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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
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 sec.240.14a-11(c) or sec.240.14a-12
SECOND BANCORP, INCORPORATED
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] 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: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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SECOND BANCORP INC. LOGO
108 Main Avenue, S.W.
Warren, Ohio 44481
April 1, 1999
NOTICE OF ANNUAL SHAREHOLDERS MEETING
Notice is hereby given that the Annual Meeting of Shareholders of Second
Bancorp Incorporated, will be held in the Directors Room of The Second National
Bank of Warren, 108 Main Avenue, S.W., Warren, Ohio, on Tuesday, May 11, 1999,
at 1:30 P.M. for the following purposes:
1. To approve an amendment to the Articles of Incorporation of Second
Bancorp (the "Articles of Incorporation") that increases the number
of authorized common shares from 20 million shares to 30 million
shares;
2. To approve an amendment to the Regulations of Second Bancorp (the
"Regulations") that gives the Board of Directors greater discretion
in changing the number of directors and makes the Company's
Regulations consistent with its Articles of Incorporation;
3. To approve an amendment to the Articles of Incorporation that
increases the number of classes of directors into which the Board of
Directors is divided from two classes to three classes;
4. To elect a Board of Directors consisting of ten directors;
5. To ratify the appointment of Ernst & Young LLP as the independent
Certified Public Accountants of Second Bancorp Incorporated; and
6. To transact such other business as may come before the meeting or any
adjournment thereof.
March 15, 1999 has been fixed by the Board of Directors as the record date.
Only those shareholders of record as of the close of business on that date are
entitled to notice of and to vote at the meeting.
WHETHER OR NOT YOU CONTEMPLATE ATTENDING THE ANNUAL SHAREHOLDERS MEETING,
THE BOARD OF DIRECTORS URGES YOU TO SIGN AND RETURN THE PROXY CARD IN THE
ENCLOSED ENVELOPE AS PROMPTLY AS POSSIBLE.
YOU MAY REVOKE THE PROXY AT ANY TIME PRIOR TO ITS EXERCISE BY NOTICE IN
WRITING DELIVERED TO THE SECRETARY OF SECOND BANCORP OR BY EXECUTION OF A LATER
DATED PROXY. IF YOU ATTEND THE MEETING, YOU MAY CHOOSE TO WITHDRAW YOUR PROXY
AND VOTE IN PERSON AT THE MEETING.
A proxy statement is submitted herewith.
Christopher Stanitz
Secretary of Second Bancorp Incorporated
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SECOND BANCORP INC. LOGO
108 Main Avenue, S.W.
Warren, Ohio 44481
April 1, 1999
PROXY STATEMENT
The Annual Meeting of Shareholders (the "Annual Meeting") of Second Bancorp
Incorporated ("Second Bancorp", the "Company", or the "Corporation"), will be
held Tuesday, May 11, 1999, at 1:30 P.M. in the Board of Directors Room at the
Main Office of The Second National Bank of Warren ("Second National" or the
"Bank"), 108 Main Avenue, S.W., Warren, Ohio. This Proxy Statement is being
mailed on or about April 1, 1999.
Only those shareholders of record at the close of business on March 15,
1999, will be entitled to vote.
The solicitation of proxies will be made by mail, personal interview,
telephone and facsimile. Directors, officers and other representatives of Second
Bancorp may solicit proxies. Second Bancorp has also retained Corporate Investor
Communications, Inc. to assist in the solicitation of proxies for a fee expected
to approximate $5,000 plus reimbursement of out-of-pocket expenses. Second
Bancorp will bear the cost of the solicitation of proxies, and it may reimburse
brokers and others for their expenses in forwarding solicitation material to
beneficial owners of Second Bancorp.
COMMON SHARES OUTSTANDING
As of the record date for the Annual Meeting there were 10,688,450 common
shares outstanding, of which 10,600,478 common shares are entitled to vote. The
remaining 87,972 common shares are held by Second National, the wholly owned
subsidiary of Second Bancorp, in certain fiduciary capacities and cannot be
voted.
The general corporation law of Ohio provides that if notice in writing is
given by a shareholder to the president, a vice president, or secretary of the
Corporation, not less than 48 hours before the time fixed for holding the
meeting, that the shareholder desires the voting at such election to be
cumulative, and an announcement of such notice is made upon the convening of the
meeting by the chairman of the meeting, or by or on behalf of the shareholder
giving such notice, then each shareholder shall have cumulative voting rights in
the election of directors. Proxies solicited by the Board of Directors will be
voted cumulatively, if necessary. For all other purposes, each share is entitled
to one vote.
SECURITY OWNERSHIP
As of the record date, the table below identifies the persons or "groups",
as the term is used in section 13(d)(3) of the Securities and Exchange Act of
1934, who own of record or beneficially more than five percent of any class of
Second Bancorp voting securities and the number of shares thereof owned directly
or beneficially by all Second Bancorp directors and executives as a group as of
the record date (unless otherwise indicated).
NAME OF RECORD AMOUNT AND NATURE PERCENT
TITLE OF CLASS OR BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
-------------- ------------------- ----------------------- --------
Common Shares Market Main & Co. (Nominee for 615,754 shares(1) 5.761%
subsidiary Second National
Bank's Trust Department)
Common Shares Second Bancorp's executives 1,285,509.084 shares(3) 12.027%
and directors as a group(2)
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(1) Shares held of record as of December 31, 1998 (as indicated on an SEC
Schedule 13G, a copy of which was delivered to the Company) in fiduciary
capacity for various trust customers of subsidiary The Second National Bank
of Warren. None of the beneficial owners through Second National's trust
department own or control five percent or more of the voting securities of
the Company.
(2) The executive and director group is comprised of 18 individuals.
(3) Officer shareholdings include outstanding stock options exercisable as of
the record date. Figure includes all directly owned shares and all shares
deemed beneficially owned by individuals in the executive and director
group, whether or not disclaimed by the executive or director in question.
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SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Under the securities laws of the United States, Second Bancorp's directors,
executive (and certain other) officers and any persons holding more than ten
percent of any class of Second Bancorp security are required to report their
ownership of Second Bancorp securities and any changes in that ownership to the
Securities and Exchange Commission and to the Nasdaq Stock Market, Inc. on a
timely basis. Second Bancorp is required to report in this Proxy Statement any
failure to make the necessary filing as and when due. In making the following
statement, Second Bancorp has relied on the written representations of its
incumbent directors and officers and copies of reports known by the Company to
have been have filed with the SEC. During 1998, all of the required filings were
made on a timely basis.
DIRECTORS
During 1998 there were 12 meetings of the Board of Directors. Each
incumbent director was present for more than 75% of the number of meetings of
the Board of Directors. The members of Second National's Examining (Audit)
Committee are Robert C. Lewis, Jr., a Second National director, and Second
Bancorp directors John C. Gibson, Norman C. Harbert, and Raymond John Wean, III.
The functions of the Examining Committee are to meet with Second National's
auditors to review and inquire as to audit functions and other financial matters
and to review the year-end audited financial statements of Second Bancorp and
its subsidiary and reports of the national bank examiners as related to Second
National. The Examining Committee held 6 meetings in 1998. Second Bancorp's
board of directors has no Nominating Committee.
EXECUTIVE COMPENSATION
Under proxy rules and regulations promulgated by the Securities and
Exchange Commission, publicly held corporations are required to disclose to
their shareholders certain information concerning, or deemed relevant to,
compensation paid to its Named Officers (as defined in the next sentence) and to
present that information in tabular and graphic form. The first table contains a
summary of annual and long-term compensation for services in all capacities to
Second Bancorp and its subsidiary for calendar years 1998, 1997, and 1996, of
those persons who were, at December 31, 1998, (i) the chief executive officer
and (ii) the five other most highly compensated executive officers of Second
Bancorp and its subsidiary (the "Named Officers").
