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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 [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[x] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FIRSTMERIT CORPORATION
(f/k/a First Bancorporation of Ohio)
(Name of Registrant as Specified in Its Charter)
KEVIN C. O'NEIL, BROUSE & MCDOWELL, 500 FIRST NATIONAL TOWER, AKRON, OHIO 44308
(216) 535-5711
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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 transactions 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 0-11:1
(4) Proposed maximum aggregate value of transaction:
[x] 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: $125
(2) Form, schedule or registration statement no.: Preliminary proxy statement
(3) Filing party: FirstMerit Corporation
(4) Date filed: February 15, 1995
________________________
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
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FIRSTMERIT CORPORATION
III Cascade Plaza
Akron, Ohio 44308
February 28, 1995
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders to
be held on Wednesday, April 12, 1995 at 10:00 A.M. at a new location, the Akron
West Hilton Inn, 3180 West Market Street, Akron, Ohio 44333. This will be our
first Shareholder Meeting since the change of our name from "First
Bancorporation of Ohio" to "FirstMerit Corporation."
The election of directors will take place at the Annual Meeting. This year
we will elect five Class I Directors whose terms will expire at the 1998 Annual
Meeting. You will also be asked to consider and approve two proposals dealing
with updating the form and type of indemnification for the directors and
officers of FirstMerit. Enclosed with this letter is a Notice of Annual Meeting
together with a Proxy Statement which contains information with respect to the
nominees as well as the other directors who will continue in office.
It is important that your shares be voted, and we hope that you will be
able to attend the Annual Meeting. We urge you to execute and return the
enclosed form of proxy as soon as possible, whether or not you expect to attend
the Annual Meeting in person.
Sincerely,
Howard L. Flood
President and Chief Executive
Officer
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FIRSTMERIT CORPORATION
III Cascade Plaza
Akron, Ohio 44308
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 12, 1995
The Annual Meeting of Shareholders of FirstMerit Corporation, an Ohio
corporation ("FirstMerit"), will be held at the Akron West Hilton Inn, 3180 West
Market Street, Akron, Ohio 44333, on Wednesday, April 12, 1995, at 10:00 A.M.
(local time), for the following purposes:
1. To elect five Class I Directors and to fix the number of directors at
18;
2. To approve the amendment of Article Sixth of the Amended and Restated
Articles of Incorporation regarding indemnification of the directors and
officers of FirstMerit;
3. To approve the form and use of indemnification agreements for directors
of FirstMerit; and
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on February 10,
1995, as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting. All shareholders are cordially
invited to attend the meeting in person. Whether or not you expect to attend the
meeting in person, please fill in, date, sign and return the enclosed Proxy
Card.
By Order of the Board of Directors,
Terry E. Patton
Secretary
Akron, Ohio
February 28, 1995
THE 1994 ANNUAL REPORT TO SHAREHOLDERS ACCOMPANIES THIS NOTICE
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FIRSTMERIT(R) CORPORATION
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of FirstMerit Corporation, an Ohio corporation
("FirstMerit" or "Company") of the accompanying proxy to be voted at the Annual
Meeting of Shareholders to be held on Wednesday, April 12, 1995, at 10:00 A.M.
(local time), and at any adjournment thereof. Shares represented by duly
executed proxies in the accompanying form received by the Board of Directors
prior to the meeting will be voted at the meeting. A shareholder who signs and
returns a proxy in the accompanying form may revoke it prior to or at the
meeting by giving notice to the Secretary. FirstMerit is a registered trademark
of the Company.
The close of business on February 10, 1995, has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the meeting. On that date FirstMerit had outstanding 33,330,380 shares of common
stock, no par value per share ("Common Stock"), each of which is entitled to one
vote. For information concerning principal shareholders, see the section headed
"Principal Shareholders" below.
The mailing address of the principal executive offices of FirstMerit is III
Cascade Plaza, 7th Floor, Akron, Ohio 44308, telephone number (216) 384-8000.
This Proxy Statement, together with the related Proxy Card and FirstMerit's 1994
Annual Report to Shareholders, is being mailed to the shareholders of FirstMerit
on or about February 28, 1995.
Under Ohio law and FirstMerit's Amended and Restated Articles of
Incorporation, as amended ("Articles") and its Code of Regulations
("Regulations"), if a quorum is present at the meeting, the nominees for
election as directors who receive the greatest number of votes cast for the
election of directors at the meeting by the shares present in person or by proxy
and entitled to vote will be elected directors. An abstention from voting any
share with respect to the election of any nominee for director will have the
practical effect of a vote against that nominee. A broker non-vote with respect
to any share will not affect the election of directors, since the share is not
considered present for voting purposes.
The second and third proposals must be approved by the affirmative vote of
the holders of FirstMerit's Common Stock, voting as a class, by two-thirds and a
majority, respectively. An abstention from voting any share with respect to
these proposals will have the practical effect of a vote against the proposals.
A broker non-vote will also have the effect of a vote against the proposals,
since the adoption of these proposals is determined on the basis of outstanding
shares, rather than shares present at the meeting in person or by proxy.
ELECTION OF DIRECTORS
Five Class I directors are being nominated and are to be elected at this
Annual Meeting of Shareholders. In addition, the shareholders are being asked by
the Board of Directors, pursuant to Article III, Section 2 of the FirstMerit
Regulations, to fix the total number of directors at 18, increased from 16,
which was fixed by the shareholders in 1993.
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There currently does not exist any vacancy on the Board of Directors. As a
matter of corporate policy, the Board believes it is important to maintain
vacancies on the Board. This would allow a majority of the Board, pursuant to
Article III, Section 3 of the Regulations, to appoint an individual to the
Board. Such a need could occur, as examples, as part of the terms of a future
acquisition, or in the event the Board finds a highly qualified candidate for
the Board and believes it is important to appoint such person prior to the next
Annual Shareholder meeting. Any such person appointed would serve the remaining
term of such position, which could exceed one year.
The Regulations require that the three Classes be as equal as possible. As
such, assuming the shareholders increase the number of director positions to 18,
the Classes would be divided equally with six directors in each Class, with one
vacancy in each of Classes I and III.
Set forth below for each nominee for election as a director and for each
director whose term shall continue after the Annual Meeting of Shareholders is a
brief statement, including the age, principal occupation and business experience
during the past five years, and the number of shares of Common Stock
beneficially owned by such director. The Board of Directors has nominated the
persons listed below as nominees, all of whom presently are directors of
FirstMerit. If any nominee should become unavailable for any reason, it is
intended that votes will be cast for a substitute nominee designated by the
Board of Directors. The Board of Directors has no reason to believe that the
nominees named will be unable to serve if elected. The nominees receiving the
greatest number of votes cast by shareholders by proxy or in person at the
meeting, a quorum being present, shall be elected. A majority of the outstanding
shares of Common Stock constitutes a quorum. Proxies cannot be voted for a
greater number of nominees than the number named in the Proxy Statement.
