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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [ ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Empire Banc Corporation
- -------------------------------------------------------------------------------
(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):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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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.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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[EMPIRE BANC CORPORATION LOGO]
March 26, 1999
Dear Shareholders and Friends:
We are looking forward to seeing you at the annual meeting of shareholders
of Empire Banc Corporation to be held at 9:30 a.m. on Thursday, May 13, 1999, at
the Northwestern Michigan College Dennos Museum Center, 1701 East Front Street,
Traverse City, Michigan. A continental breakfast will be served beginning at
9:00 a.m.
Notice of the meeting and a proxy statement containing information relative
to the meeting follow this letter. We urge you to attend the meeting and welcome
your participation. Please check the appropriate box on the proxy card
indicating whether or not you will attend the meeting.
PLEASE BE SURE TO MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING SO THAT YOUR SHARES WILL BE VOTED.
If you do attend the meeting, there will be an opportunity for you to revoke
your proxy and vote in person if you prefer.
Sincerely,
JAMES E. DUTMERS, JR.
James E. Dutmers, Jr.
Chairman and Chief Executive Officer
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EMPIRE BANC CORPORATION
1227 East Front Street
Traverse City, Michigan 49686
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
THURSDAY, MAY 13, 1999
TO THE SHAREHOLDERS:
The annual meeting of shareholders of Empire Banc Corporation, a Michigan
corporation (the "Company"), will be held on Thursday, May 13, 1999 at 9:30
a.m., at the Northwestern Michigan College Dennos Museum Center, 1701 East Front
Street, Traverse City, Michigan, for the purpose of considering and voting on
the following matters:
(1) election of three (3) directors to serve until the annual meeting of
shareholders in 2002 and until their successors are duly elected and
qualified;
(2) transaction of such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on March 15, 1999, are
entitled to notice of and to vote at the meeting. A list of shareholders is
available for examination at the meeting.
By Order of the Board of Directors,
WILLIAM T. FITZGERALD, JR.
William T. Fitzgerald, Jr.
Secretary
Dated: March 26, 1999
Traverse City, Michigan
YOUR VOTE IS IMPORTANT. EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE
MARK, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS EXERCISED
AT THE ANNUAL MEETING BY NOTIFYING THE SECRETARY OF THE COMPANY OR THE CHAIRMAN
OF THE MEETING AT OR BEFORE THE MEETING. IF YOUR SHARES ARE HELD IN MORE THAN
ONE NAME, ALL PARTIES MUST SIGN THE PROXY CARD.
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EMPIRE BANC CORPORATION
1227 East Front Street
Traverse City, Michigan 49686
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Empire Banc Corporation (the "Company"), a
Michigan corporation, to be voted at the annual meeting of shareholders of the
Company to be held on Thursday, May 13, 1999, at 9:30 a.m. at the Northwestern
Michigan College Dennos Museum Center, 1701 East Front Street, Traverse City,
Michigan (the "Annual Meeting"), or any adjournment thereof, for the purposes
set forth in the accompanying Notice of the Annual Meeting.
The costs of soliciting proxies will be paid by the Company. Proxies may be
solicited by mail, in person, or by telephone by directors, officers, and
regular employees of the Company. These persons will not be specially
compensated for soliciting proxies. The Company will provide to all brokers,
dealers, banks, voting trustees, and other fiduciaries, copies of the proxy
statement and the accompanying proxy card for mailing to beneficial owners.
As of March 15, 1999, the record date for the Annual Meeting, there were
3,011,790 shares of common stock of the Company, no par stock. ("Common Stock")
issued and outstanding. Each outstanding share is entitled to one (1) vote on
each matter coming before the Annual Meeting. Shareholders do not have
cumulative voting rights with respect to the election of directors. The
transaction of business at the Annual Meeting requires the presence of a quorum,
which will be established by the presence or representation at the Annual
Meeting of a majority of the outstanding shares of Common Stock entitled to
vote. Shares as to which authority is withheld in the election of directors are
counted toward the establishment of a quorum. Directors are elected by a
plurality of the votes cast at the Annual Meeting, whether in person or by
proxy. Thus the three nominees who receive the greatest number of votes cast
will be elected directors, and shares as to which authority is withheld will
have no effect on the election of directors.
Proxies are revocable by the delivery of written notice of revocation to
the Secretary of the Company at any time before the proxy is exercised. The
signing of a proxy does not preclude a shareholder from attending the Annual
Meeting and voting in person. If the proxy is not marked with the shareholder's
instructions as to voting, the shares to which the proxy applies will be voted
for the nominees for directors named in this Proxy Statement. All proxies
returned before the Annual Meeting will be voted in accordance with the
instructions contained therein. All shareholders are encouraged to mark, date
and sign the enclosed proxy card and return it to the Company. This Proxy
Statement and the accompanying proxy card were first sent or given to
shareholders on approximately March 26, 1999.