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SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL
----------------------------- OPTION OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) AWARDS(3) COMPENSATION(4)
--------------------------- ---- --------- -------- ------------ ---------------
Alan G. Brant, 1998 $267,500 $90,000 11,300 $9,628
Chairman and President of Second
Bancorp, and Chief Executive Officer, 1997 $252,000 $80,000 7,500 $9,193
Director, and President of The Second 1996 $238,000 $80,000 7,500 $9,168
National Bank of Warren(5)
William Hanshaw, 1998 $118,000 $42,000 11,300 $4,495
Executive Officer of Second Bancorp, 1997 $110,500 $35,000 6,500 $4,029
and Senior Vice President of The 1996 $105,500 $34,000 6,400 $4,078
Second National Bank of Warren
David H. Dye, 1998 $135,000 $18,000 11,800 $2,155
Senior Vice President of Second 1997 $ 33,750 $22,000 4,000 $ 0
Bancorp, and Executive Vice President 1996 $ 0 $ 0 0 $ 0
and Chief Lending Officer of The Second
National Bank of Warren (6)(7)
David L. Kellerman, 1998 $108,500 $42,000 10,900 $4,076
Treasurer of Second Bancorp, and 1997 $ 97,667 $36,000 7,000 $1,489
Executive Vice President, Chief 1996 $ 90,375 $36,000 7,000 $5,226
Financial Officer, and Director of
The Second National Bank of Warren
Christopher Stanitz, 1998 $114,125 $30,000 10,900 $ 651
Executive Vice President and Secretary 1997 $101,458 $22,000 7,000 $2,721
of Second Bancorp, and Vice President 1996 $ 95,750 $21,000 6,400 $5,860
of The Second National Bank of Warren
Diane C. Bastic, 1998 $106,667 $33,000 10,600 $6,776
Executive Officer of Second Bancorp, 1997 $ 99,917 $30,000 6,500 $6,288
and Senior Vice President of The 1996 $ 94,917 $29,000 6,400 $6,157
Second National Bank of Warren
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(1) Includes salary earned for the year in question but paid in the following
year.
(2) Reflects bonus paid during the first calendar quarter following the end of
the year in question.
(3) Option awards for 1996 have been adjusted to take into account the May 1,
1997, 2-for-1 common stock split.
(4) Amounts reported for 1998 represent the sum of the Company's contributions
on behalf of each of the Named Officers under the Company's employee savings
plan ($7,500, $4,037, $1,519, $3,589, $0 and $6,150, respectively for
Officers Brant, Hanshaw, Dye, Kellerman, Stanitz and Bastic) and executive
long term disability plan ($2,128, $459, $636, $487, $651 and $626,
respectively for Officers Brant, Hanshaw, Dye, Kellerman, Stanitz and
Bastic).
(5) Mr. Brant also received fees in the amount of $9,700 for 1998, $7,700 for
1997, and $7,700 for 1996 in compensation for his services as a director of
Second Bancorp.
(6) Date of hire, October 1, 1997.
(7) The Company also paid $17,283 to or for Mr. Dye's benefit during 1998 for,
among other things, social dues ($7,587) and relocation expenses ($7,817).
No other Named Officer was the recipient or beneficiary during 1998 of
perquisites valued at 10% or more of his/her total salary and bonus.
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OPTION GRANTS DURING 1998
Second Bancorp's 1998 Non-Qualified Stock Option Plan (the "NQSO Plan") was
approved by action of the Company's shareholders at the May 12, 1998 Annual
Meeting. Upon approval by the shareholders, the NQSO Plan replaced the Company's
Stock Option Incentive Plan (the "ISO Plan") approved by the shareholders on May
14, 1991 and amended May 14, 1994. During 1998, options were granted to the
Named Officers under both the ISO Plan and the NQSO Plan. The following table
contains information on stock options granted during 1998 to the Named Officers
and their potential realizable value.
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POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED IN FOR OPTION TERM
OPTIONS SET TO EXERCISE OR EXPIRATION ----------------------------
NAME GRANTED(1) EMPLOYEES(2) BASE PRICE(3) DATE(4) 5% 10%
---- ---------- ------------ ------------- ---------- ------------ ------------
A. G. Brant 1,300 6.8% $25.438 2/02/08 $ 20,803 $ 52,705
10,000 13.3% $25.000 11/19/08 $ 157,200 $ 398,400
W. Hanshaw 2,100 11.0% $25.438 2/02/08 $ 33,604 $ 85,138
9,200 12.3% $25.000 11/19/08 $ 144,624 $ 366,528
D. H. Dye 3,800 19.9% $25.438 2/02/08 $ 60,808 $ 154,060
8,000 10.7% $25.000 11/19/08 $ 125,760 $ 318,720
D. L. Kellerman 1,700 8.9% $25.438 2/02/08 $ 27,203 $ 68,921
9,200 12.3% $25.000 11/19/08 $ 144,624 $ 366,528
C. Stanitz 1,700 8.9% $25.438 2/02/08 $ 27,203 $ 68,921
9,200 12.3% $25.000 11/19/08 $ 144,624 $ 366,640
D. C. Bastic 2,100 11.0% $25.438 2/02/08 $ 33,604 $ 85,128
8,500 11.3% $25.000 11/19/08 $ 133,620 $ 338,640
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ALL COMMON NA NA NA NA $171,036,577 $433,331,140
SHAREHOLDERS $168,022,434 $425,827,848
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(1) The reported stock options were granted in two sets to the Named Officers.
The first set was granted on February 3, 1998 under the Company's ISO Plan
and the second set was granted on November 20, 1998 under the NQSO Plan.
(2) Options granted to non-employee directors under the NQSO Plan are excluded
from calculation. Non-employee directors were not eligible to participate in
the ISO Plan.
(3) The base price of each awarded option is equal to the mean of the bid and
ask price of the Corporation's common stock on the date the option was
granted.
(4) Notwithstanding the stated expiration date, all stock options held by an
individual terminate if that person ceases to be an employee for any reason
other than death, disability or retirement. In the event of retirement,
death or disability, options must be exercised by the recipient or, as the
case may be, by the recipient's representative by the earlier of the
expiration date of the option or the third anniversary date of the event.
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AGGREGATE OPTION/SAR EXERCISES IN 1998 AND YEAR-END OPTION/SAR VALUES
The third table contains information on the value realized by the Named
Officers during 1998 on their exercise of stock appreciation rights (SARs) and
stock options and the number and value of unexercised stock options and SARs at
year-end 1998.
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NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AND SARS AT AND SARS AT
SHARES YEAR-END 1998(1) YEAR-END 1998
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE(2) REALIZED(3) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Alan G. Brant 17,300(4) $418,355 29,500(5) 14,300 $320,490 $195
William Hanshaw 3,250(6) $ 44,077 7,650 13,300 $ 27,861 $130
David H. Dye 0 0 4,000 11,800 $ 0 $ 0
David L. Kellerman 7,000(7) $122,934 4,500 13,400 $ 293 $163
Christopher Stanitz 0 0 27,400 13,400 $250,129 $163
Diane C. Bastic 6,000(8) $121,002 16,900 12,600 $126,067 $130
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(1) Where appropriate, the number of options and SARs have been adjusted for
stock dividends and stock splits. All numbers represent options unless
otherwise indicated.
(2) With respect to stock appreciation rights, the number of SARs exercised
during the year.
(3) Market value of underlying securities at exercise or year-end, minus the
exercise or base price.
(4) Includes 1,800 share stock option with a base price of $10.583 per share
exercised January 12, 1998, on which date the price of the Company's common
stock was $25.00 per share ($25,951 value realized). Includes 9,800 SARs
with a base price of $5.454545 per share exercised May 12, 1998, at a five
day average price of $34.275 per share ($282,440 value realized). Includes
5,700 share stock option with a base price of $10.583 per share exercised
July 1, 1998, on which date the price of the Company's common stock was
$29.875 per share ($109,964 value realized).
(5) Includes options to purchase 19,500 shares of stock at various prices and
10,000 SARs with a base price of $5.454545.
(6) 3,250 share stock option with a base price of $13.438 per share exercised
May 26, 1998, on which date the price of the Company's common stock was
$27.00 per share ($44,077 value realized).
(7) 7,000 share stock option with a base price of $13.438 per share exercised
April 1, 1998, on which date the price of the Company's common stock was
$31.00 per share ($122,934 value realized).
(8) 6,000 share stock option with a base price of $10.583 per share exercised
July 20, 1998, on which date the price of the Company's common stock was
$30.75 per share ($121,002 value realized).
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REPORT OF THE COMPENSATION AND ORGANIZATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation and Organization Committee of the Board of Directors (the
"Committee") is a joint committee of Second Bancorp Incorporated and Second
National (together referred to in this report as the "Company"), and is composed
of outside directors John A. Anderson (Committee Chairman), Cloyd J. Abruzzo,
and Robert J. Webster. The Committee reviews and approves all officer
compensation levels with a view toward attracting and retaining qualified,
competent executives to lead the Company in its achievement of its business
objectives and to enhance long-term shareholder value.
EXECUTIVE OFFICER COMPENSATION
The Company's executive officer compensation program comprises base
salaries, discretionary cash incentive bonuses, and long-term incentives in the
form of stock option grants.
Base Salary. Each executive officer's salary level is reviewed annually
based upon performance of functional responsibilities, contribution to corporate
strategic goals, experience, and demonstrated capabilities. Measurements of
performance may be quantitative and/or qualitative depending upon the context of
the job under evaluation.
Discretionary Cash Incentive Bonus. The Company pays discretionary bonuses
to its executive officers from an incentive pool. Cash bonuses were paid from
the incentive pool during 1999 to ten individuals in amounts representing the
Committee's subjective assessment of the executive's contribution to the
Company's success, experience and demonstrated capabilities.