NOMINEES FOR ELECTION AS CLASS I DIRECTORS
(TERM EXPIRING IN 1995)(A)
SHARES BENEFICIALLY
PRINCIPAL OCCUPATION FOR PAST FIVE YEARS OWNED
NAME AGE AND OTHER INFORMATION NUMBER-PERCENT(B)(C)
- ---------------------------- ---------------------------------------- --------------------
Richard L. Hardgrove 56 Chief Operating Officer and Senior 1,491(d)
Executive Vice President of FirstMerit; 40,578(e)
President and Chief Executive Officer of 26,790(f)
First National; formerly President and
Chief Executive Officer of Massillon
Philip A. Lloyd, II 48 Attorney, Brouse & McDowell, Akron, 10,562(d)
Ohio, a legal professional association 138,670(e)(g)
1,800(f)
Gilbert H. Neal 62 Formerly President and Chief Executive 2,248(d)
Officer, General Tire Inc., Akron, Ohio, 1,800(f)
a manufacturer of tires
Roger T. Read 53 Chairman, Harwick Chemical corporation, 13,512(e)
Akron, Ohio (formerly President and 1,200(f)
Chief Executive Officer), a manufacturer
and wholesaler of chemicals and allied
products
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SHARES BENEFICIALLY
PRINCIPAL OCCUPATION FOR PAST FIVE YEARS OWNED
NAME AGE AND OTHER INFORMATION NUMBER-PERCENT(B)(C)
- ---------------------------- ---------------------------------------- --------------------
Del Spitzer 67 President, Spitzer Management, Inc., 2,124(d)
Elyria, Ohio, a management firm for 690(e)
several enterprises including Spitzer 1,800(f)
Auto Stores, a group of retail
automobile dealerships
CLASS II DIRECTORS CONTINUING IN OFFICE
(TERM EXPIRING IN 1996)(A)
Richard A. Chenoweth 69 Attorney, Buckingham, Doolittle & 8,933(d)
Burroughs, Akron, Ohio, a legal 3,758(e)(g)
professional association; Director, 1,800(f)
Roadway Services, Inc., Akron, Ohio, a
publicly-held transportation company
Elizabeth A. Dalton 66 Formerly member of Board of Education of 1,935(d)
the Akron City School District 738(e)(g)
1,800(f)
Howard L. Flood 60 President and Chief Executive Officer of 20,395(d)
FirstMerit; formerly President and Chief 26,766(e)(g)
Executive Officer of First National 47,470(f)
Richard G. Gilbert 74 Formerly, Chairman, Chief Executive 157,165(d)
Officer and Director of The CIVISTA 152,501(e)(g)
Corporation, a publicly-held savings and 93,558(f)
loan holding company
Clifford J. Isroff 58 Chairman and Secretary, I Corp., Akron, 4,600(d)
Ohio, a manufacturing holding company 1,800(f)
Stephen E. Myers 51 President, Chief Executive Officer and 5,385(d)
Director of Myers Industries, Inc., 600(f)
Akron, Ohio, a publicly-held
manufacturer and distributor of rubber,
plastic and formed metal products;
Director, Reko International Group,
Inc., a publicly-held manufacturer of
plastic injection molds
CLASS III DIRECTORS CONTINUING IN OFFICE
(TERM EXPIRING IN 1997)(A)
John C. Blickle 44 President of Heidman, Inc., dba 788(d)
McDonald's Restaurants, Akron, Ohio, 2,936(e)
quick service restaurants 1,800(f)
Robert M. Carter 44 Attorney, Carter & Haygood, attorneys, 200(d)
Cleveland, Ohio; formerly independent 1,800(f)
practitioner; Director, Ohio Edison
Company, Akron, Ohio, a publicly-held
electric utility company
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Terry L. Haines 48 President, Chief Executive Officer and 847(e)
Director, A. Schulman, Inc., Akron, Ohio 1,200(f)
(formerly Vice President, Sales and
General Manager, ASI Canada), a
publicly-held manufacturer and
wholesaler of plastic materials
Robert G. Merzweiler 41 President and Chief Executive Officer, 1,500(d)
Landmark Plastic Corporation, Akron, 1,800(f)
Ohio, a manufacturer of plastic products
Justin T. Rogers, Jr. 65 Formerly Chairman, Chief Executive 3,104(d)
Officer and Director, Ohio Edison 1,200(f)
Company, Akron, Ohio, a publicly-held
electric utility company
- ---------------
(a) The directors have served since the year following their name: Messrs.
Chenoweth, Flood, Isroff, Rogers and Mrs. Dalton, 1981; Mr. Lloyd, 1988;
Messrs. Hardgrove, Neal and Spitzer, 1989; Messrs. Blickle and Myers, 1990;
Messrs. Carter, Merzweiler and Haines, 1991; Mr. Read, 1992; and Mr.
Gilbert, 1995.
(b) Number of shares beneficially owned are reported as of January 31, 1995.
None of the Directors beneficially own one percent (1%) or more of the
outstanding shares of FirstMerit Common Stock.
(c) All directors and executive officers as a group (28 persons) beneficially
owned 895,619 shares of Common Stock as of January 31, 1995. This represents
approximately 2.69% of the outstanding shares of Common Stock as of that
date.
(d) Sole voting and/or investment power.
(e) Shared voting and/or investment power.
(f) Shares with respect to which the nominee or director has the right to
acquire beneficial ownership by exercising options granted under
FirstMerit's 1982 Incentive Stock Option Plan ("1982 Stock Plan"), 1992
Stock Option Program ("1992 Stock Plan"), 1985 FirstMerit Corporation Stock
Plan (CV) and 1993 FirstMerit Corporation Stock Plan (CV) (collectively the
"CV Stock Plans"), or the 1992 Directors Stock Option Program ("Director
Stock Plan").
(g) Includes reported beneficial ownership of the following numbers of shares
owned by family members or trusts, as to which the director disclaims any
beneficial ownership: Mr. Chenoweth, 3,758; Mrs. Dalton, 738; Mr. Flood,
5,007; Mr. Gilbert, 144,732; and Mr. Lloyd, 124,204.
There are (and during the past five years there have been) no legal
proceedings material to an evaluation of the ability of any director or
executive officer of FirstMerit to act in such capacity or concerning his
integrity.
For purposes of this Proxy Statement, "Bancorp Trust" is Bancorp Trust
Company, N. A., "Citizens" is Citizens National Bank, "Elyria" is EST National
Bank, "First National" is First National Bank of Ohio, "FirstMerit Credit Life"
is FirstMerit Credit Life Insurance Company, "FirstMerit Community Development"
is FirstMerit Community Development Corporation, "Life Savings" is Life Savings
Bank, FSB, "Old Phoenix" is Old Phoenix National Bank of Medina, "Peoples, N.A."
is Peoples Bank, N.A., and "Peoples Bank" is Peoples National Bank, all of which
are wholly-owned operating subsidiaries of FirstMerit (the "Subsidiaries").
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COMMITTEES
The Board of Directors of FirstMerit has several committees and has
appointed members to such committees since the 1994 Annual Meeting of
Shareholders.
The Audit and Review Committee consisted of John C. Blickle, Chairman,
Richard A. Chenoweth, Elizabeth A. Dalton, Robert G. Merzweiler and Del Spitzer.
It met five times during 1994 to examine and review internal and external
reports of operations of FirstMerit and the Subsidiaries for presentation to the
full Board of Directors.
The Loan Committee consisted of Robert M. Carter, Chairman, Robert G.
Merzweiler and Stephen E. Myers. It met five times during 1994 to monitor the
lending activities of the Subsidiaries to assure such activities are conducted
consistent with FirstMerit's loan policy.
The Compensation Committee was appointed to establish policies for and
levels of reasonable compensation for directors, officers and employees of
FirstMerit and its Subsidiaries, and to administer FirstMerit's 1982 Stock Plan,
the 1992 Stock Plan, the CV Stock Plans and the Employee Stock Purchase Plan
("ESPP"). The Committee also has involvement with the Pension Plan for Employees
of FirstMerit Corporation and Subsidiaries, the Executive Supplemental
Retirement Plan ("SERP"), the FirstMerit Corporation and Subsidiaries Employees'
Salary Savings Retirement Plan ("401(k) Plan"), the FirstMerit Corporation
Senior Officer Incentive Compensation Program (the "Compensation Program") and
the Executive Post-Retirement Death Benefit Plan ("Death Benefit Plan"). The
committee met seven times during 1994. Its members consisted of Philip A. Lloyd,
II, Chairman, Terry L. Haines, Gilbert H. Neal and Justin T. Rogers, Jr.
The Executive Committee evaluates and responds to management's
recommendations concerning planning, management, acquisitions, nominations for
directors and committee membership. The Executive Committee is authorized to act
for the Board of Directors when the Board is not in session, except in certain
limited circumstances. The members of the Executive Committee consisted of
Clifford J. Isroff, Chairman, Richard A. Chenoweth, Howard L. Flood, Richard L.
Hardgrove, Philip A. Lloyd, II, Roger T. Read, Justin T. Rogers, Jr. and Del
Spitzer. It met 17 times during 1994.
There were 12 regularly scheduled and special meetings of the Board of
Directors in 1994. Messrs. Myers and Spitzer attended fewer than 75 percent of
the aggregate of the total number of meetings of the Board of Directors and the
total number of meetings of committees on which each served.