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PRINCIPAL SHAREHOLDERS
The following table sets forth certain information, as of February 26,
1999, as to the Common Stock beneficially owned by each person known by the
Company to be the beneficial owner of more than five percent (5%) of the Common
Stock:
Amount and
Name and Nature of Percent
Address of Beneficial of
Beneficial Owner Ownership Class
---------------- ----------------- -------
James E. Dutmers, Jr. ...................................... 418,887 13.9
1227 East Front Street
Traverse City, MI 49686
The Empire National Bank
Employee Stock Ownership Plan............................... 372,394 12.4
1227 East Front Street
Traverse City, MI 49686
(1) Mr. Dutmers is Chairman and Chief Executive Officer of the Company. He has
sole voting power with respect to 416,078 shares and shared voting power
with respect to 2,809 shares. He has sole investment power with respect to
31,146 shares and shared investment power with respect to 87,417 shares. Of
the shares beneficially owned by Mr. Dutmers, 367,781 (or 12.2% of the
outstanding shares of Common Stock) are subject to a Voting Trust Agreement,
dated November 10, 1997, under which Mr. Dutmers is the sole trustee. As
trustee of the voting trust, Mr. Dutmers has the sole power to vote the
shares subject to the voting trust on all matters, including the election of
directors of the Company. Power to dispose of the shares of Common Stock
subject to the voting trust is vested in the shareholders who are parties to
the Voting Trust Agreement, subject to first being offered to the other
parties to the Voting Trust Agreement at fair market value. The Voting Trust
Agreement will terminate by its terms on May 30, 2004. The amount shown
excludes 33,327 shares covered by currently exercisable options held by Mr.
Dutmers.
(2) Shares are held for the benefit of participants in the plan. Each plan
participant is entitled to direct the plan's board of trustees as to the
exercise of voting rights attributable to shares allocated to his or her
account. As of March 15, 1999, 372,394 shares were allocated to
participants' accounts. The remaining shares, if any, are voted by the
plan's board of trustees comprised of James E. Dutmers, Jr., Robert L.
Israel, James M. Merenda, and William T. Fitzgerald, Jr. Messrs. Dutmers and
Israel are directors of the Company. All of the aforementioned persons are
officers of the Company.
ELECTION OF DIRECTORS
The Board of Directors is divided into three (3) classes, with the
directors in each class being elected for a term of three years and until their
successors are duly elected and qualified. The current terms of three (3)
directors will end with the Annual Meeting. Thus, shareholders will elect three
(3) directors at the Annual Meeting for terms ending at the annual meeting of
shareholders in 2002.
Except as otherwise indicated by shareholders on the proxy card, proxies
will be voted for election of the three (3) nominees named in the following
table. If a nominee becomes unable or unwilling to serve, proxies will be voted
for such other person, if any, as shall be designated by the Company's Board of
Directors. However, the Company's management does not anticipate that this will
occur.
The nominees, and the other current directors of the Company, except
Laurence P. Skendzel, M.D., Ronald G. Reffitt, Sr., and Deborah J. Knudsen, have
been directors of the Company since its formation in 1987. Mr. Reffitt and Mrs.
Knudsen became directors in 1994. Dr. Skendzel became a director in 1989. The
nominees and other current directors of the Company are also directors of the
Company's wholly owned subsidiary, Empire National Bank (the "Bank"), and have
been since the year shown in the following table. Also shown for each nominee
and the other current directors are his or her age, principal occupation or
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employment for the last five (5) years or more, and shares of Common Stock
beneficially owned as of February 26, 1999. The information is based in part on
information supplied by such persons.
Amount and Nature of Beneficial Ownership of
Common Stock(1)
------------------------------------------------------
Sole Voting Shared Voting
Name, Age and Director and/or and/or Percent of
Occupation for of Bank Investment Investment Common
Last 5 Years Since Power Power(2) Total Stock
-------------- ----------- ----------- ------------- ------- ----------
NOMINEES FOR DIRECTOR FOR THREE-YEAR TERMS ENDING IN 2002
Robert L. Israel.................... 1976 45,053(3) 28,188 73,241 2.4
Age 55
President and Chief Operating
Officer, Empire Banc Corporation and
Empire National Bank
John M. Rockwood, Jr.(5) ........... 1985 1,152 0 1,152 *
Age 55
President and Chief Executive
Officer, Munson HealthCare
Louis A. Smith(5)................... 1976 22,179 51,306 73,485 2.4
Age 59
Attorney, Smith & Johnson Attorneys,
P.C.