Stock Option Grants. To achieve long-term enhancement of shareholder value,
the Company has an incentive program which involves the granting of
non-qualified stock options ("NQSOs") to a limited number of key officers,
including its executive officers. NQSOs are awarded by the Committee under the
Company's 1998 Non-Qualified Stock Option Plan approved by the shareholders on
May 12, 1998 (the "NQSO Plan"). NQSOs are awarded under the Plan at an exercise
price on the date determined by the Committee, such price to be no less than the
mean of the "bid" and "ask" prices of Second Bancorp's common shares on such
grant date. Options are awarded for ten year periods but are not exercisable
during the first year following their grant and are currently subject to an
annual limit of 10,000 shares to any individual. The NQSO Plan superseded and
replaced an incentive stock option plan originally adopted by the shareholders
on May 14, 1991 and amended May 10, 1994 (the "ISO Plan").
Options are awarded subjectively with the Committee taking into
consideration the same attributes that are considered in the setting of salaries
and the distribution of cash incentive bonuses. During 1998, a total of 19,100
options representing a like number of Company shares were awarded to ten
individuals under the ISO Plan and 75,100 options representing a like number of
Company shares were awarded to nine key officers under the NQSO Plan.
CHIEF EXECUTIVE OFFICER COMPENSATION
Measurements employed in determining compensation paid to Alan G. Brant are
generally similar to those applicable to other executive officers, but also
include his performance in attracting, developing, retaining, and motivating key
management members critical to the achievement of the Company's short and long
term growth, earnings, and strategic goals. Elements of Mr. Brant's compensation
thus set by the Committee are reviewed by remaining outside members of the
Board.
The base salary paid Mr. Brant in 1998 and incentive cash bonus paid him in
March, 1999 (as indicated in the Executive Compensation Table in this proxy
statement) were a direct and indirect reflection of (i) the Company's progress,
performance, and growth and to a lesser extent (ii) salaries and bonuses paid to
CEOs of banking companies similar to the Company in size and market areas.
Aggregate base salary and cash bonus paid to Mr. Brant for 1998 represented a
7.7% increase over compensation paid to him in the prior year. Mr. Brant's 6.2%
base salary increase reflects, among many other things, the Company's 5%
increase in earnings, 9% increase in dividends paid, and 60% appreciation in the
value of its stock during 1997. The cash bonus paid Mr. Brant in March, 1999
reflects, among many other things, the Company's 56% growth in assets and
consolidation of its leading market share in headquarter Trumbull County during
1998, both as a result of the acquisitions of two strategically attractive
financial institutions. Though earnings per share for 1998 (restated to account
for acquisitions) were reduced to $.99 (before merger costs) from $1.25 the
prior year as a result of prudent balance sheet restructuring, the Company has
been managed and positioned to effectively develop and take advantage of the
efficiencies these accretive transactions should produce.
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Since stock option grants depend upon increases in the Company's common
stock price to have value as an incentive to the recipient, such grants are
viewed by the Committee as integral components of Mr. Brant's (and other key
executives') compensation arrangement. Given the historic performance of the
Company's stock, we believe they are a highly effective tool in directly
aligning his financial interests, and the interests of the executive team, with
those of the Company's shareholders.
Cloyd J. Abruzzo
John A. Anderson
Robert J. Webster
COMMON STOCK PERFORMANCE GRAPH
Supplemental to the executive compensation information presented in this
Proxy Statement, the Securities and Exchange Commission requires a five year
comparison of total return to Second Bancorp common shareholders with an
appropriate broad based market index and an index of stock performance by a peer
group of publicly traded companies. The graph that follows compares year-end
total shareholder returns, assuming dividend reinvestment, for the five-year
period ending December 31, 1998, on Second Bancorp common shares with the Nasdaq
Bank Stocks Index (Nasdaq Banks) and Nasdaq Stock Market Index (Nasdaq Market).
The Nasdaq Bank Stocks Index is an index of total stock return for all domestic
banks traded on the Nasdaq. The Nasdaq Stock Market Index is a broad-based index
of total stock return for all U.S. companies traded on the Nasdaq National
Market.
Performance Graph
SECOND BANCORP NASDAQ BANKS NASDAQ MARKET
-------------- ------------ -------------
YE 93 100 100 100
YE 94 103.8 99.6 97.8
YE 95 144.9 148.4 138.3
YE 96 159.6 195.9 170
YE 97 264.4 328 208.6
YE 98 236.3 324.9 293.2
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DIRECTOR COMPENSATION
Each Second Bancorp director was paid $4,500 for serving on the Board of
Directors in 1998 and $400 for each board or committee meeting attended. In
addition, each director participates in the Company's 1998 Non-Qualified Stock
Option Plan approved by the shareholders on May 12, 1998 (the "NQSO Plan").
Under the NQSO Plan, non-employee directors are entitled to receive options to
purchase 1,000 shares of Second Bancorp common stock (i) at, or in conjunction
with, the inception of the NQSO Plan, (ii) upon initial election or appointment
to the Board of Directors, and (iii) on the date of each annual meeting of the
Company's shareholders provided, however, that non-employee director are not
eligible to receive more than 1,000 options under the NQSO Plan during any one
calendar year. Options granted under the NQSO Plan are for ten year periods, are
not exercisable until the first anniversary date of the grant and are
exercisable at a price not less than the mean of the "bid" and "ask" price of
the Company's stock on the date the options are awarded. On November 20, 1998,
each non-employee director received 1,000 options to purchase Company stock at
$25.00 per share under the NQSO Plan.
PENSION PLAN
Second Bancorp has no pension plan, but its officers are participants in
Second National's pension plan. Second National has a defined benefit,
non-contributory pension plan for all of its employees identified as "The
Employees Retirement Plan of The Second National Bank of Warren". Due to the
plan's fully funded status, the aggregate contribution for all plan participants
during 1998 was zero percent (0%) of the total remuneration of the plan
participants. Remuneration for the purposes of the plan is the total of
salaries, commissions, and bonuses paid during the year to the plan
participants. Retirement benefits under the pension plan are based primarily
upon years of service and remuneration and take into account, among other
things, the retirement benefit paid under the Social Security Act. The normal
retirement date for the pension plan is age 65. No pension benefits were paid to
the Named Officers in 1998.
The following table sets forth the estimated annual benefits at normal
retirement age pursuant to the provisions of the pension plan to persons in
specified remuneration and year-of-service classifications:
ESTIMATED ANNUAL PENSION
FOR REPRESENTATIVE YEARS OF CREDIT SERVICE
(ASSUMING RETIREMENT JANUARY 1, 1999)
FINAL AVERAGE ---------------------------------------------
REMUNERATION 10 20 30 40
- ------------- --------- --------- --------- ---------
$100,000 $20,000 $40,000 $50,000 $50,000
125,000 25,200 50,500 63,100 63,100
150,000 30,500 61,000 76,200 76,200
175,000 32,600 65,200 81,500 81,500
200,000 32,600 65,200 81,500 81,500
250,000 32,600 65,200 81,500 81,500
300,000 32,600 65,200 81,500 81,500
350,000 32,600 65,200 81,500 81,500
Officers Brant, Hanshaw, Dye, Kellerman, Stanitz and Bastic had as of
December 31, 1998, 13, 9, 1, 17, 6 and 13 years respectively of completed
credited service under Second National's pension plan.
EMPLOYEES' SAVINGS PLAN
The officers of Second Bancorp are participants in The Employees' Savings
Plan of The Second National Bank of Warren (the "Plan"). Any employee who has
completed 1,000 hours of service to Second National is eligible to participate
in the Plan. The Plan provides that any eligible employee may elect a deduction
from his/her salary, ranging from 1-15% of compensation per payroll period, the
amount of which will be held by the Plan trustee for the account of such
employee. Under the Plan (and subject to Internal Revenue Code limitations on
individual participant's contributions to the Plan in any given year), Second
National will contribute to the Plan, on behalf of each participating employee,
an amount equal to 75% of the lesser of (i) the participating employee's
contribution to the Plan, or (ii) 6% of the participating employee's
compensation. Participation in the Plan is voluntary. Amounts held by the Plan
trustee for a participating employee may be withdrawn by such employee upon
termination of employment with Second National, upon the participant's
retirement or in the event of his or her disability. Amounts set aside for a
participating employee's benefit, through salary deduction, will be invested by
the Plan trustee at the participant's direction in one of
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several investment vehicles -- a Money Market Fund, a Second Bancorp Stock Fund,
a Fixed Income Common Trust Fund, an Equity Common Trust Fund, or a Growth
Common Trust Fund. Second National's portion of the contribution is invested
solely in the Second Bancorp Stock Fund.
