, each committee assists the Board in fulfilling its risk management oversight responsibilities in the following areas:
Audit Committee . Assists the Board with risk oversight in the areas of financial reporting, internal controls, tax and compliance with public reporting requirements.
Compensation Committee . Assists the Board with risk oversight associated with our compensation policies and programs, including maintaining an executive compensation program that is designed to encourage the achievement of corporate objectives and strategies, enhance stockholder value and incent and retain our executive officers, and discourage unnecessary or excessive risk taking.
Nominating and Corporate Governance Committee . Assists the Board with risk oversight associated with corporate governance and director selection and succession.
Enterprise Risk Committee (in formation) . The Board of Directors intends to establish an Enterprise Risk Committee in May 2017. This committee will oversee certain enterprise risks and will be comprised entirely of independent directors.
Each committee reports to the full Board of Directors at least quarterly at regular meetings concerning the activities of the committee, the significant matters it has discussed and the actions taken by the committee. The Board also receives reports directly from the President and Chief Executive Officer, the Chief Risk Officer and other members of management regarding the Company’s risk management functions. In addition, the Chairman of the


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Board meets regularly with the President and Chief Executive Officer to discuss strategy and risks facing the Company. Key members of senior management attend Board meetings and are available to address any questions or concerns raised by the Board of Directors.
Meetings
Our Board of Directors holds regular quarterly meetings and special meetings as needed. In 2016, the Board held four regularly scheduled meetings and four special meetings. Our directors also communicate with each other between meetings. Further, the Board of Directors devotes additional time outside of its regular meetings to presentations and discussions with senior management about the Company’s long-term strategy, corporate objectives and initiatives, financial operating plans, and industry and market updates, which are then discussed further at the Board’s quarterly meetings.
We expect our directors to attend all Board and committee meetings for those committees on which they serve. Directors are also expected to attend each annual meeting of stockholders. Other than Mr. Brown, Ms. Hayley and Messrs. Modruson and Van Arsdell, each of whom joined the Board after our last annual meeting of stockholders, and Ms. Boigegrain, all of our current directors, including the current nominees for director, attended last year’s annual meeting. Eight of our directors attended 100% of the total number of meetings of the Board of Directors and Board committees on which he or she served during 2016, with the remaining six directors attending at least 75% of the meetings and with the average attendance for all directors being 95%.
Board Committees
Our Board of Directors has three standing committees, our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. Each standing committee has a written charter and the Board of Directors has determined that each of the members of our standing committees is “independent” under the provisions of our Corporate Governance Guidelines and the rules of the NASDAQ Stock Market. The Board has also established an Advisory Committee for the purpose of providing general advice to management with respect to general business matters as needed between regular meetings of the Board. Additionally, the Board intends to establish an Enterprise Risk Committee in May 2017, which will be comprised entirely of independent directors.
Under our Corporate Governance Guidelines, the members of each Board committee (including each committee chair) are appointed by the Board of Directors upon the recommendation of the Nominating and Corporate Governance Committee, and a member may only serve as the chair of one committee of the Board at any given time. The table below provides membership and meeting information for each Board committee for the 2016 fiscal year, as well as the expected committee membership for our new directors who have not yet been appointed to a committee and for the Enterprise Risk Committee that is in the process of being formed.


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Name
Audit
Compensation
Nominating and Corporate Governance
Advisory
Enterprise Risk (1)
Barbara A. Boigegrain
ü
ü
Thomas L. Brown (2)
ü
ü
John F. Chlebowski, Jr. (3)
ü
Br. James Gaffney
ü *
ü
Phupinder S. Gill
ü
ü
Kathryn J. Hayley (4)
ü
ü
Peter J. Henseler
ü
ü
Patrick J. McDonnell
ü *
ü
ü
Frank B. Modruson (4)
ü
ü
Robert P. O’Meara
ü *
Ellen A. Rudnick
ü
ü
Mark G. Sander
Michael L. Scudder
ü
Michael J. Small
ü
ü
Stephen C. Van Arsdell (2)
ü
ü
J. Stephen Vanderwoude
ü *
ü
ü
ü
Total committee meetings 2016
8
5
6
2
N/A
______________________________
*
Designates Chair of this committee.
(1)
The Board intends to establish an Enterprise Risk Committee in May 2017 with Messrs. Brown, Gill, McDonnell, Modruson, Small and Vanderwoude as the proposed members of this committee.
(2)
Messrs. Brown and Van Arsdell joined our Board of Directors in February 2017. The Board intends to appoint, in May 2017, Mr. Brown to the Audit Committee and, upon formation, the Enterprise Risk Committee, and Mr. Van Arsdell to the Audit Committee and the Nominating and Corporate Governance Committee.
(3)
Mr. Chlebowski’s term as a director will expire at the Annual Meeting on May 17, 2017. Mr. Chlebowski has decided to retire from the Board at the expiration of his present term and, accordingly, he will not stand for re-election.
(4)
Ms. Hayley and Mr. Modruson joined our Board of Directors in August 2016. The Board intends to appoint, in May 2017, Ms. Hayley to the Audit Committee and the Compensation Committee, and Mr. Modruson to the Audit Committee and, upon formation, the Enterprise Risk Committee.
Below is a brief description of each standing committee of our Board of Directors, as well as our Advisory Committee. Each standing committee has the authority to engage, at the Company’s expense, legal counsel or other advisors or consultants as it deems appropriate to carry out its responsibilities. The charter of each standing committee describes the specific responsibilities and functions of such committee. You may view a current copy of each charter by visiting our website at www.firstmidwest.com/corporategovernance .
Audit Committee . The responsibilities of the Audit Committee include, among others:
Selecting and retaining our independent registered public accounting firm and pre-approving all services performed by this firm.
Oversight of the external reporting process and the adequacy of the Company’s internal controls.
Oversight of the scope of the audit activities of the independent registered public accounting firm and the Company’s internal auditors.
Oversight of the process for determining the independence of the independent registered public accounting firm.