DIRECTORS NOT STANDING FOR ELECTION WHOSE TERMS END IN 2000
John R. Anderson.................... 1973 2,799 0 2,799 *
Age 71
Anderson, Gordon and Associates
Advertising and Public Relations
Don A. Good, M.D. .................. 1984 10,496 3,957 14,453 *
Age 60
Physician, Grand Traverse Obstetrics
and Gynecology, P.C.
Laurence P. Skendzel, M.D.(5)....... 1989 0 1,027 1,027 *
Age 68
Retired in 1994, formerly Physician,
Grand Traverse Pathology, P.C.
Deborah J. Knudsen(5)............... 1994 0 432 432 *
Age 48
President and Chief Executive
Officer
Traverse City Convention and
Visitors Bureau
DIRECTORS NOT STANDING FOR ELECTION WHOSE TERMS END IN 2001
James E. Dutmers, Jr. .............. 1976 390,573(3)(4) 28,314(4) 418,887 13.9
Age 55
Chairman and Chief Executive
Officer, Empire Banc Corporation and
Empire National Bank
Michael H. Dennos................... 1973 26,006 0 26,006 *
Age 78
Retired, Business Executive
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Amount and Nature of Beneficial Ownership of
Common Stock(1)
------------------------------------------------------
Sole Voting Shared Voting
Name, Age and Director and/or and/or Percent of
Occupation for of Bank Investment Investment Common
Last 5 Years Since Power Power(2) Total Stock
-------------- ----------- ----------- ------------- ------- ----------
Thomas G. McIntyre(5)............... 1981 7,747 10,325 18,072 *
Age 51
Chairman, Passageways/Carlson
Wagonlit Travel
Ronald G. Reffitt, Sr.(5) .......... 1994 11,400 0 11,400 *
Age 61
President, Peninsula Construction
and Supply, Inc.
(1) The numbers of shares presented include shares owned of record by each
person and shares which, under applicable regulations of the SEC, are deemed
to be beneficially owned by each person. Under these regulations, a
beneficial owner of a security includes any person, who, directly or
indirectly, through any contract, arrangement, understanding, relationship,
or otherwise has or shares voting power or investment power with respect to
the security. Voting power includes the power to vote or to direct the
voting of the security. Investment power includes the power to dispose or to
direct the disposition of the security.
(2) The numbers of shares presented include shares as to which the indicated
person is legally entitled to share voting and/or investment power by reason
of joint ownership, trust, or other contract or property right, and, in some
instances, shares held by spouses and minor children over whom the indicated
person may have substantial influence by reason of relationship.
(3) The amounts shown exclude 33,327 and 33,327 shares covered by currently
exercisable options held by Mr. Dutmers and Mr. Israel, respectively.
(4) 367,781 shares are subject to a Voting Trust Agreement, dated November 10,
1997, of which Mr. Dutmers is the sole voting trustee. The terms of the
voting trust are described in Note (1) on page 2 of this Proxy Statement.
(5) The named director's account under the Directors' Deferred Compensation and
Stock Investment Plan (the "Director Plan," see "Director Compensation,"
page 11) is credited with units subsequently payable in an equal number of
shares of Common Stock as follows: Mrs. Deborah J. Knudsen, 2,832 units; Mr.
Ronald G. Reffitt, Sr., 1,914 units; Mr. John M. Rockwood Jr., 2,628 units;
Dr. Laurence P. Skendzel, M.D., 1,132 units; Mr. Thomas G. McIntyre, 490
units; and Mr. Louis A. Smith 1,947 units.
* Less than one percent (1%).
As of February 26, 1999, all directors and executive officers of the
Company as a group (consisting of 16 persons) owned 799,841 shares of Common
Stock or 26.6 percent of the outstanding Common Stock. This amount excludes
178,264 shares covered by currently exercisable options held by executive
officers of the Company. As of February 26, 1999, the following executive
officers of the Company owned the following numbers of shares of Common Stock,
excluding shares covered by currently exercisable options held by them: William
T. Fitzgerald, Jr., 45,837 shares; James M. Merenda, 26,321 shares; Bruce W.
Reavely, 31,054 shares; and Daniel G. Stoudt, 43,844 shares.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held eight (8) meetings in 1998. All
directors except Messrs. Dennos and Rockwood attended at least seventy-five
percent (75%) of the aggregate of these meetings and the meetings of all
committees of which they were members.