CERTAIN AGREEMENTS WITH EXECUTIVE OFFICERS
Second Bancorp and Mr. Brant are parties to an agreement, as amended from
time to time, pursuant to which he was granted appreciation rights in Second
Bancorp common stock (the "SAR Agreement"). On the occurrence of certain
specified events, those rights entitled him to receive a cash payment in an
amount equal to the increase in value of a share of Company stock between the
date of the grant of the rights and the date of exercise, times the number of
stock appreciation rights being exercised. Mr. Brant's remaining stock
appreciation rights under the SAR Agreement (as footnoted in the "Aggregate
Option/SAR Exercises in 1998 and Year-End Option/SAR Values" table in this Proxy
statement), are exercisable on or before March 31, 1999. The Company and Mr.
Brant are also parties to an employment agreement (the "Employment Agreement"),
and a deferred compensation agreement. The Employment Agreement, which is
presently operative, sets forth the terms and conditions applicable to Mr.
Brant's service as President and Chief Executive Officer of Second National. By
action of the Company's Board of Directors on November 17, 1998, the term of Mr.
Brant's Employment Agreement was extended for an additional two year period
ending March 31, 2001 and was supplemented to provided for an additional one
year extension through March 31, 2002 in the event a change in control of the
Company occurs during the term of the Employment Agreement. The deferred
compensation agreement replaces a supplemental pension agreement which provided
that Mr. Brant would receive an additional year of pension credit for every two
years of service. The deferred compensation agreement provides that Mr. Brant
will receive the benefit contemplated by the supplemental pension agreement
without regard to the limits placed on executive compensation by the Internal
Revenue Code.
Second Bancorp has entered into severance agreements with Messrs. Hanshaw,
Dye, Kellerman, Stanitz, Ms. Bastic, and two other key executives. Those
agreements generally provide certain benefits to the executive if his/her
employment is terminated within one year after the date of any change in control
of the Company or if the executive resigns within that time frame as a result of
a significant reduction in job responsibilities or compensation, or relocation
of his/her job to a place more than 40 miles distant. Upon any such occurrence,
the executive will be entitled to a continuation of salary and benefits for up
to three years and executive job search assistance. These agreements remain in
effect through May 31, 2003, unless the executive voluntarily leaves the
Company's employ or is terminated for cause prior to that date.
TRANSACTIONS WITH DIRECTORS AND MANAGEMENT
All of the directors and officers of Second Bancorp, and the companies with
which they are associated, were customers of and transact banking business with
Second National in the ordinary course of the Bank's business during fiscal year
1998 and to date. Except as disclosed herein, loans and commitments to loan
included among such transactions were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other unrelated persons. Such transactions did not
involve more than the normal risk of collectibility or present other unfavorable
features.
Two of the Bank's branches are owned by Company and Bank Director John C.
Gibson or entities related to him. During 1998, the Bank leased office space in
Newton Falls, Ohio from Mr. Gibson and J.D. Gibson at an annual lease rental
rate of $33,600. In addition, during 1998, the Bank also leased its Champion
branch from the Cousins Company, an entity 50% owned by Mr. Gibson, at an annual
lease rental rate of $40,158. The Bank continues to make monthly lease payments
to both Mr. Gibson and Cousins Company for those facilities under lease
agreements expiring in 2001 and 2004 respectively.
Mr. Gibson also serves as Chairman of the Board of Jack Gibson Construction
Company ("Gibson Construction"). During 1998, the Bank contracted with Gibson
Construction with respect to a number of facilities renovation and repair
projects. Fees paid to Gibson Construction by the Company during 1998 for
services performed in the normal course of business totaled $23,743.
The Bank subleases space in its main office building to various entities
including the Raymond John Wean Foundation, which subleased office space in 1998
at an annual rental rate of $15,888. Raymond John Wean, III, a director of the
Company, is one of four administrators of that Foundation.
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The firm of Harrington, Hoppe & Mitchell, Ltd., of which Company Director
John L. Pogue is a partner, was paid fees for various legal services performed
for the Company and the Bank in the normal course of their business during 1998
and it is anticipated that such an arrangement will continue. Legal fees (and
director fees due Mr. Pogue) paid to that firm in 1998 were $183,663. In
addition, the firm subleased space from the Bank in its main office building
during 1998 at an annual rental rate of $78,600.
Company Director James R. Izant is the former Executive Vice President and
Secretary of Trumbull Financial Corporation which was acquired by, and merged
into, Second Bancorp on November 19, 1998. Second Bancorp and Mr. Izant are
parties to a Consulting and Non-Competition Agreement dated August 31, 1998 (the
"Consulting Agreement") pursuant to which Mr. Izant: (i) advises the Company on
conversion issues related to the acquisition and merger; (ii) assists Second
Bancorp and its subsidiary in the preservation of customer relationships and
attraction of new customers; (iii) assists the Company in the retention and/or
recruitment of high quality employees; (iv) provides general consulting services
on the request of Chairman Alan G. Brant for up to forty-five hours per month;
and (v) has agreed not to compete with Second Bancorp for two (2) years. In
return for his services and agreement, Second Bancorp has committed to exercise
reasonable best efforts to have Mr. Izant nominated by the Board of Directors as
a director of Second Bancorp during the two year term of the Consulting
Agreement and Mr. Izant will receive: (i) a $90,000 non-compete fee payable in
two annual installments of $45,000 each; and (ii) consulting fees in the amount
of $3,750 per month for twenty-four consecutive months.
PROPOSAL 1
AMENDMENT OF ARTICLE FOURTH OF
THE ARTICLES OF INCORPORATION
The Board of Directors recommends the amendment of Article FOURTH of the
Articles of Incorporation to increase the number of authorized shares of common
stock from 20 million shares to 30 million shares without par value.
INCREASE IN AUTHORIZED COMMON SHARES
Currently, the Company has 9,311,550 authorized but unissued common shares.
The Board of Directors believes that it is prudent to have a greater number of
authorized but unissued commons shares available for use in raising capital,
future acquisitions, and for general corporate purposes such as stock splits,
stock dividends and benefit and compensation plans. The Company has an historic
pattern of stock splits and has also paid stock dividends, and the Board of
Directors continuously evaluates whether circumstances warrant such action. The
Board of Directors believes that greater flexibility in the Company's capital
structure is highly desirable. By authorizing additional common shares, the
Board of Directors would have the authorized shares and flexibility necessary to
meet the Company's future needs without experiencing the delay and significant
expense of having to seek shareholder approval for an increase in authorized
shares. The Company has no current plans to issue any of the additional
authorized common shares.
The increase in the authorized number of common shares does not alter the
rights of the outstanding common shares or the manner in which the Board of
Directors may authorize the issuance of additional common shares. The additional
common shares authorized by the proposed amendment will, if and when issued,
have the same rights as the currently authorized common shares. Current holders
of common shares have no preemptive rights (that is, rights to maintain the same
proportionate share of ownership of the outstanding common shares by purchasing
a proportionate share of any additional common shares that may be issued in the
future).
EFFECT OF AMENDMENT
The actual effect of the authorization of additional common shares upon the
rights of existing holders of common shares is not possible to predict unless
and until the Board of Directors issues such shares. However, such effects would
include dilution of the voting power of the outstanding common shares to the
extent that additional common shares are issued. Any such issuance of additional
shares could also have the effect of diluting the earnings per share and book
value per share of existing common shares, and such additional shares could be
used to dilute the stock ownership of persons seeking to obtain control of the
Company.
The Board of Directors believes the authorization of additional common
shares is in the long-term best interests of the Company and its shareholders.
At present, the Company has no plans to issue additional common shares, although
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such shares would be available for issuance without further action by the
shareholders except as may be required by applicable law.
VOTE REQUIRED TO AMEND
The resolutions necessary to amend Article FOURTH of the Articles of
Incorporation are attached to this Proxy Statement as Annex 1 and will be
submitted to the shareholders for adoption at the Annual Meeting. In accordance
with the Articles of Incorporation, the affirmative vote of the holders of
shares entitling them to exercise a majority of the voting power of the Company
is required to adopt the proposed amendment. Proxies will be voted in favor of
the resolutions unless otherwise instructed by the shareholder. Abstentions and
shares not voted by brokers and other entities holding shares on behalf of
beneficial owners will have the same effect as votes cast against this
Amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
AMENDMENT OF ARTICLE FOURTH OF THE ARTICLES OF INCORPORATION.