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Oversight of the procedures for the receipt, retention and resolution of complaints regarding accounting, internal controls or auditing matters.
Discussing with management and the independent auditors critical accounting policies and practices used by the Company, any off-balance sheet items and judgments made in connection with the preparation of the Company’s financial statements.
Compensation Committee . Our Compensation Committee reviews and evaluates our general compensation philosophy and oversees the development, implementation and any revisions to our compensation policies and programs. The responsibilities of the Compensation Committee include, among others:
Reviewing and approving the Company’s general compensation philosophy.
Oversight of the development and implementation of our compensation policies and programs.
Reviewing and monitoring the Company’s incentive and other compensation programs.
Recommending to our Board of Directors goals and objectives relating to the compensation of our Chief Executive Officer.
Assisting our Board of Directors in evaluating our Chief Executive Officer and recommending to our Board the Chief Executive Officer’s compensation.
Reviewing and recommending to our Board of Directors the annual compensation of senior management.
Administering our Omnibus Stock and Incentive Plan and Non-Employee Directors Stock Plan.
Oversight of the Company’s health and welfare programs.
Oversight of the Company’s retirement plans.
Conducting an annual risk assessment of the Company’s compensation programs.
Retaining an independent compensation consultant to provide advice to the Compensation Committee relative to compensation matters.
Nominating and Corporate Governance Committee . The responsibilities of the Nominating and Corporate Governance Committee include, among others:
Recommending to the Board of Directors the director nominees for election at any meeting of stockholders at which directors are elected.
Identifying, interviewing and recruiting individuals to serve as members of our Board.
Overseeing matters of corporate governance, including reviewing the Company’s Corporate Governance Guidelines and Code of Ethics and Standards of Conduct.
Advising the Board of Directors on Board and committee organization, membership, function, performance and effectiveness.
Reviewing director independence standards and qualifications and making recommendations to the Board of Directors with respect to the determination of the independence and qualifications of directors.


34


Reviewing related person transactions, if and when they arise.
Overseeing the annual self-evaluation process of the Board of Directors and each of its committees.
Reviewing stockholder proposals and considering responses or actions regarding such proposals.
Advisory Committee . The primary responsibility of the Advisory Committee is to advise and consult with management with respect to general business matters as needed between regular meetings of the Board of Directors.
Board and Committee Self-Evaluations
The Board and the Audit, Compensation and Nominating and Corporate Governance Committees conduct an annual self-evaluation, which includes both a qualitative and quantitative assessment by each director of the performance of the Board and the committees on which the director sits. The Nominating and Corporate Governance Committee oversees these evaluations. As part of this process, each director completes an annual self-evaluation of the Board and the committees on which the director sits and has a one-on-one meeting with the Chair of the Nominating and Corporate Governance Committee. The results of the self-evaluations are reported to the Board of Directors.
Related Person Transactions
We maintain a written policy for reviewing, approving and monitoring transactions involving the Company and related persons (generally, directors and executive officers or their immediate family members, or stockholders owning 5% or more of our Common Stock).
Our Nominating and Corporate Governance Committee is responsible for reviewing and approving (or ratifying) all transactions with related persons. The Nominating and Corporate Governance Committee will take into account all relevant factors in its analysis, including whether the transaction is on terms comparable to those available to third parties. The Nominating and Corporate Governance Committee will also determine whether any transaction with a related person impairs the independence of a director, or presents a conflict of interest on the part of a director or executive officer. The Chair of the Nominating and Corporate Governance Committee may pre-approve or ratify any transaction with a related person involving an amount up to $500,000. The policy also provides that transactions involving competitive bids, the rendering of services by a regulated entity and certain ordinary course banking transactions, including loans made by First Midwest Bank, will be deemed to be pre-approved by the Nominating and Corporate Governance Committee.
During 2016, First Midwest Bank engaged in transactions with certain of our executive officers, directors and entities with which they are associated. These transactions involved loans extended in accordance with Regulation O of the Federal Reserve and other banking services, all of which were in the ordinary course of business and on substantially the same terms, including current interest rates and collateral, as those prevailing at the time for comparable transactions with others not related to the Company and did not involve more than the normal risk of collectability or present other unfavorable features.
Compensation Committee Interlocks and Insider Participation
No member of our Compensation Committee has served as one of our executive officers or employees. None of our executive officers serves as a member of the board of directors or compensation committee of any other company that has an executive officer serving on our Board of Directors or our Compensation Committee.
Stockholder Communication with Directors
Stockholders may contact the Chairman of the Board, an individual director, the entire Board of Directors, our independent directors as a group or a specific Board committee by submitting written correspondence to First Midwest Bancorp, Inc., Attn:  Corporate Secretary, One Pierce Place, Suite 1500, Itasca, Illinois 60143. Each communication should specify the applicable addressee(s) to be contacted as well as the general topic of the