The Bank's Board of Directors has an Audit Committee. The Committee is
comprised of Messrs. Anderson, Rockwood, Skendzel, Smith and Mrs. Knudsen. The
Audit Committee determines whether adequate internal controls are being
maintained. It meets with the Bank's independent auditors to review internal
controls, procedures of the Bank, the scope of internal audits, the financial
position of the Bank, and external audits of the Bank.
The Company has a Nominating and Compensation Committee, which is also the
same committee for the Bank. The Committee is comprised of Messrs. Smith,
Anderson and Good, and it met one (1) time in 1998. The Nominating and
Compensation Committee is responsible for setting and administering the policies
which govern annual compensation and incentive programs. In addition, it reviews
all executive compensation and benefit programs from time to time available to
executive officers of the Company and to all officers and staff of the Bank. In
this respect, the Committee makes recommendations to the Board of Directors with
respect to the compensation of the Chief Executive Officer and the President, as
well as reviewing and approving the Chief Executive Officer's and the
President's recommendations for other executive officers of the Company (see
"Compensation Committee Report on Executive Compensation," below). The
Nominating and Compensation Committee will consider recommendations of nominees
for election to the Board of Directors of the Company proposed by shareholders.
Timely consideration by the Nominating and Compensation Committee of any such
recommendation requires submission of the recommendation to the Company's
Secretary by February 14, 2000 and no earlier than December 16, 1999.
The Bank's Board of Directors has a Trust Audit Committee. The Committee
consists of Messrs. Anderson, Dennos, Rockwood and Mrs. Knudsen. The Trust Audit
Committee examines audits of the Trust Department and determines if adequate
internal controls are being maintained in the Trust Department.
The Bank's Board of Directors has a Trust Administrative Committee. The
Committee is comprised of Messrs. Good, McIntyre, Reffitt, Skendzel, Smith,
Dutmers and Israel. The Trust Administrative Committee reviews the policies and
activities of the Trust Department.
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EXECUTIVE COMPENSATION
The following table presents, for the fiscal years shown, the annual,
long-term and other compensation paid to or accrued for the Company's Chief
Executive Officer and the Company's other executive officers, whose 1998 salary
and bonus exceeded $100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY $(1) BONUS $ COMPENSATION $(2)
- ---------------------------------------------------------------------------------------------------------
James E. Dutmers, Jr. 1998 237,154 91,124 17,360
Chairman and Chief Executive Officer 1997 229,196 83,489 16,964
1996 210,710 58,034 15,845
Robert L. Israel 1998 210,059 80,581 15,047
President and Chief Operating 1997 202,671 73,830 14,697
Officer 1996 186,611 51,320 13,708
William T. Fitzgerald, Jr. 1998 115,615 34,406 8,346
Vice President and Secretary/ 1997 109,885 30,847 8,005
Treasurer 1996 100,769 21,457 7,457
James M. Merenda 1998 115,615 34,406 8,434
Vice President 1997 109,885 30,847 8,091
1996 100,769 21,457 7,544
Bruce W. Reavely 1998 115,615 34,406 8,157
Vice President 1997 109,885 30,847 7,815
1996 100,769 21,457 7,268
Daniel G. Stoudt 1998 115,615 34,406 8,126
Vice President 1997 105,808 29,703 7,783
1996 100,769 21,457 7,346
(1) Includes director fees for Mr. Dutmers of $7,500, $6,600 and $6,300 for
1998, 1997 and 1996, respectively, and for Mr. Israel $6,975, $6,600 and
$5,850 for 1998, 1997 and 1996, respectively, (see "Director Compensation,"
page 11).