PROPOSAL 2
AMENDMENT OF ARTICLE III, SECTION 1 OF
THE REGULATIONS OF THE COMPANY
In its present form, Article III, Section 1 of the Regulations provides
that the Board of Directors may increase or decrease the number of directors
constituting the Board of Directors by no more than two directors in any one
year. The Board of Directors recommends the adoption of the proposed amendment
removing the two director limitation and providing the Board of Directors with
greater flexibility to determine the number of directors serving on the Board,
as long as the total number of directors is no greater than 18 and no less than
nine, as long as the number of directors in each class is no less than three,
and as long as any decrease does not have the effect of shortening the term of
any incumbent director.
Article III, Section 1 of the Regulations also currently provides that the
shareholders may fix or change the number of directors on the Board of Directors
at any meeting of the shareholders held for the purpose of electing directors
(at which a quorum is present) by the affirmative vote of the holders of 75% of
the shares represented at the meeting and entitled to vote on the proposal. The
ability of the shareholders to change the size of the Board of Directors will
not be affected by the proposed amendment.
Article SIXTH of the Articles of Incorporation currently provides that any
vacancy on the Board of Directors will be filled by a majority vote of the
remaining directors of the class in which such vacancy occurs, or by the sole
remaining director of the class if only one such director remains, or by the
majority vote of the remaining directors of the other classes if there is no
remaining member of the class in which the vacancy occurs, and that a director
so elected to fill a vacancy shall serve for the remainder of the then present
term of office of the class to which he or she was elected. However, Article
III, Section I of the Regulations conflicts with Article SIXTH by providing that
vacancies in the office of any director may be filled by a majority of the
directors then in office. Although the Regulations provide that, in the event of
any conflict between the provisions of the Articles of Incorporation and the
provisions of the Regulations, the provisions of the Articles of Incorporation
take precedence, the Board of Directors recommends the adoption of the proposed
amendment to Article III, Section 1 of the Regulations in order to make the
provisions regarding filling of vacancies consistent with Article SIXTH of the
Articles of Incorporation.
PURPOSE AND EFFECT OF AMENDMENT
The primary purpose of amending the Regulations as proposed is to eliminate
the restriction on the ability of the Board of Directors to change the size of
the Board of Directors by more than two directors a year, thereby avoiding the
significant delay and expense of having to obtain shareholder approval in each
instance where a change of more than two directors is required in any one year.
If the proposed amendment is adopted, the Board of Directors may increase
or decrease the number of directors serving on the Board (from its current ten
members) by any number, subject to the maximum (18) and minimum (nine)
limitations described above. However, because a reduction in the number of
directors cannot be used to remove a director from office or to reduce the term
of a current director, the number of directors may only be reduced upon the
occurrence of a vacancy on the Board of Directors.
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Taken together with other provisions of the Articles of Incorporation and
Regulations (as described below) and the proposed amendment to Article SIXTH of
the Articles of Incorporation contained in this proxy statement, this amendment
to the Regulations could have the effect of deterring certain persons from
initiating an unsolicited tender offer or a proxy contest. Such a tender offer
and proxy contest could, at least temporarily, increase the market price of the
common shares. Although the Board of Directors has no knowledge of any present
effort to gain control of the Company through the accumulation of stock or to
organize a proxy contest, the proposal is being made as a result of the Board of
Directors' conclusion that the Regulations should be changed to address the
possibility that an unsolicited tender offer for the Company deemed by the Board
to be contrary to the medium to long term best interest of the shareholders
might be coupled with a proxy contest designed to undermine the effectiveness of
the Board of Directors. If confronted with an unsolicited tender offer, the
Board of Directors would likely seek to evaluate the terms of the tender offer
while exploring other strategic alternatives, including the possibility of
negotiating a higher price for the Company. In order to prevent the Company from
pursuing other alternatives and to undermine the Board of Director's bargaining
power, the person making the tender offer or arbitragers might solicit proxies
for the purpose of increasing the number of directors and electing its own
candidates as directors (a practice known as "packing" the Board of Directors)
or taking other measures intended to force a sale of the Company.
PROVISIONS IN THE COMPANY'S ARTICLES AND REGULATIONS WHICH MAY BE DEEMED TO HAVE
ANTI-TAKEOVER EFFECTS
Under the Company's Articles of Incorporation, the following actions
("Business Combinations") require the affirmative vote of the holders of 75% of
the voting power of the Company: (i) any merger or consolidation of Second
Bancorp or its subsidiary with any person or entity who holds 10% or more of the
voting power of the Company (a "Related Person"); (ii) any sale, transfer or
other disposition to or with any Related Person of assets of the Company having
a value equal to 10% or more of the Company's consolidated net worth; (iii) the
issuance or transfer by the Company of securities of Second Bancorp or its
subsidiary to any Related Person in exchange for cash, securities or other
property having a value equal to 10% or more of the Company's consolidated net
worth; (iv) the adoption of any plan or proposal for the liquidation or
dissolution of Second Bancorp; (v) any reclassification of securities of Second
Bancorp or any merger or consolidation of Second Bancorp with any of its
subsidiaries or any other transaction which has the effect of increasing the
proportionate number of outstanding shares of any class of equity security of
Second Bancorp or any subsidiary which is directly or indirectly owned by any
Related Person; and (vi) an amendment of Article Sixth (Number of Directors),
Article Seventh (Indemnification), and Article Eighth (Supermajority Vote and
Fair Price Provision) of the Articles of Incorporation. In addition, if certain
"minimum price requirements" are not complied with in connection with any
Business Combination, such a Business Combination may not be consummated.
However, if the Business Combination is approved by two-thirds of the continuing
directors of Second Bancorp, then any such Business Combination is not required
to satisfy the "minimum price requirements" and is only required to be approved
by shareholders of Second Bancorp holding a majority of its voting power. Second
Bancorp's Articles of Incorporation also classify the Board of Directors by
providing for two classes of directors with each class serving a two year term
(but see "Proposal 3" and "Proposal 4" of this Proxy Statement).
The Company's Regulations may be amended by the affirmative vote of a
majority of the voting power of Second Bancorp, except any amendment of Article
III, Section 1 (Number of Directors) and Article VI (Indemnification of
Directors and Officers) requires the affirmative vote of 75% of the voting power
of the Company.
The proposed amendment would enable the existing members of the Board to
increase the number of directors and then fill the new vacancies with people
allied with the existing Board. Accordingly, increasing the Board of Directors
authority to change the number of directors could make the removal of incumbent
management and the assumption of control of the Company more difficult.
The Board of Directors believes that the proposed amendments would enhance
the ability of the Board of Directors to act in the interests of the Company and
its shareholders in connection with an unsolicited tender offer and that this
benefit outweighs any negative anti-takeover effects that the proposed
amendments might have.
VOTE REQUIRED TO AMEND
The resolutions necessary to amend Article III, Section 1 of the
Regulations are attached to this Proxy Statement as Annex 2 and will be
submitted to the shareholders for adoption at the Annual Meeting. Pursuant to
the Regulations, the affirmative vote of the holders of common shares entitling
them to exercise at least 75% of the voting power of the Company is required to
adopt the proposed amendment. Proxies will be voted in favor of the resolutions
unless
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otherwise instructed by the shareholder. Abstentions and shares not voted by
brokers and other entities holding shares on behalf of beneficial owners will
have the same effect as votes cast against this Amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
AMENDMENT OF ARTICLE III, SECTION 1 OF THE REGULATIONS.
PROPOSAL 3
AMENDMENT OF ARTICLE SIXTH OF
THE ARTICLES OF INCORPORATION
Under the Articles of Incorporation, the Board of Directors of Second
Bancorp is presently divided into two classes, each consisting of approximately
one-half of the entire Board. The directors serve staggered two year terms, so
that directors of only one class are elected at each Annual Meeting. The Board
of Directors recommends the amendment of Article SIXTH of the Articles of
Incorporation to change the division of the Board of Directors from two classes
to three classes, designated as Class I, Class II and Class III. Each of the new
classes will consist of approximately one-third of the total number of
directors, as fixed from time to time by the Board of Directors and
shareholders. Under the proposed amendment to the Articles of Incorporation, the
directors will serve staggered three-year terms so that directors of only one
class are elected at each Annual Meeting.
Assuming that Article SIXTH is amended as proposed, the shareholders will
be asked at the Annual Meeting to elect all of the members of the three new
classes, consisting of four directors in Class I who will serve an initial term
expiring at the Annual Meeting of Shareholders in 2000, three directors in Class
II who will serve an initial term expiring at the Annual Meeting of Shareholders
in 2001 and three directors in Class III who will serve a full term expiring at
the Annual Meeting of Shareholders in 2002.
If the shareholders adopt the proposal to amend Article SIXTH, then the
term of office of the directors in existing Class II of the Board of Directors
will be effectively reduced so as to terminate on the date of the Annual
Meeting. However, if the shareholders do not adopt the proposal, then (i) the
term of office of the directors in existing Class II will continue in effect
until the 2000 Annual Meeting of Shareholders, (ii) the five nominees who are
currently directors in existing Class I and who receive the highest number of
votes will be elected as directors to serve in existing Class I until the 2001
Annual Meeting of Shareholders, and (iii) the nominee who is currently a
director in existing Class I and who receives the next highest number of votes
will be elected as a director to serve in existing Class II until the 2000
Annual Meeting of Shareholders. Current members of existing Class I are: Dr.