35


communication. The Company will initially receive and process communications before forwarding them to the addressee(s). Communications also may be referred to other departments within the Company. The Company generally will not forward to the directors a stockholder communication that involves routine business matters of the Company or First Midwest Bank, an irrelevant topic or a request for general information about the Company. Communications regarding accounting or auditing matters should be reported in writing to the Board’s Audit Committee Chair or the Company’s Audit Services Director at First Midwest Bancorp, Inc., One Pierce Place, Suite 1500, Itasca, Illinois 60143.
INFORMATION REGARDING BENEFICIAL OWNERSHIP OF PRINCIPAL
STOCKHOLDERS, DIRECTORS AND MANAGEMENT
The following table sets forth, as of March 24, 2017, information about the beneficial ownership of our Common Stock by all directors, our named executive officers and our directors and all executive officers as a group. Except as described below, each stockholder has sole voting and investment power for all shares shown. In addition, unless otherwise indicated, the address of each beneficial owner is c/o First Midwest Bancorp, Inc., One Pierce Place, Suite 1500, Itasca, Illinois 60143.
We calculated the percent of class based on 102,840,266 shares of Common Stock outstanding on March 24, 2017. We include shares of restricted stock subject to future vesting conditions for which an individual has voting but not dispositive power. We also include shares underlying restricted stock units and performance shares that could vest, and shares subject to options that are currently exercisable or will become exercisable, within 60 days of March 24, 2017, even though an individual has neither voting nor dispositive power. Those shares are deemed to be outstanding and beneficially owned by the person holding such securities for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person.


36


Beneficial Owner
Number of
Shares/Units (1)(2)(3)(4)
Percent of Class
Directors

Barbara A. Boigegrain
30,291

*
Thomas L. Brown (5)

*
John F. Chlebowski, Jr.
27,979

*
Br. James Gaffney (6)
3,838

*
Phupinder S. Gill
40,999

*
Kathryn J. Hayley
16,000

*
Peter J. Henseler
20,097

*
Patrick J. McDonnell
35,893

*
Frank B. Modruson
1,151

*
Robert P. O’Meara
392,203

*
Ellen A. Rudnick
32,393

*
Mark G. Sander
214,667

*
Michael L. Scudder
339,517

*
Michael J. Small
25,389

*
Stephen C. Van Arsdell
14,000

*
J. Stephen Vanderwoude
78,535

*
Named Executive Officers (other than Messrs. Sander and Scudder)
Paul F. Clemens
87,625

*
Thomas M. Prame
44,634

*
Nicholas J. Chulos
42,604

*
All directors and executive officers (including named executive officers) as a group
(28 persons) (7)
1,738,435

1.69%
*
Less than 1%.
(1)
Includes the following shares of Common Stock subject to options exercisable within 60 days after March 24, 2017:  John F. Chlebowski, Jr., 6,586 shares; Br. James Gaffney, 3,740 shares; Patrick J. McDonnell, 3,740 shares; Robert P. O’Meara, 3,740 shares; Ellen A. Rudnick, 3,740 shares; J. Stephen Vanderwoude, 3,740 shares; Michael L. Scudder, 25,019 shares; Mark G. Sander, 42,328 shares; and Paul F. Clemens, 18,464 shares.
(2)
Some of our directors and officers have deferred cash compensation (in the form of phantom Common Stock) or stock option gains (in the form of Common Stock equivalents) under our deferred compensation plans. Some of these deferred amounts will be paid in shares of our Common Stock upon the director’s or officer’s retirement or other termination of employment or service with the Company . The number of shares of Common Stock to which our directors and officers would be entitled had their service or employment with the Company terminated as of March 24, 2017 is as follows:  Phupinder S. Gill, 20,610 shares; Peter J. Henseler, 1,825 shares; J. Stephen Vanderwoude, 19,908 shares; Michael L. Scudder, 9,608 shares; Paul F. Clemens, 2,014 shares; and Thomas M. Prame, 2,006 shares. The directors and officers have voting and investment power for the shares of phantom Common Stock and voting power but no dispositive power for the Common Stock equivalent shares.
(3)
Includes the following shares of Common Stock held through the Company’s 401(k) Plan:  Michael L. Scudder, 8,427 shares; Mark G. Sander, 359 shares; Paul F. Clemens, 1,139 shares; Thomas M. Prame, 82 shares; and Nicholas J. Chulos, 5,276 shares.
(4)
Includes the following shares of restricted stock subject to future vesting conditions for which the individual has voting but not dispositive power:  Michael L. Scudder, 70,256 shares; Mark G. Sander, 52,062 shares; Thomas M. Prame, 19,612 shares; and Nicholas J. Chulos, 23,348 shares. For Paul F. Clemens, excludes 20,867 restricted stock units that would not vest within 60 days after March 24, 2017 under the terms of the applicable award agreements.
(5)
Mr. Brown was appointed to the Board of Directors in February 2017 and has not yet acquired any shares of Common Stock. He has elected to receive all of his director compensation in shares of Common Stock and intends to comply with the Company’s stock ownership guidelines in less than the five-year acquisition period specified in the guidelines.
(6)
Includes 98 shares of Common Stock owned by Lewis University to which Br. James Gaffney disclaims beneficial ownership.