(2) The amounts shown for 1998 include the following: (i) combined matching and
other employer contributions made for the account of the named person by the
Bank to its Savings and Investment Retirement Plan ("Savings Plan"), a
401(k) plan for all employees, and to the Bank's Supplemental Executive
Retirement Plan (the "Supplemental Plan") as described on page 7 of this
Proxy Statement; (ii) combined contributions made by the Bank to its
Employee Stock Ownership Plan ("ESOP") for all employees and to the
Supplemental Plan for the account of the named person; and (iii) term life
insurance premiums paid on behalf of the named person, as follows:
NAME SAVINGS PLAN ESOP TERM LIFE
---- ------------ ---- ---------
James E. Dutmers, Jr. .............................. $6,890 $6,890 $3,581
Robert L. Israel.................................... 6,093 6,093 2,862
William T. Fitzgerald, Jr. ......................... 3,468 3,468 1,410
James M. Merenda.................................... 3,468 3,468 1,498
Bruce W. Reavely.................................... 3,468 3,468 1,221
Daniel G. Stoudt.................................... 3,468 3,468 1,190
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The following table presents information about stock options and stock
appreciation rights ("SARs") exercised during 1998 and held by the Named
Executive Officers at December 31, 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
NUMBER OF SHARES OPTIONS/SARS AT OPTIONS/SARS AT
UNDERLYING FISCAL YEAR END (#) FISCAL YEAR END ($)
OPTIONS/SARS VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISED (#) REALIZED(1) UNEXERCISABLE UNEXERCISABLE(2)
---- ---------------- ----------- --------------------- -------------------
James E. Dutmers, Jr. ............. 5,625 $222,535 55,602/0 $1,816,640/0
Robert L. Israel................... 21,924 866,739 70,265/0 2,316,073/0
William T. Fitzgerald, Jr. ........ 5,250 208,158 52,823/0 1,746,749/0
James M. Merenda................... 2,648 104,991 52,823/0 1,746,749/0
Bruce W. Reavely................... 3,930 155,821 52,823/0 1,746,749/0
Daniel G. Stoudt................... 9,712 393,121 41,160/0 1,349,502/0
(1) The value realized is based on the difference between the market bid price
of the shares underlying the options and SARs on the date of exercise and
the exercise and base price of the option and SARs, respectively.
(2) The value shown is based on the market bid price of the Common Stock on
December 31, 1998 of $39.50 net of the option exercise price and SAR base
price.
The Bank has adopted the Empire National Bank Employees Pension Plan (the
"Pension Plan"). The Pension Plan is non-contributory and covers full-time
employees who are age 21 or over and have at least one year of service. The
Pension Plan provides a normal retirement benefit at age 65 dependent upon final
average compensation and years of service. The final average compensation is the
highest average of a participant's base salary for any five (5) years in the
participant's last ten (10) years of employment.
The Bank has also adopted an unfunded, non-qualified Supplemental Executive
Retirement Plan (the Supplemental Plan) under which supplemental pension
benefits are to be paid upon retirement to certain executive officers covered by
the Pension Plan, including the Named Executive Officers. Under the Supplemental
Plan, a target benefit is established as a percentage of a participant's total
compensation (salary plus bonus as shown in the Summary Compensation Table,
above), depending on retirement age and years of service. Among other things,
the Supplemental Plan provides a benefit otherwise denied because of certain
limitations under the Internal Revenue Code on benefits for executive officers
and on their deferrals under the Savings Plan.
The benefits shown in the table below, based at age 65 and on years of
credited service, are combined benefits under the Pension Plan and the
Supplemental Plan on a straight life annuity basis before reduction for social
security and the actuarial equivalent of the participant's account balance,
under a profit sharing plan formerly maintained by the Bank. Actual benefits may
be reduced based on target retirement age benefit levels. Current compensation
covered under the two plans combined for the Named Executive Officers is shown
in the "Salary" and "Bonus" columns of the Summary Compensation Table.
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PENSION PLAN TABLE
YEARS OF CREDITED SERVICE
--------------------------------------------
REMUNERATION 20 25 30 35
------------ -- -- -- --
$100,000........................................ $ 40,000 $ 50,000 $ 55,000 $ 60,000
150,000........................................ 60,000 75,000 82,500 90,000
200,000........................................ 80,000 100,000 110,000 120,000
250,000........................................ 100,000 125,000 137,500 150,000
300,000........................................ 120,000 150,000 165,000 180,000
350,000........................................ 140,000 175,000 192,500 210,000
400,000........................................ 160,000 200,000 220,000 240,000
450,000........................................ 180,000 225,000 247,500 270,000
The years of credited service for the individuals named in the Summary
Compensation Table above are as follows: Mr. Dutmers, 19; Mr. Israel, 23; Mr.
Fitzgerald, 22; Mr. Merenda, 16; Mr. Reavely, 15; and Mr. Stoudt, 22.
MANAGEMENT CONTINUITY AGREEMENTS
The Company has entered into individual Management Continuity Agreements
with executive officers of the Company, including the Named Executive Officers.
Each Management Continuity Agreement provides that in the event of a change in
control of the Company, the employment of the officer who is a party to the
Agreement may not be terminated except for cause during the five-year period
following an agreement that will result in the change in control. During the
five-year period, the Company may not, without the officer's agreement, reduce
the officer's salary, bonus or benefits, change his responsibilities, or
materially change his principal place of employment. In the event the officer's
employment is terminated by the Company or the officer resigns following one or
more of the actions by the Company described in the preceding sentence without
his agreement, the officer is entitled to one hundred thirty three percent
(133%) of his regular salary payments and inclusion in employee benefit plans
for the greater of three (3) years following the termination of employment or
the remainder of the five-year period. The Agreements provide that payments to
the officers based on a percentage of regular salary payments will be reduced by
an amount necessary to eliminate certain penalty taxes otherwise payable by the
officer, if such reduction results in greater after tax payments to the officer.