David A. Allen, Jr., Norman C. Harbert, James R. Izant, Phyllis J. Izant, John
L. Pogue, and Raymond John Wean, III. Current members of existing Class II are:
John A. Anderson, Alan G. Brant, John C. Gibson, and Robert J. Webster.
PURPOSE AND EFFECT OF AMENDMENT
The Company currently has a classified Board of Directors. Generally,
classifying a board of directors provides for continuity in the governance of a
corporation, even if a person accumulates an amount of voting power that would
otherwise be sufficient to take control of the corporation at a shareholders
meeting. In addition, the classification of directors generally makes the
assumption of control by a holder of a large block of stock, tender offers,
mergers, proxy contests and the removal of incumbent management more difficult
or costly to accomplish.
Because the Board of Directors presently consists of only two classes of
directors, the anti-takeover effects of the classification of the Board of
Directors are limited. Under the current Articles of Incorporation, a potential
acquiror of the Company could take control of a majority of the Board of
Directors at a single shareholder meeting by replacing the six directors in
existing Class I, who represent more than half of the ten directors. By
reclassifying the Board of Directors from two classes to three classes, a
potential acquiror of the Company would be unable to replace half of the Board
of Directors at any one shareholder meeting since no more than thirty or forty
percent of the directors could be elected at any such meeting.
In other words, unless the proposed amendment to Article SIXTH is adopted,
a person who has acquired a majority of the voting power of the Company will be
able to replace more than half of the directors at any meeting at which the
existing Class I directors are subject to election. If the shareholders adopt
the proposed amendment, then at least two years would be required in order to
change the membership of a majority of the Board of Directors. Thus, the
increase from two classes of directors to three classes of directors may make
the assumption of control by a holder of a
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large block of the Company's stock, tender offers, mergers, proxy contests and
the removal of incumbent management more difficult to accomplish than if the
Company maintains two classes of directors.
Adoption of the proposed amendment may effect the short term ability of the
shareholders of the Company to change the composition of the Board of Directors.
However, the Board of Directors believes that the further classification of
directors will permit it to represent more effectively the interests of all
shareholders and to respond prudently to circumstances created by the demand or
actions of a minority shareholder or group.
Although the Board of Directors has no knowledge of any present effort to
gain control of the Company through the accumulation of stock or to organize a
proxy contest, there have been a number of attempts by individuals and entities
to acquire significant minority positions in public companies with the intent of
obtaining actual control of such companies by electing their own slate of
directors, or by achieving some other goal, such as the repurchase of their
shares at a premium, by threatening to obtain such control. These insurgents
often can elect a majority of a company's board of directors through a proxy
contest or otherwise even though they do not own a majority of the company's
outstanding shares. The proposed amendment to Article SIXTH may discourage such
purchases because its provisions would operate to moderate the pace of any
change in control of the Board of Directors by extending the time required to
elect a majority of the directors.
Therefore, as discussed under Proposal 2 in this proxy statement, the
proposed amendment to Article SIXTH of the Articles of Incorporation and Article
III, Section 1 of the Regulations, taken together with other provisions of the
Articles of Incorporation and Regulations, could have the effect of deterring
certain persons from initiating an unsolicited tender offer or a proxy contest.
The Board of Directors believes that having a properly classified Board of
Directors will facilitate continuity and stability of leadership by assuring
that experienced personnel familiar with the Company and its business will be
directors at all times, and by preventing precipitous changes in the composition
of the Board of Directors, thereby serving to moderate corresponding precipitous
changes in the Company's policies, business strategies and operations.
VOTE REQUIRED TO AMEND
The resolutions necessary to amend Article SIXTH of the Articles of
Incorporation are attached to this Proxy Statement as Annex 3 and will be
submitted to the shareholders for adoption at the Annual Meeting. In accordance
with the Articles of Incorporation, the affirmative vote of the holders of
Common Shares entitling them to exercise at least 75% of the voting power of the
Company is required to adopt the proposed amendment. Proxies will be voted in
favor of the resolutions unless otherwise instructed by the shareholder.
Abstentions and shares not voted by brokers and other entities holding shares on
behalf of beneficial owners will have the same effect as votes cast against this
Amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
AMENDMENT OF ARTICLE SIXTH OF THE ARTICLES OF INCORPORATION.
PROPOSAL 4
ELECTION OF DIRECTORS
IF THE AMENDMENT OF ARTICLE SIXTH IS APPROVED
The Board of Directors has proposed that the shareholders amend Article
SIXTH of the Articles of Incorporation to increase the classes of directors on
the Board of Directors from two to three classes. If the shareholders approve
this amendment at the forthcoming Annual Meeting, then the shareholders will be
asked to elect four directors in new Class I, three directors in new Class II
and three directors in new Class III. Each director in Classes I, II and III
will hold office until the Annual Meeting in 2000, 2001 and 2002, respectively
(or sooner upon resignation or removal), and thereafter will stand for election
for three year terms. Except as otherwise specified in the proxy, the Common
Shares represented by all properly executed and returned proxies will be voted
for the election of the ten nominees named below as Class I, II and III
directors of Second Bancorp. If, though currently unanticipated, a nominee
should become unavailable to serve, proxies will be voted for the election of
such person, if any, as shall be recommended by the Board of Directors. The
adoption of the proposed amendment will have the effect of reducing the term of
office of the existing Class II directors so that it expires at the next Annual
Meeting.
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The names of the ten nominees for Classes I, II and III directors of Second
Bancorp, together with specific information about the nominees, are as follows.
NUMBER AND PERCENTAGE
PRINCIPAL OCCUPATION OF COMMON SHARES OWNED
DURING THE PAST FIVE BENEFICIALLY AS OF DIRECTOR
NOMINEES AGE YEARS AND DIRECTORSHIPS MARCH 15, 1999 (1) SINCE
-------- --- ----------------------- ---------------------- --------
CLASS I TERM EXPIRES IN 2000.
Dr. David A. Allen, 57 Dean, Kent State University 1,000 1998
Jr. -Trumbull Campus; former Director of
Trumbull Financial Corporation and
the Trumbull Savings and Loan
Company
John L. Pogue 53 Partner, Harrington, Hoppe & 1,668(2) 1987
Mitchell, Ltd. (attorneys)
Raymond John Wean, III 50 Business consultant. Formerly 8,603(3) 1987
President and Chief Executive
Officer of Barto Technical Services,
Inc. Prior to January 1995,
President of Danieli Wean, Inc.,
designer and manufacturer of
industrial machinery. Director of
Second National Bank
Robert J. Webster 75 Retired President and Chief 43,980(4) 1987
Executive Officer of Denman Tire
Corporation, manufacturer of
automobile tires and rubber rolls.
Director of Second National Bank
CLASS II TERM EXPIRES IN 2001.
John C. Gibson 70 Chairman of the Board, Jack Gibson 25,635(5) 1987
Construction Company. Director of
Sovereign Circuits, Inc. and Second
National Bank
Norman C. Harbert 65 Chairman, President, and Chief 12,538(6) 1987
Executive Officer of The Hawk
Corporation, owner of several
manufacturing firms. Director of
Second National Bank
James R. Izant 40 Private investor and consultant. 438,256(7) 1998
Former Executive Vice President, (4.10)%
Secretary and Director of Trumbull
Financial Corporation and the
Trumbull Savings and Loan Company
CLASS III TERM EXPIRES IN 2002.
John A. Anderson 61 Chairman and Chief Executive 16,966 1987
Officer, The Taylor-Winfield
Corporation, Ravenna Manufacturing
Company and Hubparts, Inc. Director
of Second National Bank
Alan G. Brant 67 Chairman and President, Second 109,137(8) 1987
Bancorp and President, Director, and (1.01)%
Chief Executive Officer, Second
National Bank
Phyllis J. Izant 35 Development Associate for Leadership 422,781(9) 1998
Gifts, Purdue University, West (3.96)%
Lafayette, Indiana. Former Director
of Trumbull Financial Corporation
and the Trumbull Savings and Loan
Company
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(1) Unless otherwise stated, each nominee's percentage ownership of Second
Bancorp stock is less than 1%.
(2) Includes 446 shares of common held in a SEP IRA account for Mr. Pogue's
benefit.
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(3) Includes 990 shares owned by Mr. Wean's wife and 1,917.158 shares owned by
his children, the beneficial ownership of which he has disclaimed.