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(7)
Includes:  136,548 shares of Common Stock subject to options exercisable within 60 days after March 24, 2017; 59,193 shares of Common Stock payable to certain directors and executive officers pursuant to our deferred compensation plans; 25,672 shares of Common Stock held in our 401(k) Plan for the accounts of certain executive officers; and 316,777 shares of restricted stock. Excludes: 34,158 restricted stock units and 61,833 earned performance shares that would not vest within 60 days after March 24, 2017 under the terms of the applicable award agreements.
Other Security Ownership
The following table identifies each person known to us as of March 24, 2017 to beneficially own more than 5% of our outstanding Common Stock.
Name and Address of Beneficial Owner
Number of Shares
Percent of Class


BlackRock, Inc. (1)
9,365,981

11.5
%
55 East 52nd Street
New York, NY 10055


The Vanguard Group (2)
6,882,836

8.5
%
100 Vanguard Boulevard
Malvern, PA 19355
Dimensional Fund Advisors LP (3)
6,829,752

8.4
%
Building One
6300 Bee Cave Road
Austin, TX 78746


Wellington Management Group LLP (4)
4,742,504

5.8
%
c/o Wellington Management Company LLP
280 Congress Street
Boston, MA 02210
(1)
This information is based solely on a Schedule 13G/A filed with the SEC on January 12, 2017 by BlackRock, Inc., which reported sole voting power as to 9,130,543 shares and sole dispositive power as to 9,365,981 shares as of December 31, 2016.
(2)
This information is based solely on a Schedule 13G/A filed with the SEC on February 10, 2017 by The Vanguard Group, which reported sole voting power as to 96,285 shares, shared voting power as to 7,138 shares, sole dispositive power as to 6,783,518 shares and shared dispositive power as to 99,318 shares as of December 31, 2016.
(3)
This information is based solely on a Schedule 13G/A filed with the SEC on February 9, 2017 by Dimensional Fund Advisors LP, which reported sole voting power as to 6,600,241 shares and sole dispositive power as to 6,829,752 shares as of December 31, 2016. Dimensional Fund Advisors LP and its subsidiaries disclaim beneficial ownership of all securities reported on the Schedule 13G/A.
(4)
This information is based solely on a Schedule 13G/A filed with the SEC on February 9, 2017 by Wellington Management Group LLP (“WMG”) on behalf of each of WMG, Wellington Group Holdings LLP (“WGH”), Wellington Investment Advisors Holdings LLP (“WIAH”) and Wellington Management Company LLP (“WMC”). The Schedule 13G/A reported that each of WMG, WGH and WIAH shared voting power as to 3,626,579 shares and shared dispositive power as to 4,742,504 shares, and WMC shared voting power as to 3,605,369 shares and shared dispositive power as to 4,721,294 shares, as of December 30, 2016.


38


DIRECTOR COMPENSATION
We use a combination of cash and equity-based compensation set at levels we believe will allow us to attract and retain qualified individuals to serve on our Board of Directors. Each year, the Compensation Committee reviews, with the assistance of our independent compensation consultant, and makes a recommendation to our Board of Directors regarding the compensation that we pay to our directors. In setting director compensation, we consider the significant amount of time that directors devote to fulfilling their duties, advice that we receive from our compensation consultant and comparative data regarding director compensation at the companies in our peer group. Michael L. Scudder, our President and Chief Executive Officer, and Mark G. Sander, our Senior Executive Vice President and Chief Operating Officer, do not receive compensation for serving as a member of the Board. In addition, Br. James Gaffney has elected not to receive any director compensation.
The following table summarizes our annual compensation for non-employee directors for 2016:
Component
Amount
An annual fixed cash retainer for each non-employee director
$
50,000

An annual award of Common Stock for each non-employee director*
$
50,000

An annual fixed cash retainer for the Board Chair
$
150,000

An annual fixed cash retainer for the Audit Committee Chair
$
15,000

An annual fixed cash retainer for the Compensation Committee and Nominating and Corporate Governance Committee Chairs
$
10,000

An annual fixed cash retainer for each member of the Audit Committee (excluding the Audit Committee Chair)
$
4,000

*
A director may elect to receive the stock component of his or her director compensation in cash.
Each director’s annual cash retainer is paid in equal quarterly installments in arrears. Payment of each retainer installment is contingent upon the director’s service during the preceding quarter. We do not pay separate fees for attendance at Board or Board committee meetings. We also reimburse our directors for their reasonable Board and committee attendance-related expenses.
Barbara A. Boigegrain, Phupinder S. Gill, Peter J. Henseler, Patrick J. McDonnell, Ellen A. Rudnick and Michael J. Small each received an award of 2,494 shares of fully-vested Common Stock for their 2016 service as the stock component of their director compensation. Additionally, Frank B. Modruson, who joined the Board in August 2016, received an award of 1,149 shares of fully-vested Common Stock for his 2016 service as the stock component of his director compensation. Kathryn J. Hayley, John F. Chlebowski, Jr., John L. Sterling, who retired from the Board at our 2016 annual meeting of stockholders, and J. Stephen Vanderwoude each elected to receive cash in lieu of shares of fully-vested Common Stock for 2016; each of them has satisfied our stock ownership guidelines for directors. In light of his significant holdings of our Common Stock, Robert P. O’Meara also has elected to receive cash in lieu of the stock component of his director compensation.
Deferred Compensation Plan for Non-Employee Directors
Our Deferred Compensation Plan allows non-employee directors to defer receipt of either 50% or 100% of their director fees and retainers. Deferral elections are made in December of each year for amounts payable in the following year. Amounts are deemed to be invested in separate investment accounts under the plan, with the various investment alternatives available under our Deferred Compensation Plan, including an investment account for shares of our Common Stock.