Such reduction will also increase the corresponding deduction to which the
Company is entitled. While the amount of any benefits from the Management
Continuity Agreements will be dependent on salary levels and other factors and
events occurring in the future, the current annual salary levels for the Named
Executive Officers covered by the Agreements are as follows: Mr. Dutmers,
$241,564; Mr. Israel, $213,615; Mr. Fitzgerald, $125,000; Mr. Merenda, $125,000;
Mr. Reavely, $125,000; and Mr. Stoudt, $125,000.
The Company's purpose for entering into these Agreements with the executive
officers selected is to provide financial security to those officers following a
change in control of the Company and to provide an additional current inducement
for them to remain employed by the Company. With continuation of their
employment being reasonably assured, these officers may be in a better position
to act, with respect to a possible change in control of the Company, for the
benefit of the Company and its shareholders without concern about their own
financial security.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Nominating and Compensation Committee of the Board of Directors of the
Company (the "Committee") is comprised entirely of non-employee directors. The
Committee is responsible for setting and administering the policies which govern
annual compensation and incentive programs. In addition, it reviews all
executive compensation and benefit programs from time to time available to
executive officers of the Company and to all employees of the Bank. In this
respect, the Committee makes recommendations to the Board of Directors with
respect to the compensation of the Chief Executive Officer and the President, as
well
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as reviewing and approving the Chief Executive Officer's and the President's
recommendations for other executive officers of the Company.
The annual compensation programs of the Company are tied to the Company's
performance. The executive compensation program is comprised of base salaries
plus a performance leveraged, short-range and long-range incentive system, which
will pay executive officers more for better performance. In evaluating its
executive officers' performance and determining their compensation, the
Committee evaluates the performance of Empire Banc Corporation and Empire
National Bank, focusing on specific corporate financial performance goals, as
well as comparisons to industry peer groups.
In determining base salaries, including that of the Chief Executive
Officer, the Committee evaluates corporate and executive performance. The
Committee reviews a number of factors, both financial and qualitative. While no
single factor by itself is considered the key to overall corporate performance,
ratings are heavily dependent upon the previous year's achievement of the
pre-established financial objectives. The Committee also assesses the executive
officer's individual performance based on specific strategic objectives and
qualitative factors such as strategic planning, organizational and management
development progress, quality of regulatory examinations by the Office of the
Comptroller of the Currency and the Federal Reserve, and community and civic
involvement. Salaries are also based on a comparison to industry peer salaries.
The short-term incentive or Profit Sharing Incentive Award ("PSIA"),
established in 1984, is a cash bonus program based upon a performance formula
approved by the Board of Directors. All Bank employees and executive officers of
the Company, including the Chief Executive Officer, are eligible to participate
in the PSIA program. In establishing the PSIA formula, the Board of Directors
chose performance criteria which should lead to long-term growth in the stock
price of the Company. The formula currently requires the Company to exceed all
pre-established targets for return on average assets, return on average equity
and an annual increase in profits before any bonus payments are made. The
pre-established minimum target for each performance criteria was determined
based upon peer performance, industry performance, and desired Company
performance levels. The Committee has concluded that the specific targets for
performance are confidential business information the disclosure of which would
adversely affect the Company. The total amount of PSIA awards to be granted to
all employees and executive officers of the Company is determined by the amount
net income exceeds the pre-established target levels for return on assets,
return on average equity and the annual increase in profits.
The amounts of individual awards granted to all Bank employees and
executive officers of the Company, including the Chief Executive Officer, are
also based upon a pre-established formula for allocating the total amount of the
PSIA pool available for awards. This allocation formula is determined by the
total amount of awards to be granted as a percentage of eligible compensation
and relative responsibility and accountability of the employee or executive
officer.