(4) Includes 10,232 shares of stock owned by Mr. Webster's wife, the beneficial
ownership of which he has disclaimed.
(5) Includes 1,831.847 shares of common stock owned by, or for the benefit of,
Mr. Gibson's wife, the beneficial ownership of which he has disclaimed.
Includes 4,471.655 shares which are owned by the Jack Gibson Construction
Company which company is controlled by Mr. Gibson.
(6) Includes 4,121.26 shares of stock held by the trustee of Mr. Harbert's
defined benefit plan and 2,279.838 shares of stock held in a personal trust
for his benefit.
(7) Includes 1,931 shares of stock held in trust for a minor, the beneficial
ownership of which he has disclaimed.
(8) Includes 16,016.594 shares of stock held by Mr. Brant's wife, the beneficial
ownership of which he has disclaimed. Includes 20,437.64 vested shares of
stock held for Mr. Brant's benefit in the Bank's Savings Plan. Includes
23,800 shares of stock representing a like number of currently exercisable
options owned by Mr. Brant.
(9) Includes 37,800 shares of stock held in trust for two minors, the beneficial
ownership of which she has disclaimed.
IF THE AMENDMENT OF ARTICLE SIXTH IS NOT APPROVED
Under Article SIXTH of the Articles of Incorporation as currently in
effect, the Board of Directors is divided into two classes, each consisting of
approximately one-half of the entire board. At present, the directors serve
staggered two year terms, so that directors of only one class are elected at
each Annual Meeting. If the amendment of Article SIXTH of the Articles of
Incorporation is not approved by the shareholders at the forthcoming Annual
Meeting, then the shareholders will be asked to elect five directors in existing
Class I and one director in existing Class II. Each Class I director will hold
office until the Annual Meeting in 2001 (or sooner upon resignation or removal)
and each Class II director will hold office until the Annual Meeting in 2000 (or
sooner upon resignation or removal). Except as otherwise specified in the proxy,
the shares represented by all properly executed and returned proxies will be
voted for the election of the five nominees who are currently directors in
existing Class I who receive the highest number of votes as Class I directors of
Second Bancorp and the nominee currently serving as a director in existing Class
I who receives the next highest number of votes as a Class II director of Second
Bancorp. If, though currently unanticipated, a nominee should become unavailable
to serve, proxies will be voted for the election of such person, if any, as
shall be recommended by the Board of Directors.
If the proposed amendment of Article SIXTH is not adopted, then the term of
office of the current directors in existing Class II will continue unaffected
until it expires at the Annual Meeting of Shareholders in 2000.
Current members of existing Class I are: Dr. David A. Allen, Jr., Norman C.
Harbert, James R. Izant, Phyllis J. Izant, John L. Pogue, and Raymond John Wean,
III. Current members of existing Class II are: John A. Anderson, Alan G. Brant,
John C. Gibson, and Robert J. Webster.
NO VACANCIES
As of the date of this printing, no vacancies exist on the Company's Board
of Directors.
VOTE REQUIRED TO ELECT
If the shareholders approve the amendment to Article SIXTH of the Articles
of Incorporation and if a quorum is present at the Annual Meeting, then the
nominees for director of each new Class who receive the greatest number of votes
cast by the shares present in person or by proxy and entitled to vote at the
Annual Meeting will be elected to serve as directors of that Class.
Proxies will be voted in favor of the nominees named above or any
substitutes unless otherwise instructed by the shareholder. Abstentions and
shares not voted by brokers and other entities holding shares on behalf of
beneficial owners will not affect the election of directors, because such shares
are not considered present for voting purposes.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION OF THE DIRECTOR NOMINEES NAMED ABOVE.
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PROPOSAL 5
AUDITORS
The Board of Directors has appointed Ernst & Young LLP as the independent
Certified Public Accountants of Second Bancorp for the year 1999. A resolution
requesting shareholder ratification of this appointment will be presented at the
Annual Meeting.
A representative of Ernst & Young LLP will be present at the Annual Meeting
and will be available to respond to appropriate questions and to make a
statement, if desired.
MISCELLANEOUS
The Board of Directors of Second Bancorp is not aware of any matters which
are to be presented at the forthcoming Annual Meeting of Shareholders other than
those specifically enumerated herein and in the notice of the meeting.
Whether or not you expect to be present at the Annual Shareholders Meeting,
it is important that you sign and return the enclosed proxy. If you do attend
the Meeting, you may vote personally rather than by proxy.
All shares represented by proxy in the form enclosed herewith will, in the
absence of other instructions, be voted in favor of:
(1) Amending Article FOURTH of the Company's Articles of Incorporation
to increase the number of authorized shares of common stock from 20 million
shares to 30 million shares;
(2) Amending Article III, Section 1 of the Company's Regulations to
give the Board of Directors greater discretion in changing the number of
directors and to make the Regulations consistent with the Company's
Articles of Incorporation;
(3) Amending Article SIXTH of the Company's Articles of Incorporation
to increase the number of classes of directors into which the Board of
Directors is divided from two classes to three classes;
(4) Electing each of the nominees listed in this proxy statement to
the Board of Directors of the Company; and
(5) Ratifying the appointment of Ernst & Young LLP as the independent
Certified Public Accountants of the Company.
Management knows of no other matters to be voted upon at the Annual
Meeting. If any other matter properly comes before the Annual Meeting, it is the
intention of the persons named in the form of proxy to vote upon any such
matters in accordance with the recommendations of the Board of Directors.
The cost of solicitation of proxies shall be borne by Second Bancorp,
including the cost of preparing and mailing this Proxy Statement. Such
solicitation will be made by mail and may be by contacts made by the Board of
Directors and employees of Second Bancorp and Second National personally or by
telephone or telegram.
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20
SHAREHOLDER PROPOSALS -- 2000
In order for shareholder proposals to be considered for presentation at the
Annual Meeting of Shareholders in the year 2000, such proposals must be received
by the Secretary of Second Bancorp by December 1, 1999.
THE PROXIES ARE SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THE PROXIES
MAY BE REVOKED AT ANY TIME PRIOR TO THEIR EXERCISE BY NOTICE IN WRITING
DELIVERED TO THE SECRETARY OF SECOND BANCORP OR BY EXECUTION OF A LATER DATED
PROXY. FINANCIAL STATEMENTS FOR THE LATEST FISCAL YEAR, PREPARED IN ACCORDANCE
WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, ARE CONTAINED IN SECOND BANCORP'S
1998 ANNUAL REPORT MAILED TO SHAREHOLDERS WITH THIS NOTICE AND PROXY STATEMENT.
ADDITIONAL COPIES OF SECOND BANCORP'S ANNUAL REPORT FOR 1998 CAN BE OBTAINED
WITHOUT CHARGE UPON WRITTEN REQUEST DIRECTED TO THE CORPORATION'S SECRETARY,
CHRISTOPHER STANITZ, AT THE ADDRESS SET FORTH ON THE COVER OF THIS PROXY
STATEMENT.
Christopher Stanitz
Secretary
Second Bancorp Incorporated
18
21
ANNEX 1
RESOLVED, that Article FOURTH of the Articles of Incorporation of Second
Bancorp Incorporated (the "Corporation") be amended by deleting the present
Article FOURTH in its entirety and substituting therefor the following:
FOURTH: The maximum number of capital shares which this Corporation is
authorized to issue or to have outstanding at any time shall be thirty
million (30,000,000) shares, all of which shall be common shares. The
shares shall have no par value stated. The Board of Directors of the
Corporation is hereby empowered to issue from time to time shares of its
capital shares, whether now or hereafter authorized. No holders of any
class of shares of the Corporation shall have any preemptive rights to
purchase or to have offered to them for purchase any shares or other
securities of the Corporation.
FURTHER RESOLVED, that the proper officers of the Corporation be, and they
hereby are, authorized and directed to take all actions, execute all
instruments, and make all payments that are necessary or desirable, in their
discretion, to make effective the foregoing amendment to the Articles of
Incorporation, including without limitation, filing a certificate of such
amendment with the Secretary of State of Ohio.