39


Directors are able to modify their investment allocations at any time, subject to applicable stock trading blackout periods. Deferred director fees and retainers are payable at the director’s election, either as a lump sum or in installments over a period not to exceed fifteen years. Payments under the Deferred Compensation Plan begin at the date specified by the director or upon cessation of service as a director.
2016 Director Compensation Table
The following table and explanatory notes provide information regarding the cash and Common Stock awarded to each non-employee director during 2016.
Name
Fees Earned or Paid in Cash (1)
Stock
Awards (2)
Option Awards (3)
Non-Equity Incentive Plan Compensation (4)
Change in Pension Value (4) and Nonqualified Deferred Compensation Earnings
All Other Compensation (5)
Total
Barbara A. Boigegrain
$
50,000

$
50,000
$

$

$

$
$
100,000

Thomas L. Brown (6)





John F. Chlebowski, Jr.
104,000




104,000

Br. James Gaffney (7)





Phupinder S. Gill
54,000

50,000


6,436

110,436

Kathryn J. Hayley (8)
50,000




50,000

Peter J. Henseler
50,000

50,000


6,768

106,768

Patrick J. McDonnell
65,000

50,000



115,000

Frank B. Modruson (8)
25,000

25,000



50,000

Robert P. O’Meara (9)
300,000



67,207

10,542
377,749

Ellen A. Rudnick
50,000

50,000



2,500
102,500

Michael J. Small
54,000

50,000



104,000

John L. Sterling (10)
50,000




50,000

Stephen C. Van Arsdell (6)





J. Stephen Vanderwoude
110,000



7,042

117,042

(1)
Includes amounts deferred at the election of the directors pursuant to our Deferred Compensation Plan.
(2)
Amounts represent the aggregate grant-date fair value of Common Stock awards granted under our Non-Employee Directors Stock Plan during the period, calculated in accordance with FASB Accounting Standards Codification Topic 718 (“ASC 718”). Assumptions used in the calculation of these amounts are described in Note 17 to our audited financial statements included in our Form 10-K. The aggregate number of shares of Common Stock granted by the Company to each non-employee director during 2016 was 2,494 shares to each of Barbara A. Boigegrain, Phupinder S. Gill, Peter J. Henseler, Patrick J. McDonnell, Ellen A. Rudnick and Michael J. Small, and 1,149 shares to Frank B. Modruson.
(3)
The aggregate number of unexercised stock options outstanding as of December 31, 2016 issued to non-employee directors was as follows: John F. Chlebowski, Jr., 6,586; Br. James Gaffney, 3,740; Patrick J. McDonnell, 3,740; Robert P. O’Meara, 3,740; Ellen A. Rudnick, 3,740; and J. Stephen Vanderwoude, 3,740.
(4)
The Company does not maintain a non-equity incentive plan or pension plan for directors.
(5)
The amount for Robert P. O’Meara includes payments made on his behalf under a Retirement and Consulting Agreement between the Company and Mr. O’Meara. The amount for Ellen A. Rudnick represents the amount paid under our matching gift donation program to eligible educational institutions designated by the director.
(6)
Messrs. Brown and Van Arsdell joined our Board in February 2017 and thus received no compensation for 2016 Board service.


40


(7)
Br. James Gaffney has elected not to receive any compensation for his service on the Board of Directors.
(8)
Ms. Hayley and Mr. Modruson joined our Board in August 2016 and thus received pro-rated compensation for their 2016 Board service.
(9)
Included in Robert P. O’Meara’s director compensation fees earned or paid in cash are director fees paid to him as a non-employee director of First Midwest Bank.
(10)
Mr. Sterling retired from our Board at our 2016 annual meeting of stockholders and thus received pro-rated compensation for his 2016 Board service.
2017 Director Compensation
Consistent with the Compensation Committee’s annual review of our director compensation program, the Compensation Committee reviewed the amount of compensation paid to our directors. In connection with its review of our director compensation program, the Compensation Committee held discussions with its independent compensation consultant, Deloitte Consulting LLP, and considered publicly available director compensation data from the companies in our peer group, as well as other information.
Upon the conclusion of this process, the Compensation Committee determined that director compensation for 2017 should be increased modestly, both because the Compensation Committee believed that the Company’s director compensation was below the levels prevalent in the Chicago market and to allow the Company to continue to remain competitive in its ability to retain and attract qualified directors. Specifically, the Compensation Committee determined that it was appropriate to increase both the annual fixed cash retainer and the annual award of Common Stock paid to each non-employee director from $50,000 to $52,500, for a total of $105,000, and recommended this change to our Board of Directors. Our Board of Directors unanimously approved the recommended changes to the compensation paid to our directors consistent with the Compensation Committee’s recommendation, effective as of January 1, 2017. The awards of Common Stock will continue to be granted as fully-vested shares of Common Stock, and our directors may continue to elect to receive the stock component of their director compensation in cash.
Director Stock Ownership Guidelines
We believe that each director should have a meaningful equity investment in our Company. Our director stock ownership guidelines provide that directors are encouraged to own Common Stock equal in value to three times the total annual base compensation for non-employee directors, or $315,000. This amount is the equivalent of six times the base annual cash retainer paid to our non-employee directors. Directors are expected to acquire and maintain this share ownership threshold within five years of joining the Board of Directors. All of our directors own a sufficient number of shares of Common Stock under our stock ownership guidelines, except for two of our newest directors who joined our Board within the past several months and who are in the process of accumulating shares to comply with our stock ownership guidelines. Br. Gaffney is exempt from our stock ownership guidelines because he does not accept any director compensation for serving on our Board.