The long-term incentive utilized is the Empire Banc Corporation Stock
Option Plan. The Plan encompasses a series of stock options, and tandem stock
appreciation rights granted from years 1988 through 1993. Participants include
the Chief Executive Officer and all executive officers of the Company. The Plan
was approved by the shareholders of the Company in 1988 with a limited amendment
approved in 1993. Each option period is for ten (10) years and one (1) day, and
granted options only become vested over a five year period. (No options or SARs
were granted to the Named Executive Officers in 1998). The maximum number of
shares authorized by the Plan were previously granted. The number of shares
covered by unexercised options and SARs held by the Named Executive Officers are
shown in the table above titled "Aggregated Options/SAR Exercises in Last Fiscal
Year and FY-End Optional SAR Values." In the opinion of the Committee and the
Board of Directors, the Plan promotes the alignment of management and
shareholder interests and will result in executive officers of the Company being
sufficient shareholders to encourage long-term performance and Company growth.
The Committee meets without the Chief Executive Officer and President to
evaluate their performance and reports on that evaluation to the Board of
Directors of the Company.
9
13
With respect to Mr. Dutmers, the Company's Chairman and Chief Executive
Officer, the Committee determined his salary and annual cash bonus for 1998
based on the same factors and analyses as considered by the Committee in
determining the compensation of all other executive officers. These factors and
analyses are described above. The Chief Executive Officer's final performance
rating is a composite of all relevant factors. It also reflected the Committee's
positive assessment of Mr. Dutmers' leadership of the Company based on the
qualitative factors described above. Mr. Dutmers' cash bonus for 1998 was
determined by the PSIA formula described above and reflected the Company's 1998
financial performance, which exceeded the pre-established goals for return on
average assets, return on equity and the increase in annual profits.
Submitted by the Compensation Committee of the Board of Directors.
Louis A. Smith, Chairman Don A. Good, M.D. John R. Anderson
PERFORMANCE GRAPH
The following line graph compares cumulative, five-year total shareholder
return of the Common Stock, assuming reinvestment of dividends, with the NASDAQ
Market Index (a broad equity market index) and the Media General Industry
Group-Midwest Banks index (a published industry index).
REGIONAL MIDWEST
NASDAQ COMPOSITE BANKS EBC
---------------- ---------------- ---
'1993' 100.00 100.00 100.00
'1994' 104.99 99.02 104.21
'1995' 136.18 144.12 150.13
'1996' 169.23 192.54 193.09
'1997' 207.00 328.65 273.22
'1998' 291.96 364.62 361.04
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1993 1994 1995 1996 1997 1998
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NASDAQ COMPOSITE 100.00 104.99 136.18 169.23 207.00 291.96
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REGIONAL MIDWEST BANKS 100.00 99.02 144.12 192.54 328.65 364.62
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EBC 100.00 104.21 150.13 193.09 273.22 361.04
- ----------------------------------------------------------------------------------------------------
10
14
DIRECTOR COMPENSATION
Non-management directors of the Bank are paid an annual retainer of $7,000.
All directors of the Bank and the non-management directors of the Company are
compensated at a rate of $600 per directors' meeting attended. Non-management
directors are compensated at a rate of $400 per committee meeting attended.
Currently, Empire Banc Corporation offers directors the opportunity to
defer receipt and income taxation of meeting fees and retainer fees through the
Empire Banc Corporation Directors' Deferred Compensation Plan (the "Director
Plan").
Under the Director Plan, meeting fees may be deferred by crediting the
amount payable to an account (a "Cash Reserve Account") which receives earnings
based on the Company's average earning asset rate as reported in the annual
report to shareholders for the immediately preceding year. Also, under the
Director Plan, meeting fees and/or retainer fees may be deferred by crediting an
account (a "Stock Reserve Account") with a number of units equal to 110% of the
amount of retainer fees divided by the market price of the Common Stock on the
day when the fees are paid. Units are also credited to the Stock Reserve Account
as dividends are paid on Common Stock in an amount equal to the dividend rate
per share multiplied by the number of units in the Stock Reserve Account divided
by the market price of the Common Stock on the date dividends are paid to
shareholders. Cash Reserve Account balances are paid in cash and Stock Reserve
Account balances are paid in shares of Common Stock equal to the number of units
credited to the Stock Reserve Account. In general, these payments will be made
upon the earliest of reaching age 65, retirement, total and permanent disability
or death. A director may, however, defer payment past reaching age 65 until the
earliest of retirement, total and permanent disability or death by an
appropriate election under the Director Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Bank had during 1998, and expects to have in the future, banking
transactions in the ordinary course of its business with the Company's directors
and officers, and members of their families and organizations with which they
are associated, on substantially the same terms, including interest rates and
collateral on loans, as those prevailing at the same time for comparable
transactions with others. These transactions did not involve more than the
normal risk of collectability or present other unfavorable features. During
1998, the Bank paid $126,820.16 to the firm of Smith & Johnson Attorneys, P.C.,
of which Director Louis A. Smith is a shareholder.