19
22
ANNEX 2
RESOLVED, that Article III, Section 1 of the Regulations of Second Bancorp
Incorporated (the "Corporation") be amended by deleting the present Article III,
Section 1 in its entirety and substituting therefor the following:
Section 1. Subject to the Articles of Incorporation of the
Corporation, the number of Directors that shall constitute the whole Board
of Directors may be: (a) increased or decreased from time to time by
resolution adopted by a majority of the Directors then in office (whether
or not constituting a quorum), provided that any such decrease does not of
itself have the effect of shortening the term of office of any incumbent
Director; and (b) fixed or changed at a meeting of the shareholders held
for the purpose of electing Directors at which a quorum is present by the
affirmative vote of the holders of 75% of the shares represented at the
meeting and entitled to vote on the proposal. The Directors shall be
elected at the annual meeting of the shareholders at which their respective
terms of office expire or, if not so elected, at a special meeting of the
shareholders called for that purpose, and each elected Director shall hold
office until his or her successor is duly elected and qualified. Directors
need not be shareholders. Subject to the Articles of Incorporation,
vacancies in the office of any Director due to death, resignation, removal
or other cause, and newly-created directorships resulting from any increase
in the authorized number of Directors, shall be filled by a majority vote
of the remaining Directors of the class in which such vacancy occurs, or by
the sole remaining director of the class if only one such Director remains,
or by the majority vote of the remaining Directors of the other classes if
there be no remaining member of the class in which the vacancy occurs. A
Director so elected to fill a vacancy shall serve for the remainder of the
then present term of office of the class to which he or she was elected.
FURTHER RESOLVED, that the proper officers of the Corporation be, and they
hereby are, authorized and directed to take all actions and execute all
instruments that are necessary or desirable, in their discretion, to make
effective the foregoing amendment to the Regulations.
20
23
ANNEX 3
RESOLVED, that Article SIXTH of the Articles of Incorporation of Second
Bancorp Incorporated (the "Corporation") be amended by deleting the present
Article SIXTH in its entirety and substituting therefor the following:
SIXTH:
(A) The number of directors constituting the Board of Directors
shall be such number, not more than eighteen (18), as shall be
fixed from time to time in accordance with the Regulations of the
Corporation and the number so fixed shall constitute the Board of
Directors until the number of directors is thereafter changed
pursuant to the provisions of the Regulations, but the number
thereof shall in no event be less than nine (9) and the number of
directors in each class shall in no event be less than three (3).
(B) The Board of Directors shall be and is divided into three new
classes, Class I, Class II and Class III, which shall be as nearly
equal in number as possible. Each director shall serve for a term
ending on the date of the third annual meeting following the
annual meeting at which such director was elected; provided,
however, that each initial director in Class I shall hold office
until the annual meeting of shareholders in 2000, each initial
director in Class II shall hold office until the annual meeting of
shareholders in 2001 and each initial director in Class III shall
hold office until the annual meeting of shareholders in 2002.
(C) In the event of any increase or decrease in the authorized
number of directors, (i) each director then serving as such shall
nevertheless continue as a director of the class of which he or
she is a member until the expiration of his or her current term,
or his or her prior death, retirement, resignation or removal and
(ii) the newly created or eliminated directorship resulting from
such increase or decrease shall be apportioned by the Board of
Directors among the three classes of directors so as to maintain
such classes as nearly equal as possible.
(D) Notwithstanding any of the foregoing provisions of this
Article SIXTH, each director shall serve until his or her
successor is elected and qualified or until his or her death,
retirement, resignation, or removal. Should a vacancy occur or be
created, whether arising through death, resignation or removal of
a director, or through an increase in the number of directors of
any class, such vacancy shall be filled by a majority vote of the
remaining directors of the class in which such vacancy occurs, or
by the sole remaining director of the class if only one such
director remains, or by the majority vote of the remaining
directors of the other classes if there be no remaining member of
the class in which the vacancy occurs. A director so elected to
fill a vacancy shall serve for the remainder of the then present
term of office of the class to which he or she was elected.
(E) Wherever the term "Board of Directors" is used in these
Articles of Incorporation, such terms shall mean the Board of
Directors of the Corporation; provided, however, that, to the
extent any committee of directors of the Corporation is lawfully
entitled to exercise the powers of the Board of Directors, such
committee, to the extent provided by resolution of the Board of
Directors or the Regulations, may exercise any power or authority
of the Board of Directors under these Articles of Incorporation in
management of the business and affairs of the Corporation,
including without limitation, the declaration of a dividend or the
authorization of the issuance of shares.
FURTHER RESOLVED, that the proper officers of the Corporation be, and they
hereby are, authorized and directed to take all actions, execute all
instruments, and make all payments that are necessary or desirable, in their
discretion, to make effective the foregoing amendment to the Articles of
Incorporation, including without limitation, filing a certificate of such
amendment with the Secretary of State of Ohio.
21
24
SECOND BANCORP INCORPORATED
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 11, 1999
The undersigned hereby appoints Eugene E. Rossi, Michael G.
Casale, and Frederick M. Shape, and each of them, with power of
substitution, proxies to represent the undersigned to vote all
common shares of Second Bancorp Incorporated, owned by the
undersigned at the Annual Meeting of Shareholders to be held in the
Directors Room at the Main Office of The Second National Bank of
Warren, 108 Main Avenue, S.W., Warren, Ohio, on Tuesday, May 11,
1999, at 1:30 P.M. and any adjournment thereof, as marked on the
reverse side hereof.
The proxies are also authorized to vote upon such other
business as may properly come before the meeting.
None of the above named proxy holders are officers or employees
of Second Bancorp Incorporated.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THIS PROXY CONFERS AUTHORITY TO VOTE "FOR" EACH OF THE PROPOSITIONS
AND "FOR" ALL OF THE NOMINEES FOR DIRECTOR LISTED ON THIS PROXY CARD
UNLESS OTHERWISE INDICATED. IF ANY OTHER BUSINESS IS PRESENTED AT
THE MEETING, THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE BOARD OF DIRECTORS. THIS PROXY MAY BE REVOKED
AT ANY TIME PRIOR TO EXERCISE.
SEE REVERSE
SIDE
25
X PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE FOLLOWING PROPOSALS AND "FOR" ALL OF THE NOMINEES FOR DIRECTOR.
FOR WITHHELD
4. Election of // //
Ten Directors
NOMINEES:
CLASS I TO SERVE INITIAL TERM OF ONE YEAR:
Dr. David A. Allen, Jr., John L. Pogue,
Raymond John Wean, III, and Robert J. Webster
CLASS II TO SERVE INITIAL TERM OF TWO YEARS:
John C. Gibson, Norman C. Harbert,
and James R. Izant
CLASS III TO SERVE INITIAL TERM OF THREE YEARS:
John A. Anderson, Alan G. Brant,
and Phyllis J. Izant
FOR, EXCEPT VOTE WITHHELD FROM THE
FOLLOWING NOMINEE(S):
______________________________________________________
FOR AGAINST ABSTAIN
1. To amend Article FOURTH of the Amended Articles of // // //
Incorporation of the Company to increase the number
of authorized common shares from 20 million shares
to 30 million shares.
2. To amend Article III, Section 1 of the Regulations // // //
of the Company to give the Board of Directors greater
discretion in changing the number of directors and to
make the Regulations consistent with the Amended
Articles of Incorporation.
3. To amend Article SIXTH of the Amended Articles of // // //
Incorporation of the Company to increase the number
of classes of directors into which the Board of
Directors is divided from two classes to three
classes.
5. To ratify the appointment of Ernst & Young LLP, as // // //
the independent Certified Public Accountants of
Second Bancorp, Incorporated.
(IN THE EVENT THAT THE PROPOSAL TO CREATE A THREE CLASS BOARD IS NOT ADOPTED:
THE FIVE NOMINEES WHO ARE CURRENTLY DIRECTORS IN EXISTING CLASS I WHO RECEIVE
THE HIGHEST NUMBER OF VOTES WILL BE ELECTED TO EXISTING CLASS I TO SERVE UNTIL
THE 2001 ANNUAL MEETING OF SHAREHOLDERS; THE NOMINEE WHO IS CURRENTLY A DIRECTOR
IN EXISTING CLASS I AND WHO RECEIVES THE NEXT HIGHEST NUMBER OF VOTES WILL BE
ELECTED TO EXISTING CLASS II TO SERVE UNTIL THE 2000 ANNUAL MEETING OF
SHAREHOLDERS; AND THE TERM OF OFFICE OF THE FOUR DIRECTORS IN EXISTING CLASS II
WILL CONTINUE IN EFFECT UNTIL THE 2000 ANNUAL MEETING OF SHAREHOLDERS.)
THE UNDERSIGNED HEREBY RATIFIES AND CONFIRMS ALL THAT SAID PROXIES, OR ANY OF
THEM, OR THEIR SUBSTITUTES, SHALL LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE
HEREOF, AND HEREBY REVOKES ANY AND ALL PROXIES HERETOFORE GIVEN BY THE
UNDERSIGNED TO VOTE AT SAID MEETING. THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF
NOTICE OF ANNUAL SHAREHOLDERS MEETING AND THE PROXY STATEMENT ACCOMPANYING THE
NOTICE.
SIGNATURE _____________________________________________ DATE ________________
SIGNATURE _____________________________________________ DATE ________________
NOTE: Please sign exactly as name appears at left. When shares are held as
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title. If a
corporation or partnership, please sign corporate or partnership name by
authorized officer.