Section 16(a) of the Securities Exchange Act of 1934 requires FirstMerit's
directors, officers and persons who own more than ten percent of its Common
Stock ("Section 16 Filers") to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc., and to furnish FirstMerit with copies
of all such forms they file. FirstMerit understands from the information
provided to it by the Section 16 Filers that for 1994 all reports were filed by
the Section 16 filers, except: George P. Paidas and Thomas C. Williams each
filed a Form 3 late after being appointed as Executive Vice Presidents; and Mac
Management Services, Inc. Profit Sharing Trust filed a Form 3 late, and John C.
Blickle filed an amendment to a Form 4 to show his relationship as trustee of
the above named trust.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning the
compensation paid or accrued by FirstMerit and its Subsidiaries, to or on behalf
of its chief executive officer and each of the four other most highly
compensated executive officers of FirstMerit determined as of the end of the
last fiscal year, December 31, 1994 (the "Named Executive Officers"), and for
the fiscal years ended December 31, 1993 and 1992:
SUMMARY COMPENSATION
LONG-TERM
COMPENSATION(4)
---------------
ANNUAL COMPENSATION AWARDS
-------------------------------------------- ---------------
OTHER SECURITIES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3) OPTIONS/SARS COMPENSATION(5,6)
- ----------------------- ----- -------- -------- --------------- --------------- ------------------
Howard L. Flood 1994 $386,033 $149,206 -0$- 15,290 $ 64,283
President and Chief 1993 365,700 121,095 -0- 14,420 127,032
Executive Officer 1992 357,746 15,000 -0- 14,560 105,052
Richard L. Hardgrove 1994 251,521 54,638 -0- 7,650 79,575
Chief Operating Officer 1993 235,000 66,381 -0- 7,800 53,398
and Senior Executive 1992 210,157 8,400 -0- 5,340 71,711
Vice President
Scott A. Lyons 1994 201,400 40,000 -0- 4,230 24,758
Senior Vice President 1993 190,000 43,227 -0- 4,320 44,031
1992 174,090 4,389 -0- 3,700 55,711
John R. Macso 1994 183,008 43,860 -0- 4,050 15,142
Executive Vice President 1993 172,000 48,800 -0- 4,080 45,601
1992 161,846 8,446 -0- 3,780 32,190
W. Daniel Waldron 1994 171,057 49,231 -0- 3,760 19,107
Executive Vice President 1993 150,870 47,493 -0- 3,760 14,559
1992 144,378 8,450 -0- 3,340 8,517
<FN>
- ---------------
(1) Includes the deferred portion of salary under the 401(k) Plan.
(2) For 1994 and 1993, includes the amounts paid pursuant to the Compensation
Program, and for 1992, includes amounts paid pursuant to the discretionary
bonus program. The amounts included represent the incentive bonus earned for
the prior year, but which cannot be determined and paid until the first
quarter of the following year.
(3) Perquisites provided to each of Named Executive Officers, if any, do not
exceed the disclosure thresholds established under Securities and Exchange
Commission ("Commission") rules and are not included in this total.
(4) None of the Named Executive Officers has any restricted stock holdings. No
long-term incentive plan payouts were made in 1994.
(5) "All Other Compensation" for 1994 includes the following: (i) contributions
to FirstMerit's 401(k) Plan to match the 1994 pre-tax elective deferral
contributions made by each to the 401(k) Plan: Mr. Flood, $6,930, Mr.
Hardgrove, $6,930; Mr. Lyons, $6,930, Mr. Macso, $6,930, and Mr. Waldron,
$6,930; (ii) amounts accrued under FirstMerit's 1992 Stock Plan as "Dividend
Units" (an accrued right to a cash payment) granted: Mr. Flood, $40,013, Mr.
Hardgrove, $18,680; Mr. Lyons, $11,072, Mr. Macso, $10,780, and Mr. Waldron,
$9,813; (iii) amounts paid or accrued under FirstMerit's SERP: Mr. Flood,
$(363,265), Mr. Hardgrove, $(18,946); Mr. Lyons, $(157), Mr. Macso,
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$(8,899), and Mr. Waldron, $(9,416); (iv) the present value of the amounts
accrued under FirstMerit's Unfunded Supplemental Benefit Plan ("Supplemental
Benefit Plan"): Mr. Flood, $374,564, Mr. Hardgrove, $68,063; Mr. Lyons,
$3,242, Mr. Macso, $1,920, and Mr. Waldron, $8,481; (v) amounts paid or
accrued by FirstMerit for term life and accidental death insurance: Mr.
Flood, $2,376, Mr. Hardgrove, $1,863; Mr. Lyons, $1,507, Mr. Macso, $1,794,
and Mr. Waldron, $2,591; (vi) amounts paid or accrued by FirstMerit for fees
as a director and committee member of FirstMerit and First National: Mr.
Flood, $-0-, Mr. Hardgrove, $-0-; Mr. Lyons, $-0-, Mr. Macso, $-0-, and Mr.
Waldron, $-0-; and (vii) amounts paid or accrued under FirstMerit's Death
Benefit Plan: Mr. Flood, $3,665, Mr. Hardgrove, $2,985; Mr. Lyons, $2,164,
Mr. Macso, $2,617, and Mr. Waldron, $708.
(6) The negative benefit accruals during 1994 resulted from the generally
decreasing nature of benefit accruals in the SERP. For example, Mr. Flood
had a large negative benefit accrual in the SERP in 1994 of $363,265 and a
large positive accrual in the Supplemental Benefit Plan in 1994 of $374,564.
This was due to the shift of benefits from the SERP to the Supplemental
Benefit Plan for benefits in excess of the $150,000 pay limit. The net
present value benefit accrual in 1994 due to this shift was a positive
$11,299.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options and/or dividend units during fiscal 1994 under FirstMerit's 1992 Stock
Plan to the Named Executive Officers:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL
----------------------------------------------------- REALIZABLE VALUE AT
PERCENTAGE ASSUMED ANNUAL
NUMBER OF OF TOTAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN OR BASE EXPIRATION -------------------
NAME GRANTED(1) FISCAL YEAR PRICE DATE 5% 10%
- ---------------------- ------------ ------------ ---------- ---------- -------- --------
Howard L. Flood 15,290 23.2% $23.50 4/13/04 $225,971 $572,656
Richard L. Hardgrove 7,650 11.6% 23.50 4/13/04 113,060 127,004
Scott A. Lyons 4,230 6.4% 23.50 4/13/04 62,515 70,226
John R. Macso 4,050 6.2% 23.50 4/13/04 59,855 67,237
W. Daniel Waldron 3,760 5.7% 23.50 4/13/04 55,569 62,423
<FN>
- ---------------
(1) The 1992 Stock Plan generally provides for granting of incentive stock
options ("ISOs") and non-qualified stock options ("NQSOs") (collectively
"Stock Options"). The option price per share of ISOs must be equal to the
fair market value of a share of Common Stock on the date granted; the option
price of NQSOs may be set by the Committee. The exercise period of ISOs may
not be more than ten years from grant, while the period of NQSOs may be set
by the Committee. No Stock Option may be exercised until six months after
the date of grant. The purchase price of any Stock Option must be paid upon
exercise in (i) immediately available funds, (ii) shares of Common Stock, or
(iii) a combination of (i) and (ii). In the event a participant's employment
is terminated due to death, disability or retirement, ISOs awarded will
remain exercisable for the maximum period allowable under the Internal
Revenue Code of 1986, as amended ("Code"), and NQSOs remain exercisable for
the remainder of the option term or five years, whichever is less. If a
participant's employment is terminated for any other reason, all Stock
Options granted will be cancelled immediately; provided, however, that if
FirstMerit terminates a participant for reasons other than misconduct or
misfeasance, the participant has 30 days to exercise any Stock Options; and
provided further, that if termination is attributable to a "change in
control," any Stock Options previously granted will continue for their term.
"Change of Control" is basically defined as a change in 30% or more of the
beneficial ownership of FirstMerit or a change of a majority of the Board of
Directors within a two year period.