41


COMPENSATION DISCUSSION AND ANALYSIS
The following Compensation Discussion and Analysis describes our executive compensation philosophy and programs as established by our Compensation Committee. Our Compensation Discussion and Analysis is presented in the following sections:
Executive Summary
This Compensation Discussion and Analysis provides information and perspective regarding our 2016 executive compensation program and decisions for our executive officers generally and, more specifically, for our named executive officers identified below:
Name
Title
Michael L. Scudder
President and Chief Executive Officer of the Company and Chairman and Chief Executive Officer of First Midwest Bank
Mark G. Sander
Senior Executive Vice President and Chief Operating Officer of the Company and Vice Chairman, President and Chief Operating Officer of First Midwest Bank
Paul F. Clemens*
Executive Vice President and Chief Financial Officer of the Company and First Midwest Bank
Thomas M. Prame
Executive Vice President and Director, Strategic Planning and Consumer Banking of First Midwest Bank
Nicholas J. Chulos
Executive Vice President, Corporate Secretary and General Counsel of the Company and Executive Vice President, Corporate Secretary and Chief Legal Officer of First Midwest Bank
*
Mr. Clemens served as Executive Vice President and Chief Financial Officer of the Company during 2016. In April 2016, Mr. Clemens advised the Company of his intention to retire when he turns age 65 in mid-2017, and the Company then initiated a search process for his successor. On January 5, 2017, Patrick S. Barrett was hired as the Company’s Executive Vice President and Chief Financial Officer.
We seek to align the interests of our executives with the interests of our stockholders. As such, we believe it is important to incent and reward our executives for corporate and individual performance, with a clear emphasis


42


on corporate performance. We maintain a pay-for-performance environment with an executive compensation program having both short-term and long-term performance-based awards, including a significant equity component, and compensation that is at-risk for the executives.
Our executive compensation program is designed to accomplish the following goals:
Encourage the achievement of corporate financial objectives that create value for our stockholders.
Align the interests of our executives with our stockholders.
Attract and retain high-performing executives.
Our Compensation Committee also annually reviews the risks and rewards associated with each element of our executive compensation program to assure that the program does not encourage our executive officers to take excessive risks to enhance their compensation.
Pay-for-Performance
Consistent with our longstanding compensation practices, performance-based cash and equity awards in 2016 constituted a significant portion of the compensation package of our named executive officers. In 2016, approximately two-thirds of the total direct compensation (base salary, annual cash incentive and long-term incentive) paid to each of our Chief Executive Officer and our Chief Operating Officer was either performance-based or tied to the value of our Common Stock.
Additionally, our short-term and long-term performance goals require the Company to achieve performance at or exceeding a Board-approved budget in order for our executives to receive target payout levels and are in furtherance of strategic and operating objectives that we believe will create long-term value for our stockholders. Our performance goals are centered around our business and financial plans, which we believe will not encourage undue risk taking or imprudent actions by our executive officers to achieve these goals.
2016 Achievements
The Company’s activities in 2016 reflected significant achievement, growth and transformation. Despite a continued low interest rate environment, as well as state and local fiscal struggles, we delivered strong results in 2016 and continued our focus on our corporate strategic priorities of building the highest quality team, diversifying and growing loans and revenues, and balancing investment and risk. During 2016, we accomplished balanced execution across our business lines that resulted in record revenues of $538 million and record net income of $92.3 million, or $1.14 per share, a 9% improvement from 2015. This performance includes costs associated with our M&A activity and other significant transactions. Our total return to stockholders as of the end of 2016 was 39% and 52% over the last year and three years, respectively.


43


The charts below provide information about our recent growth:
plagrowearnfeebasedroaa02.jpg
Additionally, in 2016, we completed our combination with National Bank & Trust Company (Sycamore/DeKalb, Illinois) and, on January 6, 2017, we completed our combination with Standard Bank & Trust Company (south metro Chicago). On a combined basis, these transactions added $3.3 billion in assets, $2.2 billion in loans, $2.6 billion in deposits and $1.0 billion in wealth management assets to our Company. These transactions strengthened our market position in metro Chicago and enhanced our commercial banking and wealth management teams. We now have approximately $14 billion in total assets (40% larger than at the start of 2016) and an additional $9.5 billion of wealth management assets (29% larger than at the start of 2016). In 2016, we also raised additional capital by issuing $150 million of subordinated notes and completed a sale-leaseback of 55 of our branches for a purchase price of $150 million.
Highlights of our successes in 2016 include the following:
Earnings Growth . Increased earnings by 9% to $92.3 million, or $1.14 per share, compared to 2015. Excluding costs related to M&A activity and related integration, as well as other significant transactions, we had core earnings of $1.22 per share.
Total Stockholder Return (TSR). Our TSR for 2016 was 39.4% as compared to 9.9% in 2015. Our five-year TSR was 167.2% as compared to 132.2% for the companies in our peer group and 151.9% for the NASDAQ Bank Index.
Return on Equity. Our core return on average tangible common equity (excluding costs related to M&A activity, related integration and other significant transactions) increased to 11.5% from 11.2% in 2015.
Well Capitalized. Maintained regulatory capital ratios significantly above the minimums for designation as a “well capitalized” institution. Tier 1 capital to total risk-weighted assets of First Midwest Bank was 9.83% at December 31, 2016 (regulatory minimum for being well capitalized is 8.0%).
Dividends. In 2016, we were pleased to pay our 136th consecutive quarterly dividend to our stockholders.