INDEPENDENT AUDITORS
The firm of Crowe, Chizek and Company examined and certified the financial
statements of the Company and the Bank for the year ended December 31, 1998.
Crowe, Chizek and Company have been the independent auditors for the Bank since
1982 and for the Company since its formation in 1987. The Board of Directors of
the Company has selected Crowe, Chizek and Company to act as the Company's
independent auditors for the calendar year 1999.
A representative of Crowe, Chizek and Company is expected to be present at
the Annual Meeting to respond to appropriate questions from shareholders and to
make any comments deemed appropriate.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and certain officers, and persons who own more than ten percent (10%)
of the Company's Common Stock to file with the SEC initial reports of beneficial
ownership and reports of changes of beneficial ownership of Common Stock. These
officers, directors and greater than ten-percent (10%) shareholders are required
by SEC regulation to furnish the Company with copies of these reports.
11
15
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the two fiscal years ended December 31, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent (10%) beneficial owners were complied with.
OTHER MATTERS
The Board of Directors knows of no matters to be presented for
consideration at the Annual Meeting other than the matters described herein.
Should any other matter properly come before the Annual Meeting, the persons
named as proxies in the accompanying proxy card will vote on such matters in
accordance with their discretion.
ADDITIONAL INFORMATION
The financial statements of the Company, supplementary financial
information, and management's discussion and analysis of operations for the
fiscal year ended December 31, 1998 are included in the Company's 1998 Annual
Report to Shareholders delivered with this Proxy Statement.
The Company files an Annual Report on Form 10-K with the Securities and
Exchange Commission. A COPY OF THE FORM 10-K REPORT FOR THE YEAR ENDED DECEMBER
31, 1998 IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST OF ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT IS ADDRESSED FROM
WILLIAM T. FITZGERALD, JR., SECRETARY, EMPIRE BANC CORPORATION, 1227 EAST FRONT
STREET, TRAVERSE CITY, MICHIGAN 49686.
SHAREHOLDER PROPOSALS
Shareholder proposals must be received by the Company no later than
November 29, 1999, to be considered for possible inclusion in the proxy
materials relating to the next annual meeting of shareholders.
By Order of the Board of Directors,
WILLIAM T. FITZGERALD, JR.
William T. Fitzgerald, Jr.
Secretary
Dated: March 26, 1999
Traverse City, Michigan
12
16
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EMPIRE BANC CORPORATION
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
EMPIRE BANC LOGO
I(we), the undersigned shareholder(s) of Empire Banc Corporation (the
"Company") appoint John R. Anderson and Laurence P. Skendzel, or any one of
them (with full power of substitution) to vote all the common stock of the
Company, standing in my (our) name(s) on the books of the Company on March
15, 1999, at the annual meeting of shareholders to be held at the
Northwestern Michigan College Dennos Museum Center, 1701 East Front Street,
Traverse City, Michigan, on Thursday, May 13, 1999, at 9:30 a.m., and any
adjournments thereof with all the powers I would possess if personally
present as follows:
(1) Election of Directors [ ] FOR all nominees below
(except as marked to the contrary [ ] WITHHOLD AUTHORITY to
below) vote for all nominees listed below
To withhold authority to vote for any individual, mark FOR above and
strike out the name below.
Robert L. Israel John M. Rockwood, Jr. Louis A. Smith
(2) To transact such other business as may properly come before the
meeting and any adjournment thereof.
(continued on reverse side)
17
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The Board of Directors recommends shareholders vote "FOR" the nominees
named above. If NO SPECIFIC VOTE IS GIVEN, THE PROXY WILL BE VOTED "FOR" ALL
NOMINEES. If any other business is presented at the meeting, this proxy
shall be voted IN THE DISCRETION OF THE PROXIES with respect to such
business. All shares represented by properly executed proxies will be voted
as directed. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS and
may be revoked before its exercise by either written notice or notice in
person at the meeting or by a subsequently dated proxy. The undersigned
hereby acknowledges receipt of a Notice and Proxy Statement, each dated
March 26, 1999, for the Annual Meeting of Shareholders of the Company called
for May 13, 1999.
Dated , 1999
-------------------------------
(signature(s) of
shareholder(s))
-------------------------------
(signature(s) of
shareholder(s))
I(we) [ ] will [ ] will not
attend the meeting.
OUR RECORDS INDICATE THAT THE
PERSON(S) ON THE ATTACHED LABEL
SHOULD SIGN THE PROXY. WHEN
SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE
AS SUCH. IF MORE THAN ONE
TRUSTEE, ALL SHOULD SIGN. ALL
JOINT OWNERS MUST SIGN.