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The 1992 Stock Plan also provides that a Dividend Unit be awarded to
participants with respect to each share of Common Stock for which a Stock
Option is granted, for a period of up to five years. The amount payable with
respect to each Dividend Unit is equal to the aggregate dividends actually
paid on one share of Common Stock, to the extent the participant held the
Dividend Unit on the record date of each such dividend. In the event of
termination of a participant's employment, Dividend Units awarded remain
outstanding for the duration of the Stock Option to which they are attached,
but Dividend Units will terminate upon the termination, cancellation or
expiration of their related Stock Options. The 1992 Stock Plan provides that
in the event of a Change of Control, FirstMerit will promptly thereafter pay
to each participant an amount equal to the aggregate amount accrued on the
Dividend Units held by the participant on the date of the Change of Control.
(2) This computation does not include the value of any Dividend Units which
might be paid during such time.
OPTION EXERCISES AND HOLDINGS
The following table contains information concerning the exercise of Stock
Options and/or Dividend Units under FirstMerit's 1982 Stock Plan and its 1992
Stock Plan, and information on unexercised Stock Options held as of the end of
the fiscal year, by the Named Executive Officers:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SAR OPTIONS AT
AT FISCAL YEAR-END YEAR-END
------------------ ------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE(1) UNEXERCISABLE(2)
- --------------------------- --------------- -------- ------------------ ------------------
Howard L. Flood 6,000 $46,260 47,470 $144,459
Richard L. Hardgrove N/A N/A 26,790 96,565
Scott A. Lyons N/A N/A 15,750 70,836
John R. Macso N/A N/A 11,910 30,971
W. Daniel Waldron 1,000 14,790 25,060 164,460
- ---------------
<FN>
(1) All options held are currently exercisable.
(2) Based upon the closing price reported in the Nasdaq National Market System
for the Common Stock of FirstMerit on December 31, 1994. This computation
does not include the value of any Dividend Units which might be paid during
such time.
PENSION PLANS
Under the Pension Plan for Employees of FirstMerit Corporation and
Subsidiaries (the "FirstMerit Pension Plan"), a tax-qualified defined benefit
pension plan, pension benefits may be paid to executive officers in the future.
Executive officers participate in the FirstMerit Pension Plan on the same basis
as other employees.
Pension benefits at normal retirement age 65 are based on the average base
salary (exclusive of bonuses and overtime, if either exists, and not exceeding
$150,000 in 1994) of each participant for the highest four consecutive years
during the last ten years of employment. The benefits payable equal the sum of
1.35 percent
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of such average base salary multiplied by the number of years of credited
service, up to 40 years, plus .55 percent of such average base salary in excess
of "covered compensation," multiplied by the number of years of credited service
not exceeding 35 years. "Covered compensation" for this purpose means the
average (without indexing) of the Social Security taxable wage bases in effect
for each calendar year during the 35-year period ending with the last day of the
calendar year in which the participant attains (or will attain) Social Security
retirement age.
Contributions to the FirstMerit Pension Plan are actuarially determined and
cannot be appropriately allocated to individual participants. As of December 31,
1994, Mr. Flood had 31.7 years of service credit, Mr. Hardgrove had 29.3 years
of service credit, Mr. Lyons had 3.6 years of service credit, Mr. Macso had 29.0
years of service credit and Mr. Waldron had 34.1 years of service credit.
The following table sets forth estimated annual retirement benefits
(assuming the payments are made on a straight life-annuity basis) at age 65
payable to persons in the specified remuneration and years of service
classification under the FirstMerit Pension Plan.
PENSION PLAN TABLE
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT ON
AVERAGE BASE DECEMBER 31, 1994 WITH YEARS OF SERVICE INDICATED
SALARY USED FOR -------------------------------------------------------------------------
PLAN BENEFITS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- --------------- -------- -------- -------- -------- -------- --------
$ 75,000 $19,370 $25,826 $32,282 $38,739 $45,195 $ 50,258
100,000 26,495 35,326 44,157 52,989 61,820 68,570
150,000 40,745 54,326 67,907 81,489 95,070 105,195
200,000 54,995 73,326 91,657 109,989 128,320 141,820
250,000 69,245 92,326 115,407 138,489 161,570 178,445
300,000 83,495 111,326 139,157 166,989 194,820 215,070
350,000 97,745 130,326 162,907 195,489 228,070 251,695
400,000 111,995 149,326 186,657 223,989 261,320 288,320
450,000 126,245 168,326 210,407 252,489 294,570 324,945
500,000 140,495 187,326 234,157 280,989 327,820 361,570
The foregoing figures are provided without regard to limitations on annual
pension benefits which can be paid from a tax-qualified pension plan and trust
under the Code.
FirstMerit also has adopted the Supplemental Pension Plan for its
employees, including executive officers. The original effective date of the
Supplemental Pension Plan was January 1, 1984, and it was amended effective
January 1, 1991. Under the Plan, persons entitled to receive benefits under the
FirstMerit Pension Plan are eligible to receive the excess amounts they would
have been entitled to under the Pension Plan but for limitations on maximum
benefits imposed by the Code on tax-qualified pension plans. FirstMerit entered
into a Supplemental Pension Agreement with Mr. Macso on June 10, 1991, which
provides him with a credit of 20-years for determining his benefits and vesting
service.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee members consisted of Philip A. Lloyd, II,
Chairman, Terry L. Haines, Gilbert H. Neal and Justin T. Rogers, Jr. In serving
on the Compensation Committee, Mr. Lloyd participates in the determination of
the compensation to be received by the executive officers of FirstMerit. Philip
A. Lloyd, II, is also a director of FirstMerit and serves on the Executive
Committee. Mr. Lloyd is a shareholder of the law firm of Brouse & McDowell which
performs legal services for FirstMerit and its Subsidiaries. During 1994, Brouse
& McDowell was paid $459,624 for legal services rendered to FirstMerit and
$1,004,884 for legal services rendered to the Subsidiaries. The amount of Mr.
Lloyd's interest in such fees cannot be practically determined.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
This section discusses the employment contracts and termination agreements
for the Chief Executive Officer and the Named Executive Officers.
FirstMerit entered into a termination agreement with Howard L. Flood in
1991. The agreement provides that if there is a Change of Control of FirstMerit,
and Mr. Flood subsequently is terminated during the term of the agreement, he
will be entitled to continued compensation and benefits for a period of three
years following termination. Such benefits will not be available, however, if
the termination is (i) due to death, retirement or disability, (ii) by
FirstMerit for "cause," or (iii) by Mr. Flood other than for "good reason."
"Cause" includes felonious criminal activity, disclosure of confidential
information, breach of contract, dishonesty, gross negligence or
insubordination. "Good Reason" includes reduction of salary or incentive
compensation or relocation if a Change of Control occurs, reduction in
responsibilities, involuntary discontinuance of benefit plans or reduction of
vacation time.
The amount of continued compensation will be equal to the greater of Mr.
Flood's base salary at the time of termination or immediately prior to the
Change of Control, plus annual payments equal to the average annual incentive
compensation paid to Mr. Flood over the two years preceding the Change of
Control. The benefits received by Mr. Flood during the three-year period after
termination must include medical, disability and life insurance benefits
identical to those in effect just before the Change of Control. Mr. Flood also
will be entitled to immediate vesting of all stock options and similar rights in
which he participates. FirstMerit also will pay for one year up to $35,000 of
reasonable outplacement expenses incurred by Mr. Flood in seeking comparable
employment through a placement firm. Notwithstanding any of the foregoing, the
termination compensation and benefits to Mr. Flood will not exceed that which is
permitted under the Code without being considered "parachute payments" and
thereby being subject to excise taxes.
To promote stability among the executive officers, the Board of Directors
of FirstMerit also authorized FirstMerit to enter into agreements with certain
key officers regarding termination due to a Change of Control. Of the Named
Executive Officers, Richard L. Hardgrove, Scott A. Lyons, John R. Macso and W.
Daniel Waldron have agreements which have a Change of Control provision.