44


Asset Growth. Total assets grew to $11.4 billion as of December 31, 2016, an increase of 17% from December 31, 2015. When we completed the Standard Bank transaction on January 6, 2017, our assets increased to approximately $14 billion, or 40% larger than on December 31, 2015.
Deposit Growth. Total deposits grew to $8.8 billion, an increase of 9% from December 31, 2015 and three-year growth of 12%.
Loan Growth. Total loans grew to $8.3 billion, an increase of 15% from December 31, 2015 and three-year growth of 23%. Organically, loans grew by 11.3% in 2016 as compared to 2015.
Growth of Wealth Management Business. Our wealth assets under management were $8.6 billion at December 31, 2016, reflecting an increase of $1.2 billion, or 16%, from December 31, 2015. We added an additional $850 million of assets under management when we acquired Standard Bank & Trust Company in January 2017 and Premier Asset Management LLC in February 2017.
Growth of Fee-Based Revenues. Continued to diversify our revenues by growing fee-based revenues to $145.1 million, an increase of 14% from December 31, 2015 and three-year growth of 31%.
M&A Activity. Completed the acquisition of National Bank & Trust Company ($700 million in assets). Also completed the acquisitions of Standard Bank & Trust Company on January 6, 2017 ($2.6 billion in assets) and Premier Asset Management on February 28, 2017 ($550 million of assets under management).
Sale-Leaseback. Completed a sale-leaseback of 55 of our branches for a purchase price of $150 million, which resulted in an initial pre-tax gain of almost $90 million and which will add approximately $50 million of tier 1 capital upon our adoption of recent FASB leasing guidance.
Significant Investment in our Leadership. In 2016, we welcomed several new executive and senior level leaders and added over 450 new colleagues through both organic and M&A growth. Our new executive team members add talent with new perspectives and experience in operating in larger, more diverse businesses.
For a reconciliation of the GAAP and non-GAAP financial measures discussed above, which includes earnings, earnings per share and return on average tangible common equity (ROATCE), in each case excluding certain significant transactions, see our Form 10-K filed with the SEC on February 28, 2017.
2017 Compensation
Given the significant growth of the Company and its transition to an institution having more than $10 billion in assets operating within a heightened regulatory regime, the Compensation Committee determined, at its meeting in February 2017, to make modest adjustments to the 2017 base salaries of certain members of senior management to align compensation with market practices for similarly-sized organizations and to reflect the increased nature and scope of position responsibilities that accompany a larger and a more complex and diverse organization. In addition, our Chief Executive Officer and Chief Operating Officer recommended that any compensation based on their individual performance ratings should be based entirely on corporate performance, and our Compensation Committee concurred with this recommendation. Accordingly, for 2017 compensation purposes, the annual cash incentive awards and restricted stock awards of our Chief Executive Officer and our Chief Operating Officer, which were based, in part, on individual performance ratings, instead will now be based entirely on Company performance. The Committee believes this change is appropriate because the individual performance of the CEO and the COO is already closely aligned with the overall performance of the Company and because it will drive even greater focus on maximizing the Company’s financial performance.


45


Total Stockholder Return
In addition to the achievements noted above, we created long-term stockholder value in 2016. The table below reflects our one-, three- and five-year TSR as compared to the average TSR for our 2016 peer group and the NASDAQ Bank Index (the Company is included in this index):
fmbi2016chart.jpg
As described more fully below under Compensation Discussion and Analysis—Peer Group , at its November 2016 meeting, our Compensation Committee approved various changes to our peer group for 2017.
Stockholder Say-on-Pay Vote in 2016
Our Compensation Committee reviews the annual advisory vote on executive compensation when designing our executive compensation program and setting executive compensation levels. With respect to compensation decisions in 2016 (and in 2017), the Compensation Committee considered the say-on-pay approval by 93% of the votes cast at our 2016 annual meeting of stockholders.
Although the Compensation Committee believes these vote results confirm that our stockholders are in agreement with our approach to executive compensation, the Compensation Committee annually evaluates our compensation program and our compensation disclosure practices in an effort to confirm that our pay and performance are linked and that our compensation practices are clearly disclosed.
Our Compensation Committee intends to consider the vote results from this year, and future advisory votes, when determining the design and amounts provided under our executive compensation program.
Recent Program Enhancements
Double Trigger Vesting for Equity Awards .  Beginning in 2016, our Compensation Committee determined that performance share, restricted stock and restricted stock unit awards will have a double trigger vesting feature in the event of a change-in-control of the Company. As such, both a change-in-control of the Company and a termination of employment by either the executive for good reason or an acquirer without cause within 24 months following the change-in-control must occur in order for the unearned or unvested equity awards to vest. We already maintain a double trigger requirement following a change-in-control for enhanced severance payments to be made to our named executive officers, and we intend to continue this practice.
Increased Executive Stock Ownership Guidelines .  Beginning in 2017, and based on a recommendation from our Chief Executive Officer and our Chief Operating Officer, our Compensation Committee determined that the