Messrs. Hardgrove, Macso and Waldron have agreements which provide that
these officers will be entitled to continued compensation and benefits for a
period of twenty-four, eighteen and eighteen months, respectively, subject to
certain limitations, if any such officer is terminated after a "Change of
Control" of FirstMerit and during the term of the agreement. Such benefits will
not be available, however, if termination is (i) due to death, retirement or
disability, (ii) by the FirstMerit for Cause, or (iii) by either officer other
than for a Good Reason. The amount of continued compensation will equal the
higher of their base salary which was in effect at termination or immediately
before the Change of Control.
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Incentive compensation in an amount equal to the average of the incentive
compensation paid to Messrs. Hardgrove, Macso and Waldron in each of the two
years before the Change of Control will be paid on the first anniversary of
termination, and an additional amount equal to that amount will be paid to Mr.
Hardgrove, and an amount equal to one-half of such amount will be paid to
Messrs. Macso and Waldron, on the last day of the twenty-fourth, eighteenth and
eighteenth month, respectively, following termination. Additional benefits
provided to Mr. Hardgrove during the twenty-fourth month period, and Messrs.
Macso and Waldron during the eighteen-month period following termination, will
include medical and life insurance benefits identical to those in effect for the
officer just before the Change of Control. Messrs. Hardgrove, Macso and Waldron
each will also be entitled to immediate vesting of all stock options and similar
rights, and will have 90 days to exercise such options or rights. FirstMerit
will pay for one year up to $25,000 in reasonable outplacement expenses incurred
by Messrs. Hardgrove, Macso or Waldron in seeking comparable employment through
a placement firm. All of the continued compensation and benefits described above
will discontinue, however, if either Mr. Hardgrove, Mr. Macso or Mr. Waldron
obtains comparable employment with another employer, reaches age 65 or is
deceased. Another limitation on the continued compensation and benefits is that
they may not exceed that which is permitted under the Code without being
considered "parachute payments" and thereby being subject to excise taxes.
Mr. Lyons' agreement provides that if prior to attaining age 55, and within
twenty-four months of a Change of Control, he is involuntarily terminated
without cause or he voluntarily terminates his employment for Good Reason,
subject to certain limitations, he is entitled to receive twenty-four monthly
payments in an amount equal to his average monthly earnings. In addition, he
will continue to receive the same employee benefits over the twenty-four-month
period. If Mr. Lyons obtains comparable employment during the 24-month period,
the payments and benefits cease.
FIRSTMERIT COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
PHILOSOPHY AND COMPOSITION OF COMMITTEE
FirstMerit's executive compensation program is designed to enable
FirstMerit to attract, motivate and retain top quality executive officers by
providing a fully competitive and comprehensive compensation package. It
provides for competitive base salaries that reflect individual performance as
well as annual variable incentive awards payable in cash for the achievement of
financial performance goals established by the Compensation Committee and
approved by the Board of Directors. In addition, long-term, stock-based
incentive awards are granted to strengthen the mutuality of interest between the
executive officers and FirstMerit's stockholders and to motivate and reward the
achievement of important long-term performance objectives of FirstMerit.
FirstMerit's executive compensation program is administered by the
Compensation Committee of the Board of Directors and is composed entirely of the
following non-employee directors: Philip A. Lloyd, II, Chairman, Terry L.
Haines, Gilbert H. Neal and Justin T. Rogers, Jr.
ESTABLISHMENT OF EXECUTIVE COMPENSATION PROGRAM AND PROCEDURES
In 1990 and 1993, the Compensation Committee retained the services of
Sibson & Company, Inc., a nationally recognized independent compensation
consulting company, to conduct a full review and to make recommendations
regarding the effectiveness of FirstMerit's executive compensation program. As
part of that review and for purposes of recommending a program to FirstMerit,
Sibson & Company was requested to review the executive compensation program then
being utilized and compare it to public corporations that
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shared one or more common traits with FirstMerit (such as market capitalization,
asset size and geographic location), which the Committee and Sibson & Company
felt might be FirstMerit's most direct competitors for executive talent, and
also to assist FirstMerit in establishing and weighting specific assessment
areas for the chief executive officer. The recommendations of Sibson & Company
following its review were adopted in substantial part by the Committee and Board
of Directors in 1993 for implementation in 1994.
The Compensation Committee is responsible for the establishment of the base
salary, as well as the award level for the annual incentive compensation
program, both subject to Board approval by the non-employee directors. The
Committee is also responsible for the award level and administration of the
stock option programs for executive officers, as well as recommendations
regarding other executive benefits and plans, also subject to Board approval by
the non-employee directors. In reviewing the individual performance of the Named
Executive Officers whose compensation is detailed in this Proxy Statement, the
Committee takes into account the views of the Chief Executive Officer and the
Chief Operating Officer of FirstMerit. In reviewing the Chief Executive
Officer's performance, the Committee reports on that evaluation directly to the
non-employee members of the Executive Committee and then to the non-employee
members of the Board of Directors.
As an overall evaluation tool used in determining levels of compensation
for the FirstMerit executive officers, as well as for the Chief Executive
Officer, the Committee reviews the compensation policies of other public
companies, as well as using published financial industry salary surveys, such as
the "Top Executive Study by Ben S. Cole Financial, Inc." and the "Cole Survey"
published by the Wyatt Company (the "salary surveys"). Although the Committee
has not defined or established a specific comparison group of bank holding
companies for determination of compensation, those listed in the salary surveys
which share one or more common traits with FirstMerit, such as market
capitalization, asset size, geographic location, similar lines of business and
financial returns on assets and equity, are given more weight. The companies
listed in the various salary surveys may or may not be included in the Nasdaq
Banks Index (an index included in FirstMerit's "Performance Graph" below), and
as such, the Committee is unable to make any comparisons between the two.
COMPONENTS OF EXECUTIVE OFFICER COMPENSATION
For 1994, the executive compensation program for the Named Executive
Officers, as well as for the Chief Executive Officer, consisted of three primary
components: (i) a base salary; (ii) incentive compensation; and (iii) other
executive benefits, as well as health, savings and retirement benefits generally
available to all employees. These components are discussed in detail below.
BASE SALARY. The Named Executive Officers' base salaries are reviewed
annually. They are primarily determined by evaluating the individual officers'
level of responsibilities for their position, comparing their position to
similar positions within FirstMerit and by comparing salaries detailed in the
salary surveys for executives with similar experience and responsibilities.
Significant weight is also given to the views of the Chief Executive
Officer and the Chief Operating Officer of FirstMerit regarding how the
executive officer has succeeded in his or her annual performance goals. These
goals are established by the Chief Executive Officer and the Chief Operating
Officer for each executive officer, including personal and departmental goals.
The nature of these goals differs depending upon each officer's job
responsibilities. Goals are both qualitative in nature, such as the development
and retention of key personnel, quality of products and services and management
effectiveness; and quantitative in nature, such as sales and revenue goals and
cost containment.
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The Named Executive Officer's base salary is then established by the
Committee based upon the items listed above, as well as being based upon the
Company's overall performance during the preceding year. The Committee does not
place a specific weight value on any of the above listed factors. The base
salary as established is subject to Board approval by the non-employee
directors.
INCENTIVE COMPENSATION. Incentive compensation includes two programs. The
award of cash bonuses through an incentive compensation bonus plan entitled the
"Senior Officer Incentive Compensation Plan" and through the award of stock
options under the 1992 Stock Plan. The participants and awards under
FirstMerit's incentive plans are determined by the Committee, subject to
approval by the Board of Directors.
Cash Incentive Compensation. FirstMerit's policy for cash incentive
compensation is to reward the achievement of financial objectives established in
advance by the Compensation Committee. Prior to the beginning of each year a
performance matrix is established by the Committee.
The performance matrix delineates incrementally increasing amounts of two
measures, return on assets ("ROA") and the percentage of increase of earnings
per share ("EPS") for FirstMerit. Certain threshold levels of these two measures
must be achieved during the year before any incentive bonus can be awarded. ROA
and EPS are each weighted equally in the determination of any incentive bonus. A
minimum threshold performance in both measures must be reached before any
incentive bonus can be granted. The Committee has the right, however, to also
take into consideration the individual performance of the Named Executive
Officer in making an award to him or her under the plan.
An incentive bonus award for a Named Executive Officer depends upon two
basic factors: (i) the position held by the executive officer which establishes
a maximum bonus available based upon a percentage of the officer's base salary
(i.e., CEO, 40% of base salary; COO, 35%; other Named Executive Officers, 25%),
and (ii) the extent to which the performance matrix indicates that ROA and EPS
exceeded the threshold levels. If the minimum threshold levels are not met,
incentive bonus awards are not awarded. In 1994, both minimum threshold levels
were exceeded. All incentive bonus awards are paid in cash.
Incentive Stock Options. FirstMerit's philosophy for granting stock options
is based on the principles of encouraging key employees to remain with the
Company by providing them with a long-term interest in the Company's overall
performance and providing an incentive to those executive officers to manage
with a view toward maximizing long-term shareholder value. These stock option
grants provide incentive for the creation of shareholder value since the full
benefit of the grant to each Named Executive Officer can only be realized with
an appreciation in the price of FirstMerit's Common Stock.
These grants provide the right to purchase shares of FirstMerit's common
stock at the fair market value on the date of grant. Stock options are granted
pursuant to the Stock Option Program using guidelines which include corporate
performance, individual responsibilities and performances, although option
grants historically have equaled a percentage of each Named Executive Officer's
base salary, the percentage being the same for all Named Executive Officers.
The grants made in 1994 for all participants in the Stock Option Program
were 65,790 shares of FirstMerit Common Stock, of which 34,980 shares were
awarded the Named Executive Officers or 53.1% of all options granted. Pursuant
to historical practice, option grants equaled a percentage of each Named
Executive Officer's base salary, which in 1994 equaled 25-40%, depending upon
the position held by the executive officer.
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DETERMINATION OF THE CHIEF EXECUTIVE OFFICER'S COMPENSATION
Howard L. Flood is the President and Chief Executive Officer of FirstMerit,
a position he has held since 1985. Mr. Flood's base salary in 1994 was
determined by the Committee through an assessment of two primary areas, the
annual financial results of FirstMerit, and his overall performance as a leader
of the Company. In determining compensation, the annual financial results, which
focus on ROA and EPS, were given a 75% weight by the Committee, whereas overall
performance as a leader was given a 25% weight in performance by the Committee.
Overall performance is further broken down into seven sub-areas, three of which
are each given a 20% weight, while the other four are each given a 10% weight.
In addition to these factors, the Committee also reviews the salary surveys to
determine if there are any overall trends in the financial services industry
regarding compensation of chief executive officers which would require any
adjustments to the amounts to be paid to Mr. Flood.
Mr. Flood also participates in the two incentive compensation programs. The
determination of the cash bonus awards and stock option grants to Mr. Flood are
awarded by the Committee on the same basis as the other Named Executive
Officers.
Based on these factors, the Committee established Mr. Flood's base salary
for 1994 at $386,033, which when added to his 1994 incentive cash bonus of
$149,206, was a 9.95% increase from his 1993 base salary and incentive cash
bonus. Mr. Flood was also granted an option to purchase 15,290 shares of
FirstMerit Common Stock at a per share price of $23.50 which was 100% of the
fair market value of the stock on the date of grant. The grant was made in
accordance with the guidelines of the Committee referenced above and equated to
23.2% of all options granted in 1994 to participants in the 1992 Stock Option
Program.
SECTION 162(M) DISCUSSION
The Committee is continuing to review the qualifying compensation
regulations issued by the Internal Revenue Service which provide that no
deduction is allowed for applicable employee remuneration paid by a publicly
held corporation to a covered employee to the extent that the remuneration paid
to the employee exceeds $1.0 million for the applicable taxable year, unless
certain conditions are met. Currently, remuneration is not expected to exceed
the $1.0 million base and therefore, compensation should not be affected by the
qualifying compensation regulations.
The foregoing report has been respectively furnished by the members of the
Compensation Committee, being:
Philip A. Lloyd, II, Chairman Terry L. Haines
Gilbert H. Neal Justin T. Rogers, Jr.
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PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on FirstMerit's Common Stock against the
cumulative return of the Nasdaq Banks Index, the Nasdaq Index and the S&P 500
Index for the period of five fiscal years commencing January 1, 1989 and ended
December 31, 1994.(1)
Measurement Period
(Fiscal Year Covered) FBOH NASDAQ NASDAQ BANKS S&P 500
1989 100 100 100 100
1990 86.86 84.92 73.23 96.90
1991 143.56 136.28 120.17 126.36
1992 185.77 158.58 174.87 135.97
1993 214.98 180.93 199.33 149.65
1994 213.02 176.92 198.69 151.62
<FN>
- ---------------
(1) Assumes that the value of the investment in FirstMerit Common Stock and each
index was $100 on December 31, 1988 and that all dividends were reinvested.
(2) This is a CRSP index and includes all companies on Nasdaq within the SIC
codes of 602 and 671. To the extent Nasdaq makes available the identity of
the companies which comprise this index, the Company, in a prompt manner,
will make such information available to any person requesting such.
DIRECTOR COMPENSATION
The following table describes the standard arrangements pursuant to which
non-employee directors of FirstMerit were compensated for their services in
1994:
ANNUAL FEE PER FEE PER
NAME OF ENTITY RETAINER FEE BOARD MEETING COMMITTEE MEETING
- --------------------- ------------ ------------- -----------------
FirstMerit $6,000 $ 400 $ 400
First National(1) 5,000 350 350
- ---------------
<FN>
(1) Most of the directors of FirstMerit serve as directors of First National. A
few of the directors of FirstMerit also serve as directors of one or more of
the Subsidiaries.
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The non-employee directors who serve as the chairman of the various Board
committees receive additional cash compensation as follows: Audit, Compensation
and Loan Committees, $625; and the Executive Committee, $775.
FirstMerit may pay fees to directors who are former officers of FirstMerit
or the Subsidiaries but not to directors who are incumbent officers of
FirstMerit or the Subsidiaries. The FirstMerit Corporation Directors' Deferred
Fee Plan ("Director Fee Deferral Plan") permits directors of FirstMerit who are
not employees to defer their fees, which are then credited by the FirstMerit, to
a deferred benefit account on behalf of the participating director. When a
participating director terminates service for any reason other than death,
FirstMerit pays the deferred fees together with a designated rate of interest to
the director. A participating director may withdraw from the Director Fee
Deferral Plan and receive the Plan benefits during service as a director,
provided the election is made under the terms of the Plan. A participant also is
entitled to a death benefit in the event of death during service. If a director
dies after termination of service, the director's beneficiary will receive the
unpaid balance of the Director Fee Deferral Plan account. Twelve of FirstMerit's
directors elected to participate in the Director Fee Deferral Plan during 1994.
On April 8, 1992, the shareholders approved the 1992 Directors Stock Plan.
The Directors Stock Plan generally provides for granting of non-qualified stock
options to directors who are not full-time employees of FirstMerit. Under the
Directors Stock Plan, up to 100,000 shares of FirstMerit Common Stock may be
issued, subject to adjustment in the event of certain corporate transactions as
described below.
Each participant in the Directors Stock Plan will be awarded annually, on
the day after the Annual Meeting of Shareholders, non-qualified stock options to
purchase 600 shares of Common Stock. The option price per share will be 100
percent of the fair market value of a share of Common Stock on the date the
option is granted. The Directors Stock Plan also provides that a Dividend Unit
will be awarded to participants with respect to each share of Common Stock for
which a NQSO is granted. The amount payable with respect to each Dividend Unit
is equal to the aggregate dividends actually paid on one share of Common Stock,
to the extent the participant held the Dividend Unit on the record date for
payment of each such dividend. Dividend Units will be awarded for terms of ten
years, but will accrue dividends only for the five years first following their
award.
The Directors Stock Plan provides that in the event of a Change of Control,
FirstMerit will promptly pay to each Participant an amount equal to the
aggregate amount accrued on the Dividend Units held by the participant on the
date of the Change of Control.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1994, certain directors and executive officers of FirstMerit, and
their associates, were customers of and had banking transactions with the
Subsidiaries of FirstMerit in the ordinary course of business. FirstMerit
expects that these relationships and transactions will continue in the future.