46


stock ownership guidelines should be increased from three-times to five-times base salary for our CEO and from two-times to three-times base salary for our COO.
Our Compensation Philosophy
Our Compensation Committee has designed a compensation program that promotes a pay-for-performance environment intended to create stockholder value as well as encourage and reward the Company’s short-term and long-term financial success and the achievement of performance goals established by the Compensation Committee at the beginning of each performance period. As such, a significant portion of the compensation of our executive officers (including our named executive officers) is at-risk compensation, with the amount of compensation that can be earned tied to the attainment of pre-determined performance goals and the long-term value of our Common Stock. The Committee selects performance goals that it believes are correlated to the creation of stockholder value.
Our Compensation Committee also believes that our compensation program must be market competitive to attract and retain skilled and motivated executives who can successfully grow and manage our business in an increasingly competitive and regulated environment. Adherence to this philosophy forms the overall premise for our executive compensation program and is based on the compensation principles set forth below.
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Executive compensation should be performance-based and reward achievement of corporate objectives .
Our compensation program for our named executive officers (and our other executive officers) should motivate and reward superior performance, and should be weighted toward achievement of corporate financial metrics that further our strategic priorities and that we believe will build stockholder value.
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A significant portion of executive compensation should be in the form of equity awards that encourage long-term value creation for stockholders .
Equity compensation tied to long-term performance further aligns executive management and stockholder interests. Equity compensation also focuses management on long-term value creation rather than taking risks to increase short-term compensation. Additionally, our named executive officers are required to maintain significant levels of stock ownership in the Company, which the Compensation Committee believes further aligns our named executive officers with the long-term interests of our stockholders.
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Executive compensation should reflect an appropriate balance of fixed, incentive and at-risk equity compensation .
Our Compensation Committee believes that executive compensation should be comprised of base salary, incentive compensation (both cash and stock) and long-term equity. This composition mix results in appropriate levels of fixed, incentive and at-risk compensation, and encourages achievement of both short-term and long-term performance objectives.
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Executive compensation should be market-competitive .
Vital to our continued success and growth is an experienced and dedicated management team. All elements of our compensation program should be competitive within the markets in which we compete for talent as well as for an organization of our size and level of complexity. Our Compensation Committee strives to provide compensation at levels that will enable us to attract and retain qualified, committed and high-performing executives who are able to successfully manage our Company now and as it continues to grow.


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Executive compensation should have a retention effect .
Our executive compensation program should be structured to enable us to retain high-performing executives and avoid undesirable management turnover. To encourage retention, a significant component of our compensation consists of long-term equity compensation, a portion of which is tied to a three-year performance period followed by a two-year continued service vesting period and a portion of which is subject to a three-year continued service vesting schedule.
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Executive compensation should not encourage excessive risk-taking .
Our Compensation Committee annually reviews the risks and rewards associated with our compensation program to assure that our program appropriately incentivizes our executive officers to attain corporate financial objectives without encouraging excessive risk-taking. In addition, we maintain stock ownership guidelines, caps on incentive payouts and clawback provisions that the Compensation Committee believes further mitigates excessive risk-taking.


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Compensation Best Practices
The Compensation Committee considers various compensation and corporate governance best practices when making executive compensation decisions, including the following:
What We Do
What We Don’t Do
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Double Trigger Vesting of Equity Awards Upon a Change-in-Control
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No Excise Tax Gross-ups
We do not pay our executives a tax gross-up in the event they incur an excise tax from severance benefits paid following a change-in-control.
For awards in 2016 and going forward. Requires both a change-in-control of the Company and an involuntary termination of the employee or a material reduction in job responsibilities.
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No Dividends Paid on Equity Awards Prior to Vesting
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Double Trigger for Severance Upon a Change-in-Control
We do not pay dividends on performance shares or restricted stock awards before they are earned and vested.
Requires both a change-in-control of the Company and an involuntary termination of the employee.
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No Share Recycling
Our Omnibus Stock and Incentive Plan does not permit recycling of shares.
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Capped Incentive Payouts
Payouts under our annual cash incentive compensation and performance-based equity compensation programs are capped at 175% and 200% of target, respectively.
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No Stock Option Repricing
Our Omnibus Stock and Incentive Plan prohibits repricing of stock options and stock appreciation rights, as well as cash buyouts or exchanges of underwater stock options, without stockholder approval.
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Clawback of Compensation
Employment agreements with our executive officers allow us to recover cash bonuses and other incentive compensation under certain circumstances.
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No Excessive Perquisites
Perquisites represent an immaterial portion of our executive compensation.
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Anti-Pledging and Anti-Hedging Policy
Prohibits our executive officers and all other employees from pledging, hedging or selling short shares of our Common Stock.
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Stock Ownership Guidelines
Robust stock ownership guidelines for our executive officers further align their interests with our stockholders’.