All loans and commitments to loans included in such transactions, including
equipment leasing transactions, were made and will be made in the future on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons not
employed by FirstMerit. The existing transactions do not involve more than the
normal risk of collectability or present other unfavorable features.
The law firm of Brouse & McDowell performed legal services for FirstMerit
and the Subsidiaries in 1994. Philip A. Lloyd, II, a Class I Director of
FirstMerit, is a shareholder of the law firm. The amounts of such fees for legal
services are indicated under "Compensation Committee Interlocks and Insider
Participation," above. The amount of Mr. Lloyd's interest in such fees cannot
practicably be determined.
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The law firm of Buckingham, Doolittle & Burroughs received fees for the
performance of legal services for several Subsidiaries of FirstMerit in 1994.
Richard A. Chenoweth, a Class II Director of FirstMerit, is a shareholder of the
law firm. The amount of Mr. Chenoweth's interest in such fees cannot practicably
be determined.
The law firm of Carter & Haygood received fees for the performance of legal
services for a Subsidiary of FirstMerit in 1994. Robert M. Carter, a Class III
Director of FirstMerit, is a shareholder of the law firm. The amount of Mr.
Carter's interest in such fees cannot practicably be determined.
FirstMerit and the Subsidiaries also employ other law firms for legal
services.
PROPOSALS TO AMEND THE INDEMNIFICATION PROVISION IN THE ARTICLES
AND TO APPROVE FORM OF INDEMNIFICATION AGREEMENTS
REASON FOR PROPOSALS
The interests of shareholders require that FirstMerit be successful in
attracting and retaining qualified persons as directors and officers and that
such persons be placed in circumstances that facilitate their ability to
exercise their best judgment and act upon that judgment without exposure to
unreasonable personal risks. The increase in the risk of litigation against
directors and officers impacts the ability of companies to recruit and retain
qualified persons as directors and officers. As such, it is necessary and
desirable to provide such persons with the assurance that, under appropriate
circumstances, the burden of liability and litigation expenses arising out of
their services rendered to the Corporation will be indemnified to the full
extent permitted by Ohio general corporation law, as such law may be further
revised from time to time.
The two proposals discussed below deal with the indemnification of
directors and officers of FirstMerit. The proposed amendment to the Articles is
intended to remove the possibility of an inconsistency between the current
indemnification provision in the Articles (which has been in effect since 1981)
and the current Ohio general corporation law, which has undergone revision since
that time. In conjunction with this change, FirstMerit will, as provided by the
Ohio general corporation law, enter into separate indemnification agreements
with its executive officers. In addition, FirstMerit has determined to enter
into the same agreements with its directors, however, as discussed below, it is
requesting shareholder approval of the agreements with the directors before
entering into them.
The proposed amendment to the Articles and the proposed form of
indemnification agreement do not alter the standard of care which the directors,
officers or employees of FirstMerit owe to FirstMerit and the shareholders under
the Ohio general corporation law. In addition, the forms of indemnification may
not affect a director's potential liability under the federal securities laws.
Insofar as indemnification for liabilities under the Securities Act of 1933 may
be permitted under the current Articles, or as proposed to be amended, and the
proposed form of indemnification agreement, it is the opinion of the Securities
and Exchange Commission that such indemnification is against public policy and
is, therefore, unenforceable. FirstMerit is not aware of any pending or
threatened litigation which would give rise to claims under the Articles or the
form of indemnification agreements.
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PROPOSAL TO AMEND INDEMNIFICATION PROVISION IN ARTICLES
Under current Ohio general corporation law, directors and officers are
provided with indemnification rights unless a corporation's articles or
regulations expressly exclude them. FirstMerit's Articles do not exclude the
right of indemnification.
The proposal would delete the current Article Sixth and replace it with the
following:
SIXTH: The Corporation may indemnify any director or officer, any
former director or officer of the Corporation and any person who is or has
served at the request of the Corporation as a director, officer or trustee
of another corporation, partnership, joint venture, trust or other
enterprise (and his heirs, executors and administrators) against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement,
actually and reasonably incurred by him by reason of the fact that he is or
was such director, officer or trustee in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, to the full extent permitted by applicable
law, as the same may be in effect from time to time. The indemnification
provided for herein shall not be deemed to restrict the right of the
Corporation to (i) indemnify employees, agents and others as permitted by
such law, (ii) purchase and maintain insurance or provide similar
protection on behalf of directors, officers or such other persons against
liabilities asserted against them or expenses incurred by them arising out
of their service to the Corporation as contemplated herein, and (iii) enter
into agreements with such directors, officers, employees, agents or others
indemnifying them against any and all liabilities (or such lesser
indemnification as may be provided in such agreements) asserted against
them or incurred by them arising out of their service to the Corporation as
contemplated herein.
Because the amendment provides that indemnification will be provided to the
full extent permitted by the then current applicable law, it should eliminate
the need to further change the Articles to ensure consistency in the event the
Ohio general corporation law is revised in the future.
Under the Ohio general corporation law, Ohio corporations are authorized to
indemnify directors, officers and agents within prescribed limits and must
indemnify them under certain circumstances. Ohio law does not provide statutory
authorization for a corporation to indemnify directors and officers for
settlements, fines or judgments in the context of derivative suits. It provides,
however, that directors (but not officers) are entitled to mandatory advancement
of expenses, including attorneys' fees, incurred in defending any action,
including derivative actions, brought against the director, provided the
director agrees to cooperate with the corporation concerning the matter and to
repay the amount advanced if it is proved by clear and convincing evidence that
his act or failure to act was done with deliberate intent to cause injury to the
corporation or with reckless disregard for the corporation's best interests.
The Ohio general corporation law does not authorize payment of expenses or
judgments to an officer or other agent after a finding of negligence or
misconduct in a derivative suit absent a court order. Indemnification is
required, however, to the extent such person succeeds on the merits. In all
other cases, if a director or officer acted in good faith and in a manner he
reasonably believed to be in (or not opposed to) the best interests of the
company, indemnification is discretionary except as otherwise provided by a
company's articles, code of regulations or by contract except with respect to
the advancement of expenses of directors.
A director is not liable for monetary damages under Ohio law unless it is
proved by clear and convincing evidence that his action or failure to act was
undertaken with deliberate intent to cause injury to the corporation or with
reckless disregard for the best interest of the corporation. There is, however,
no comparable provision limiting the liability of officers or other agents of a
corporation.
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The statutory right to indemnity is not exclusive in Ohio. The Ohio general
corporation law provides express authority for Ohio corporations to procure not
only insurance policies, but also to furnish protection similar to insurance,
including trust funds, letters of credit and self-insurance, or to provide
similar protection such as indemnity by contract.
PROPOSAL TO APPROVE DIRECTOR INDEMNIFICATION AGREEMENTS
In certain limited circumstances, the indemnification protection provided
to FirstMerit's directors and officers under FirstMerit's Articles could become
ineffective. Specifically, if FirstMerit was acquired and merged into another
entity, the FirstMerit Articles would be cancelled as well as the
indemnification rights provided to the directors and officers thereunder. In
addition, the Articles could be amended thereby deleting or limiting the scope
of indemnification provided the directors and officers.
There is a simple means of providing indemnification protection to
directors and officers which is not vulnerable to the two examples listed above.
FirstMerit could enter into indemnification agreements with its directors and
executive officers. These agreements would provide those persons with
indemnification which could only be modified or taken away with the approval of
the director or officer who is a party to the agreement, and would therefore
continue even if the Articles were cancelled or amended.
FirstMerit may enter into such agreements with its executive officers under
the Ohio general corporation law and FirstMerit's current Articles, as well as
if they are amended under the proposal discussed above. With regard to providing
such agreements to each member of the Board of Directors, however, a section of
Ohio law may limit the Board's right to have FirstMerit do so without
shareholder approval. Ohio law indicates that any contract between a director
and the corporation must be approved by (i) a majority of the disinterested
directors, or (ii) a majority vote of the shareholders; unless the agreement is
fair to the corporation at the time it is approved. Although the Board believes
the form of indemnification agreement proposed would be "fair to the
corporation," and would therefore not require either Board or shareholder
approval, it believes the appropriate conservative action would be to allow the
shareholders to vote on this matter.
The form of indemnification agreement will provide the type and scope of
indemnification provided the directors in the Articles. The form of
indemnification agreement, however, would require the Corporation to indemnify
the director and allow a director to select indemnification rights provided
under (i) FirstMerit's current Articles and/or Code of Regulations; (ii) Ohio
law in effect on the date of the indemnification agreement; (iii) the Articles
and law in effect at the time expenses are incurred; and (iv) any liability
insurance policy obtained by FirstMerit and in effect at the time a claim is
made. The director would have the right to be reimbursed for expenses as they
are incurred, but only if he files with FirstMerit an undertaking to repay any
amount which it is ultimately determined he must repay. No indemnification will
be required under the indemnification agreements with respect to actions, fines
or penalties, specifically excluded from indemnification coverage under
applicable Ohio law, or any proceeding initiated by the director or officer
without the consent of the Board of Directors, except in certain limited cases.
The Board of Directors has not determined what action, if any, it will take
in the event that the shareholder vote for approval of the use of the
indemnification agreements is not obtained. The Board may determine to proceed
to enter into the proposed agreements with the directors as is its authority
under the assumption that the agreements are fair to the corporation.
A copy of the form of indemnification agreement is available to any person
to whom this proxy statement has been delivered by contacting Mr. Terry E.
Patton, Secretary of FirstMerit, at the address or telephone number listed on
page 1 of this Proxy Statement.
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VOTE REQUIRED FOR APPROVAL
With regard to the first proposal to amend the Articles to replace the
current Article Sixth with the language listed above, approval by the holders of
two-thirds of the outstanding shares of FirstMerit Corporation Common Stock, in
person or by proxy, is required.
With regard to the second proposal to approve the form of indemnification
agreement and the use by FirstMerit of similar agreements in the future with
directors of FirstMerit, with such changes to the agreements reasonably related
to the subject matter as the Board may determine are necessary, approval by the
holders of a majority of the outstanding shares of FirstMerit Corporation Common
Stock, in person or by proxy, is required.
Shareholders should note that the Board of Directors may have a conflict of
interest in making this recommendation since they will benefit from the adoption
of this proposal.
THE BOARD OF DIRECTORS OF FIRSTMERIT RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR BOTH PROPOSALS DEALING WITH THE AMENDMENT TO THE ARTICLES AND THE ADOPTION
OF THE FORM AND USE OF INDEMNIFICATION AGREEMENT.
PRINCIPAL SHAREHOLDERS
The following table describes the beneficial ownership of Common Stock of
each person who was known by FirstMerit to be the beneficial owner of more than
five percent of the total shares issued and outstanding on or about February 14,
1995. Under rules and regulations promulgated by the Commission, a person is
deemed to be the "beneficial owner" of all the shares with respect to which he
has or shares voting power or investment power, regardless of whether he is
entitled to receive any economic benefit from his interest in the shares. As
used herein, the term "voting power" means the power to vote or to direct the
voting of shares and "investment power" means the power to dispose of or to
direct the disposition of shares.
These parties have certified to the Commission that the shares were
acquired in the ordinary course of business and were not acquired for the
purpose of and do not have the effect of changing or influencing the control of
FirstMerit.
SHARES AND
NATURE OF
NAME AND ADDRESS BENEFICIAL % OF
OF BENEFICIAL OWNER OWNERSHIP CLASS(2)
- -------------------------------------------- ------------------- -----------
Trust Division of 1,764,196(1) 6.5%
First National Bank of Ohio
121 South Main Street, Suite 200
Akron, Ohio 44308
Cincinnati Financial Corporation 2,632,400 9.7%
P.O. Box 145496
Cincinnati, Ohio 45250
- ---------------
(1) All of these shares are held in a fiduciary capacity for the benefit of
others by the Trust Division of First National, and the Trust Division
either has or shares voting and/or investment power.
(2) Based upon the total outstanding shares at December 31, 1994, of 27,162,000.
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AUDITORS
FirstMerit has selected Coopers & Lybrand as its auditors for 1995. Coopers
& Lybrand has served as auditors for FirstMerit since 1992. A representative of
the auditors will be present at the meeting and will be available to answer
questions. The representative will have the opportunity to make a statement at
the meeting.
SHAREHOLDER PROPOSALS AND BOARD NOMINATIONS
Any proposals to be considered for inclusion in the proxy material to be
provided to shareholders of FirstMerit for its next Annual Meeting of
Shareholders to be held in 1996 may be made only by a qualified shareholder and
must be received by FirstMerit no later than December 12, 1995.
The Executive Committee will consider nominees for directors of FirstMerit
recommended by shareholders who submit the person's name and qualifications, in
writing, to the Executive Committee. Under Article II, Section 2, of
FirstMerit's Regulations, shareholders entitled to vote for the election of
directors who intend to nominate a director for election must deliver written
notice to the Secretary of FirstMerit no later than (i) with respect to the
election to be held at an annual meeting of shareholders, 90-days in advance of
such meeting, and (ii) with respect to the election to be held at a special
meeting of shareholders, the close of business on the seventh day following the
date on which notice of such meeting is first given to shareholders. The notice
from the shareholder must set forth certain information concerning the
shareholder and each nominee, including names and addresses, a representation
that the shareholder is entitled to vote and intends to appear in person or by
proxy at the meeting, a description of arrangements or understandings between
the shareholder and each nominee, such other information required to be included
in a proxy statement, and the consent of each nominee to serve as a director of
FirstMerit if so elected.
GENERAL
The accompanying proxy is solicited by and on behalf of the Board of
Directors of FirstMerit, whose notice of meeting is attached to this Proxy
Statement, and the entire cost of such solicitation will be borne by FirstMerit.
In addition to the use of the mails, proxies may be solicited by personal
interview, telephone and telegram by directors, officers and employees of
FirstMerit. Arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation material
to the beneficial owners of stock held of record by such persons, and FirstMerit
will reimburse them for reasonable out-of-pocket expenses incurred by them in
connection therewith. FirstMerit has engaged Georgeson & Company, Inc. to aid in
the solicitation of proxies in order to assure a sufficient return of votes on
the proposals to be presented at the meeting. It is expected that Georgeson will
primarily solicit institutional investors and owners not of record who are
non-objecting beneficial owners of FirstMerit Common Stock. The costs of such
services are estimated at $2,000 plus an additional cost of $6 per individual
stockholder solicited, plus reasonable distribution and mailing costs.
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Management of FirstMerit has no information that other matters will be
brought before the meeting. If, however, other matters are properly presented,
the accompanying proxy will be voted in accordance with the best judgment of the
proxy holders with respect to such matters.
Terry E. Patton,
Secretary
Akron, Ohio
February 28, 1995
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FIRSTMERIT CORPORATION PROXY
SOLICITED BY THE BOARD OF DIRECTORS
William B. Poe, Frank H. Harvey and Robert L. Gollmer, or any of
them, with full power of substitution, are hereby authorized to represent the
shareholder designated hereby and to vote all Common Stock of such shareholder
in FirstMerit Corporation ("Company") at the Annual Meeting of Shareholders of
the Company to be held on Wednesday, April 12, 1995, and any
adjournment(s) thereof, with respect to the matters listed on the reverse side
of this card:
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF THIS PROXY IS SIGNED AND NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS SET FORTH HEREIN.
1. For the election of five Class I Directors and to fix the number of
directors at 18.
Nominees: Richard L. Hardgrove, Philip A. Lloyd, II, Gilbert H. Neal, Roger T.
Read and Del Spitzer
[ ] FOR [ ] WITHOLD [ ] For All Except INSTRUCTION: To withhold
authority to vote for any
individual nominee, mark the
"For All Except" box and strike
through the nominee's name.
2. To amend Article Sixth of the Articles of Incorporation regarding
indemnification of directors and officers.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve the form and use of indemnification agreements for directors of
the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Such other business as properly may come before said meeting and any
adjournment(s) thereof.
Please be sure to sign and date
this Proxy
DATE:_____________________________
__________________________________
__________________________________